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Steel Authority of India Ltd
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Ladies and gentlemen, good day, and welcome to the Steel Authority of India Q1 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Chandak from Motilal Oswal. Thank you, and over to you, sir.
Thank you very much, Shima. Good day, everyone, and thank you very much for joining us for the First Quarter FY '23 Earnings Call for Steel Authority of India Limited. I would like to thank the management of SAIL for giving us the opportunity to host them again for the earnings call. From the management, we have Shri Anil Tulsiani, Director Finance, and his team. So without much ado, I would call upon Tulsiani, sir, to start with the opening remarks. Over to you, sir.
Yes. Thanks, Vishal. Good afternoon, everyone, and welcome to the investor concall on the financial results for Q1 financial year 2023 of SAIL. I will briefly take you through the results of the company before we take up the questions.
This was a challenging quarter causing profits to slide for numerous steel companies, not just in India but abroad as well. Let me start with the economic scenario. The global economy has been thrown into a battle with inflationary forces across the globe and the governments all around are tightening their respective fiscal policies, which is likely to impact the GDP growth rates in the coming years.
Agencies like IMF and World Bank have started revising the projected GDP for various economies downwards. IMF, which came out with the world economic scenario in last week of July has reduced their GDP forecast to 3.2% in [ full year ] '22 from the earlier projection of 3.6% for the entire world.
The rate is expected to further slow down to 2.9% in 2023. The major advanced economies, which include countries like U.S., Germany, Japan, U.K., France, et cetera, are all seeing projected growth rates curtailed significantly. The emerging economies are faring only slightly better than their advanced counterparts.
The uncertainty relating to fresh waves of COVID, the Russia-Ukraine conflict bringing in further bad news for the inflationary forces, which have already been around and taking a toll on the government policies. Coming to India, the economy is placed much better and set to grow in the range of 7% to 7.5% in financial year '23 in the various reports like IMF, World Bank projections, RBI, MPC, et cetera. This is likely to keep India amongst the fastest-growing major economies. The domestic industries will, however, have to guard themselves from [indiscernible].
Now coming to the steel industry. The global steel industry has seen a decline in the demand and corresponding realization for past few months. With China seemingly cutting down its production in a wave of environment concerns, it has had an impact on the prices of iron ore. The coking coal, which earlier saw unprecedented high prices during February to May, following the Russia-Ukraine war, saw substantial reduction in its prices from June and July onwards.
The prices which had soared to as high as $670 to $680 for HCC have now come down to around $200 levels. The forces of inflation, uncertainty, et cetera, have all had a negative impact on the global steel industry, especially the flat products.
The impact has percolated to the Indian market as well. The prices of steel, which are at peak during April, have considerably declined with flat products yielding relatively much greater adverse impact than the longs since it is guided by the international market.
In the long segment, secondary sector plays a major role and uses thermal coal for this year review. The price of thermal coal have not come down much as compared to the coking coal. It has kept the prices of longs relatively in a better position.
Now coming to the company performance, the company has clocked its best-ever production during the quarter as compared to the Q1 of previous years. The number of Q1 financial year [indiscernible] are as follows: crude steel, current quarter, production is 4.33. And Q1 financial year '22, it's up 3.77. The sales, however, are a bit lower at 3.15 million tonnes as compared to 3.33 million tonnes in Q1 financial year '22.
Sales have been affected due to lower exports during the quarter. However, home sales has been a growth -- has seen a growth compared to CPLY. The financial performance has seen a growth in the top line as the profitability has taken a hit in line with the industry trends.
The revenue from operations is at INR 24,029 crores as compared to INR 20,642 crores in Q1 financial year '22. EBITDA [ shows at ] INR 2,606 compared to INR 6,674 crores in Q1 financial year '22. PBT at INR 1,038 crores vis-a-vis [Technical Difficulty]
I'm sorry to interrupt, sir, sorry to interrupt you. Sir, we are losing your audio in between, sir. Could you just come a little closer to the device and speak?
Okay. PBT at INR 1,038 crores vis-a-vis INR 5,145 crores for Q1 financials year '22. And the PAT at INR 776 crores as compared to INR 3,850 crore in financial year '22 -- Q1 financial year '22.
The revenue has grown higher due to higher average realization during the quarter as compared to CPLY. Profitability has been severely affected due to increase in the input cost, especially coking coal. With the coking coal prices coming down, we expect the cost of production to also correct and enable us to deliver better results in the coming quarters. With these words, I hand back to Mr. Chandak for opening the question-and-answer session. I'm sure you all have a lot of queries on the performance. Thank you.
[Operator Instructions] We take the first question from the line of Mr. Amit Dixit from Edelweiss.
I have 2 questions. The first one is essentially on the finished product inventory level. So if you can let us know the finished product inventory level at the end of the quarter. And due to high inventory, is the company advancing maintenance shutdown or taking prolonged production cut? So what is the plan on production in Q2? That is my first question.
Sure. I regard the finished steel inventory is at 1.336 million tonnes. And regarding the production cuts, we don't have any plans of having any production cuts in the coming quarter as well.
Sir, you said 1.566?
1.336.
1.336. Okay. The second question is on the debt level. If you can -- earlier, it used to be as a part of the debt, but this time around it is not. So just wanted to understand the gross debt level at the end of Q1 and also if you can indicate the treasury [ PAT ]?
Yes. The debt level was at INR 22,101 crores as of 30th June.
This is gross debt, INR 22,101 crores?
You can say that. Yes.
And what about cash balance?
Just marginal, INR 30 crores, sir.
Okay. Okay. Okay. So sir, there has been a substantial increase in debt level. If you can quantify there? I mean, is it working capital debt? Or is it, I mean, some other thing?
So it's basically the working capital debt because we had to give substantial payments for coal during this quarter. So it's the basic reason for which the debt has gone up.
We take the next question from the line of Pinakin Parekh from JPMorgan.
Just trying to understand the earnings trend over the next 2 quarters. So steel prices have fallen sharply over the last 3 months. So first, what would be sales blended realizations today versus what the company reported in the first quarter?
And similarly, what was the coking coal cost for the company on the first quarter and what it is -- its purchase price at this point of time? And when will that flow through into the P&L? Will it flow through in September quarter? Or will it be in the December quarter?
Regarding the coal price, it's quite clear that the second quarter, the prices will be substantially lower because, basically, the prices of coal which was there during the first quarter, were -- they took the impact of basically the brunt of the supplies which are affected from March to May. So the prices at that point of time means that -- if you see the flat index, it was hovering between $500 to $600. But now once the prices are coming down, we will have to take some brunt of the -- off the month of June, which will go down till, you can say, middle of August. Subsequently, we will get -- the prices of coal will be much cheaper. It will be in the range of round about -- we can say round about $230 to $240. So the benefits will start accrual of that from [indiscernible].
Sure, sir. And in terms of prices, steel realizations for the -- at this point of time, there's a decline around INR 12,000 to INR 15,000 a tonne versus what is reported on a blended basis in first quarter. Is it higher? Is it lower?
Yes. Actually, in the month of June, it was -- in the month of June, it was around INR 58,000, and we expect -- and in the month of July, it was round about INR 1,200 to INR 1,300 lower. And there is a tendency to push long over flat -- the prices are flat, but the longs are holding on. So we expect that if this similar trend goes through for the quarter, then though the results for July will not be good -- are not good, if you see the trend, but then maybe from August onwards, our performance will be better on the financial front now.
And this INR 58,000 compares to what average price for the June quarter, sir?
For the June quarter, it was INR 66,000.
We take the next question from the line of [ Vivian Skarla ] from [ Sharay ] Capital.
Sir, I had some queries about how the COG is going to be in Q1 and Q2. So basically, you're telling that coking coal prices are going to be lower in Q2. So I think COGs per tonne as of Q4 FY '22 and Q1 FY '23 also [indiscernible]. So as coking coal prices are going to go down, so where can we expect this cost to go to?
Regarding the cost of goods, we normally don't disclose that.
Okay. Okay. So can you give some guideline as to what was the coking coal prices back in Q4 FY '22 versus Q1 FY '23?
Yes. In Q1, '22/'23, the price of imported coal was in the range of INR 37,000 to INR 38,000. In the Q4 of '21/'22, it was in the range of round about INR 29,000.
Okay. So -- yes, maybe 20% increase. Fine. Sir, my second question will be regarding the volume. So if I compare Q4 FY '22 and Q1 FY '23, so I think volume has taken -- sales volume has taken a 29% hit, and realizations have, in fact, been very strong despite of the steel prices [indiscernible]. I think from -- based on my calculations, the realizations have gone up from around 65,000 to 72,000 based on our calculation. So can you please provide some more details as to why -- what was the reason for significant 30% fall in volumes and stronger realization despite of so much correction in steel prices?
Basically, we should not compare the volumes of Q4 with the next quarter volumes because, if you basically see, it's always a trend that the Q4 volumes are always high in all the industry. And if we compare the volumes of this financial year as compared to the previous financial year, it's more or less hovering at the range of 3.1 to 3.3, 3.4. It's similar volumes all throughout in the first quarter. And Q4 volumes are not basically comparable. It should not be. It should always be high for the entire industry.
There is seasonality in this business. So Q4 is going to be higher. Q1 volume going to be the lowest, not company compare [Technical Difficulty] seasonality. I just wanted to understand.
I couldn't get your question. Actually, you are not audible.
Okay. So the thing which I'm asking is, so if the [indiscernible] compare the Q1 volumes of FY '23 with FY '22, not with Q4 FY '22. So I was asking if there is some sort of seasonality that Q4 volume is going to be the highest and Q1 volume's going to be at the lower end of the spectrum. So is there some seasonality in this business? I was asking this.
Sir, it's a similar trend in all the years. Like, what I was telling you just now that if you [indiscernible] in '21/'22, we are leading on '20/'21 because of the growth impact that was 3.33 and now [ 2.94 ]. The lower volumes has been basically because of exports. Exports are substantially higher in the -- in Q1 '21/'22 at INR 364,000, which are now at INR 166,000 in this particular year.
Okay. And you are telling that Q4 or these are not comparable?
Right, Q4 is not comparable. Actually, if you just see the entire industry, I think you'll probably get the same trend everywhere.
We take the next question from the line of Mr. Mohit Bhansali from Bonanza Portfolio Limited.
I just want to ask that in URM, [ head ] hardened drill was proposed to be made last year. So what is the status? Do we plan to make it in this year? Or what quantity, if you can quantify. This is my first question.
This -- the head hardened drills are still in the trial. And we will be, of course, producing some quantity in this year. But once the trials are successful, then we'll be able to finalize how much quantities we can produce for the head hardened drills.
Can you give some time line, sir? 2 months, 3 months or -- I mean, if you can...
I will have to collect that information. I can give it to you off-line.
Okay. And sir, second question is on rised cost. It is rising -- and do you think it is sustainable the way you are selling or producing the quantity? And if you see the -- compare with private company, the employee costs are too high. Suppose there is a downturn, or U.K. COVID scenario like last year, so I'm concerned how we are going to survive? Can you please give us some details on that, sir?
The salaries and various costs, the employee-related costs which you are mentioning, it's -- we had a wage revision last year. So subsequently -- in the month of November. Subsequently, the wage revision last year, the expenditure is on a quarterly basis, around INR 3,000 crores. So it is a similar trend if you see in Q4 of '22 -- '21/'22. And in '22/'23, it's around INR 3,000 crores. And prior to that, in the Q1 of '21/'22, it was around INR 2,800 crores. So the rise is not much. And basically, what is happening is we are having a -- the people are at the higher end of their service career. So they're more -- many, many will be retiring in the coming years. And the recruitment will not be commensurate with that. And moreover, one thing is there that whoever is retiring is having a very high pay, and the person joining will be at the basic scale. So we don't apprehend much of an increase in the salaries and wages in the coming years.
But your sales are not rising to that level. I mean, if you're selling INR 25,000, INR 26,000 crores in a quarter and having a INR 3,000 build [indiscernible] 12% to 15%. And then [indiscernible] because [indiscernible] a downturn. That is what I was asking if a downturn like COVID like scenario, you'll be having a INR 6,000 crores expense. And it will be like very burdensome things you are carrying over, that also -- your expansions are also getting delayed. So how you are anticipating further expansion which you are planning in such a scenario?
Basically, what happens is that this manpower will come of use at that point also when we have expansion. With the larger volume and the same number of manpower, maybe even a lower level of manpower, the productivity will be much better in that case.
Okay. So you are trying to improve productivity. Okay. Sir, my last question, since I was tracking SAIL for a very long time, this time in the [indiscernible], anything not as detailed as it used to be earlier? Like, you have not mentioned the employee -- total number of employees in [indiscernible], and financial detail also, debt level and all. And second -- third thing is that in mining also where your mines -- earlier in your presentation, everything was very perceived clear. So this time it was not there. So is there any change in policy in approval or something else?
There's nothing like that. I think some additional -- a lot of additional information was given this time. So I think maybe we'll have to take up with our people that your [indiscernible] signature means -- your point is well taken. Maybe in the next time...
Like the last time, you have given plant-wise detail that where expansion has completed and what expenses are pending. Everything was very detailed. This time, it is not there.
But that is very old. I think all our expansion plans have more or less been completed, except maybe a few clusters here and there because of which some production capacities are [indiscernible]. Otherwise, all our expansion plans are in place.
Like, mining was also there. Like, where you are mining and how much you are mining and what in future you are -- how much you're going to mine, everything was there. This time it is not there. If you can elaborate it, it's better for us. That is my request, sir.
Okay. You can just otherwise talk to our people about it. If you want additional information, they can surely provide it to you.
Sir, if you can give the number in...
Mr. Mohit, I'm sorry to interrupt, sir. May we request you to return the call since we have participants waiting? [Operator Instructions]
We take the next question from the line of Mr. Vikash Singh from PhillipCapital.
Sir, I just wanted to understand, in our other costs, which is inflated sharply, are there any inventory losses which we have booked for this quarter?
Come again?
Sir, any inventory losses or inventory value write-downs which we have also booked in this quarter since our other costs are very high, essentially?
No, there is no [indiscernible].
So no inventory losses have been booked?
No, no, no, nothing at all.
And sir, my second question pertains to our yearly guidance. While we have not said anything about guidance seeing that the 1Q numbers at 3.15 million tonnes. So do you really think that you would be able to recover and would be able to meet your -- meet the sales guidance at this point of time?
Your voice was cracking, Vikash, we couldn't get your question.
Is this better?
Yes, that's a lot better.
Yes. So just wanted to understand your yearly volume guidance. So given the 1Q was dull and still the export duty stays in place, so how confident are we in terms of meeting our -- at least the sales volume guidance? I know the production is not a problem. But about sales, so how confident are we meeting our sales volume guidance? Or are we cutting down the volume guidance now?
No, absolutely not. Absolutely not. We will be achieving our sales as per whatever guidance we have given because we feel that in these coming quarters, the domestic consumption is surely going to go up, and we will be surely achieving our target. I think in the month of July, we had sales of more than 1.4 million.
Understood. So volumes has been recovering for now?
And we also have a very strict target for our marketing IP, and we are planning to have the highest ever August also.
Understood. Sir, just one clarification about the earlier participant question regarding no plans to cut production. There was a news regarding Bhilai shutting down a couple of older blast furnaces. So just wanted to understand, is this a permanent shutdown of older furnaces because new furnaces have been ramped up fully? Or is that basically something -- a wrong news which we have came across?
Actually, the blast furnaces are sometimes shut down for some major capital repairs. So it is because of that. Otherwise, we don't have any plans of shutting down any blast furnace as such, [indiscernible] capital [indiscernible] has to be taken up for that.
Even after that, there's no impact on the production -- monthly production on this?
No. No impact on our production.
We take the next question from the line of Sumangal Nevatia from Kotak Securities.
First thing is on the net debt. Question one -- I mean, quarter-on-quarter, there's INR 6,000 to INR 7,000 increase. Is it possible to give the breakup of what was the CapEx in 1Q and what is the working capital increase?
And also directionally, given that we have a lot of [indiscernible] almost INR 17,000 crores, INR 18,000-odd crores, do we expect working capital to keep increasing in 2Q as well?
There has been actually an increase in the working capital on automotive. And regarding the cash flows, there -- we have had a CapEx of around INR 1,000 crores in this quarter, in Q1. And regarding the cash flow from operations, there has been a rise by round about INR 8,000 crores. This is mainly on account of the full payment.
Okay. So working capital increase by INR 8,000, and cash flow is INR 1,000 crores, right?
Yes.
Okay. Okay. Understood. And directionally, how do you see it shaping up in 2Q and 3Q, the working capital requirement?
The working capital requirement will come down now because our -- just think agreements for coal outcomes are supposed to come down quite a lot in this coming month. We expect a central reduction on the working capital.
Okay. And my second question is on the coal cost. You said INR 37,000 to INR 38,000 in June quarter. What was it in July and August?
In July, we -- the cost is -- in July, it is around INR 38,000. And it's expected to come down by another INR 4,000 to INR 5,000 more in the month of August and further down from September onwards.
Understood. And the last one in terms of prices. You said...
This, I'm talking about is the imported coal.
Okay. So INR 38,000 in July, same as June quarter average, right?
Yes. INR 38,000 is in July. And in the month of August, it's going to come down a further INR 5,000. And yes, Q1, the procurement cost of this was almost INR 39,500.
Understood. Understood. And just one last clarification on the price on the...
Mr. Sumangal, we request that you go down to the question queue, sir. We have more participants waiting for their time. [Operator Instructions]
We'll take the next question from the line of [ Falguni Nattel from Jet A Securities ].
Sir, just a clarification. So the coking coal cost that you mentioned for the June quarter, INR 39,500, is this -- this is on consumption basis, right?
Yes. Yes, this is on consumption basis. But it's not that we consume entirely this. There is -- besides this, there is a CDI and the indigenous coal. So all put together, the cost will be -- the consumption will be much lower.
Sir, can you give a range or a broad number?
I can just tell you that indigenous coal is round about -- is around INR 13,000 per tonne, and it is -- you can say, 14% to 15% of the total component.
How much did you mention?
14% to 15%.
No. In indigenous coal cost, absolute, how much did you say?
[indiscernible] INR 13,000. Around INR 13,000.
INR 13,000?
Yes, 1-3.
1-3, okay. And sir, one more clarification, the realization that you mentioned for June Q1 averaged INR 66,000 per tonne is the blended realization, right?
Yes. That's the blended realization.
We take the next question from the line of Mr. Pratim Roy from B&K Securities.
I have 2 questions. One is how much of any part of the uplift we can expect from Q2, and second one is that about the...
Your voice is not clear.
Sir, am I audible?
Yes, I can hear better now.
My question was specifically what is the NSR upliftment that we can expect the blended business in 2Q, where you have mentioned that the 1Q, the NSR is around INR 66,000. So how much applicable you can expect from that level? And what is the outlook for several iron ore sales back directly? So what is -- if you can throw some light on that?
See, regarding the NSR, it is basically market-driven. So whatever the market takes us, we'll go there because it's not that SAIL decides the market price. It's basically market driven. So regarding the sale of [ tonnes ], we've not had any delays in this quarter. It was just basically the lifting of the old orders placed in the last quarter that some companies are lifted in this quarter.
Okay. Can you say some [Technical Difficulty] from this quarter right? 1Q, obviously, right?
Sorry, we couldn't catch your question again.
I'm sorry to interrupt, Mr. Roy. Are you speaking from the headset, sir? Could you switch to a handset, please? You're not clear, sir.
Yes, I got my entire [indiscernible] 1Q does iron ore sales was [indiscernible], and now 2Q, we can expect some sales from there, right?
Provided we get the right price for that.
We take the next question from the line is Mr. Pallav Agarwal from Antique Stock.
Sir, I have a question on long realization. So you mentioned that your flat products have been impacted more than long products. So given that we have a very, very healthy proportion of long products in our mix, so the decline in Q2 utilization should be lower than us as compared to our competitors? Is that a fair understanding?
I think your understanding is quite solid because we are in long products, and we expect that the Indian market is basically -- with this coming with the monsoons is going off in this -- from August, the purchases will go up in mid [indiscernible] the long product. So yes, we surely have a good advantage since we have quite a big range of the long products also and quite a large component also.
Sure, sir. Sir, always I just looked at the segment, PBIT. So again, in north Durgapur, some of the other plants still have again -- probably gone into a loss. So is this because the [indiscernible] proportion in the mix is high, and so are there -- we didn't get the benefit of better realization?
Yes. Actually, it is basically Durgapur has got semi. So it took an impact of that. And regarding the scope, there is a slightly lower production in the month -- in the first quarter, which once it goes up, we feel that it is a -- it is fairly come out of the red into the black.
We take the next question from the line of Kamlesh Bagmar from Prabhudas Lilladher.
Sir, one question on the part of your CapEx guidance. The last quarter, you mentioned that you will spend around INR 8,000 crores. And in this quarter, we had a INR 1,000 of CapEx. And despite the fact that there's no visibility on the new capacity addition, no orders have been floated. So is there a chance for this guidance to come down, or we are going to settle with like, say, INR 4,000 crore to INR 5,000 crore of CapEx? What would be the CapEx in this year?
It's too early to give you the guidance of the entire year. Yes, we have a lot of projects in the pipeline for which already the Board has given approval. And the orders will fructify in this year only. But yes, our endeavor is to improve as much as possible because these schemes whatever are there, they are basically some debottlenecking schemes. So the more we finish them off in a faster time, it would be better for the plants also. For the time being, we still are...
[indiscernible], I see the participant line has got disconnected, sir.
The next question is from the line of Mr. Anuj Singla from Bank of America.
Sir, you talked about the NSR -- blended NSR at INR 66,000. Can you also give the long and flat NSR for this quarter and what they were in the March quarter?
Yes. Actually, the difference between the 2 NSRs in the quarter was round about INR 7,000 to INR 8,000.
Okay. And the blended NSR for March quarter, sir, what was it for [indiscernible]?
For the March quarter, it was around INR 59,000 to INR 60,000.
Okay. Okay. Got it. And sir, the second question is when you talk about the realizations in July being a bit lower, I think INR 1,200 to INR 1,300 lower versus June quarter, if prices were to stabilize there, is it fair to assume this is a trend we should be assuming for the full quarter as well, and given the scenario the prices don't decline further from here?
See, the market is quite volatile, okay? We really do not know where the prices will end up. So we are not able to comment on this at this point of time.
Okay. So put it differently, have you seen a further decline in orders versus July?
It's more or less flat.
Okay. So it's still, August pricing is still INR 1,200 to INR 1,300 lower what is the June level?
Yes.
We take the next question from the line of [ Saket Kapoor from Kapoor & Company ].
Yes, sir, if you could give us some color on how the inventory -- what is the quantum of inventory for the industry in the system currently because of now -- it's a quarter now almost that export has been -- that export tax has been implemented. So how have currently the inventories been in the system, sir?
Actually, in the month of July, inventory has come down, but we do not have the figures ready with us for the industry alone.
Okay, sir, as the person, Pallav, sir, was speaking about the CapEx part of the story, sir, if you could complete that answer that -- you were telling that there is some debottlenecking exercise in the various units that we are going ahead. So if you could give some more color, what kind of amount it has? I think the INR 1,000 crores has been spent. So what are we planning to spend? And how are those resulting in cost optimization for our units?
And also in our results presentation, sir, as one of the speakers just mentioned, we hope that if unit-wise explanation is provided to us wherein the variation in profitability is explained, that would suffice a lot of questions on the part of the speakers, sir. If the major units, we can get how that Bhilai, [indiscernible] plants have performed vis-a-vis the comparative number, that would give us an understanding the reasons why the profitability has changed the way it has been. So that's a request on the part.
And on the CapEx front, sir, kindly conclude that answer by that how much is to be spent on the debottlenecking, and what would be the cost optimization that will happen post the same?
It is -- see, regarding this CapEx, our plan for the year is INR 8,000 crores because we are still maintaining our plan for that. Of course, there may be some slippages, but we are not too sure about it. But there's just one thing, that this INR 8,000 crores, whatever we are mentioning, it is also the CapEx being spent by our subsidiaries and joint ventures also. That also forms a part of this. So we expect some of our subsidiaries and joint ventures to have some expenditure during this coming quarter -- coming quarters.
And regarding our expenditure you normally see, in the first quarter, everywhere, the CapEx is also low. It normally starts picking up from the month of October and November. So these things -- if you see because what is happening is we place orders in, let's say, in the first quarter and then the funds start flowing out from the second quarter, obviously, so based on that, I think we are quite optimistic. But we -- but we are not too sure whether we'll be able to achieve the target of INR 8,000 crores in [indiscernible].
That is true, sir. But on the cost optimization front, if in your presentation you can come up with an explanation, what are we trying -- what are we emphasizing to spend? And what would be the modernization and the benefit, that would be really helpful for us as you have already outlined how much do we spend. That would give more color. So would you like to share more on the same, sir? [indiscernible] where is this amount going to be spent? And how is that going to benefit the units in terms of cost of production going down or valuation in the product -- final product?
See, basically, in the value addition of products, there may not be much of an investment now. But the main thing is on the iron side where we will have some investments for improving our Teck economics.
Correct, sir. And on the line item, other expenses, sir, how should one treat this line item with the lower revenues for this quarter also on a competitive basis? This line item has gone up significantly to INR 70 crores to INR 100 crores, what are the key components, and what are the reasons for this moving ahead?
One major component which has increased with the royalty, the royalty has gone up round about -- you can say, round about INR 400 crores. And then there is a -- some hit on us on the foreign exchange variation also.
All right. And foreign exchange, how much would it be, sir?
Foreign exchange variation in the -- we have had a hit of round about INR 500 crores.
Understood, sir. Sir, early request was to make the presentation more illustrative, unit-wise explanation, update on CapEx and the business environment currently, so kindly look into the request going ahead.
Yes, we'll see whatever best is possible.
Yes, whatever best can be done so that it could optimize, and it is of the benefit of all investor con.
We take the next question from the line of Mr. Ritesh Shah from Investec.
Just 2 questions. One is on any specific update on whatever take is on export tariffs?
On the export tariffs? Actually, we have been also requesting the ministry to waive off those tariffs. Not much headway has been made so far for that. [indiscernible] there is in India -- there is an organization by the name of Indian Steel Association. This agency normally takes us with the Ministry for this. So we are all following its example.
Right. Sir, just wanted to stress on this. Is there any particular variable that the government is looking at a particular fuel price or a particular inflation number, what they're targeting and post they will look to revise this?
We don't have an idea about that.
Okay. No problem. And sir, second question was on PLI scheme with respect to -- see are we going to participate in it? How do we look at it?
Yes. In the PLI scheme, we'll be participating for the rails, which we have got from PLI. We'll be participating on that front.
Sir, what is the extent of CapEx here?
This is being worked out now.
[Operator Instructions] We take the next question from the line of Mr. Sumangal Nevatia from Kotak Securities. This is a follow-up question.
Sir, my questions are answered.
We move to the next question from the line of Mr. Kamlesh Bagmar from Prabhudas Lilladher.
Yes. Sir, a question on the part of realizations. Over the years, SAIL has been very consistent in giving the exact number. So very perplexed that you are giving the ranges for the realization, INR 59,000 to INR 60,000. Can you give the precise realization number, what was there in this quarter and last quarter?
[indiscernible] The average NSR for Q1 is INR 56,829 and for Q4 '21/'22 it's INR 59,495. And for Q1 '21/'22, it is INR 53,929.
Okay. And sir, lastly, on this INR 489 crore of price revision for the rails which we have booked in this particular quarter, so that is also a onetime in nature because it is for the prior year. And what's the process or the thought process on this, like say, provisional-based revenues which we are recognizing on the part of realizing that amount?
This money we will get it. We have already raised invoices for this. So the money will start coming forward. And this is actually just a provisional figure which they have give us. There are -- we have already submitted the pricing for '20/'21 to the Chief Adviser Costs. This is an organization which finalizes the price for us. So we expect something like round about INR 5,000 to INR 6,000 extra for 2021. And this price, whatever they have given, it is basically for '21/'22, a provisional INR 5,000 increase. This will also further go up once we submit our pricing to the CA costs. So this is a ongoing effort till probably all our -- these costs are finalized up to '21/'22.
Okay. But sir, when we book it for the last year, so even in the Q1, we have took that as a base for our realizations in rails?
No -- yes, in last year, it was at round about INR 62,000 when we had taken it. And they have given us an increase of INR 5,000 in this year.
So even for the Q1, it would be priced at INR 67,000?
Yes.
Okay. Okay, sir. And sir, lastly, realizations which you mentioned for the July was around INR 56,000. How much was the realization in July month -- whole month, sir, NSR?
[indiscernible]?
July month, sir. NSR?
Yes. July it was -- it is around about INR 57,000.
Ladies and gentlemen, that was the last question for the day. I now hand the conference over to Mr. Vishal Chandak from Motilal Oswal for closing comments. Over to you, sir.
Thank you, everyone, for participating. So I would request [indiscernible] sir, for closing. Over to you, sir, for the closing remarks.
Okay. Yes. Look, thank you very much, Vishal. And I thank the people who are there who could participate in this concall. And just a few closing remarks. The government has done a commendable job in ensuring this vaccination. And we feel that now there may not be further jolts of COVID, and the economy will surely rebound. The results of the first quarter of sales were basically impacted due to the input costs, and they have also come down now to manageable levels, and we expect things to improve from here on.
We will, meanwhile, continue with our efforts to improve the internal factors like increasing volumes, improving product mix with higher volumes of value-added steel, even greater thrust on operating -- operational efficiencies to reduce cost of production. With coking coal costs coming down, we also smell an opportunity to again take the path towards a net debt-free company. Thank you.
Thank you, sir. On behalf of Motilal Oswal, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.