Steel Authority of India Ltd
NSE:SAIL

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Earnings Call Analysis

Q1-2025 Analysis
Steel Authority of India Ltd

SAIL Q1 FY25 Earnings Report

Steel Authority of India Ltd. (SAIL) reported challenges for Q1 FY25, driven by global steel price declines, high inflation, and geopolitical uncertainties. Domestic steel sales grew by 5%, while exports decreased significantly. Crude steel production was 4.683 million tonnes, and EBITDA improved by 16% year-over-year to INR 2,420 crores. However, net debt increased to INR 35,659 crores due to working capital needs and inventory build-up. SAIL is optimistic about future demand due to government infrastructure spending and aims to reduce costs with better operational efficiencies. Revenue from blended NSR averaged INR 53,700 per tonne in Q1 but faced declines in subsequent months.

Quarterly Performance

This quarter, the company reported crude steel production of 4.683 million tonnes and saleable steel production of 4.182 million tonnes. Saleable steel sales volumes rose by 3.3% compared to the same period last year, totaling 4.012 million tonnes. The company's domestic sales increased by 5%, while exports saw a significant decline. The overall turnover stood at INR 23,764 crores, impacted by a decline in price realization. On the profitability front, the company achieved an EBITDA of INR 2,420 crores, marking an improvement of 16% over the same period last year when EBITDA was INR 2,090 crores.

Operational Efficiency

The company has been making steady progress in operational efficiency by reducing coal-coke consumption and increasing the use of CDI. Specific energy consumption is being lowered, and BF productivity is improving. The company continues to work towards enhancing its product mix. For example, the proportion of semis in saleable steel production was 15%, and the percentage share of semis in sales was lower at 7%.

Financial Health

During the quarter, the company's debt increased by around INR 5,000 crores, mainly due to the accumulation of coal stocks and a temporary rise in finished steel and semis inventory. The net debt at the end of the quarter was approximately INR 35,659 crores, up from INR 30,593 crores at the end of the previous financial year. The company aims to bring this down to around INR 30,000 crores by year-end.

Coking Coal Costs and Inventory

The company's average coking coal cost for the quarter was around INR 23,000 per tonne. This cost is expected to remain stable in the next quarter due to the consumption of existing stockpiles. Although some competitors have forecasted a decline of $30 to $40, the company does not anticipate significant fluctuations.

Price Realization

The blended Net Sales Realization (NSR) for the quarter was INR 53,700 per tonne. However, this value declined by INR 500 to INR 600 in July and by another INR 1,000 to INR 1,500 in August. The company expects the average price to stabilize around these levels for the second quarter.

Future Outlook

Looking ahead, the company is optimistic about improving realizations and margins, driven by government measures aimed at boosting infrastructure spending. This is expected to positively impact domestic steel demand. Additionally, the company is committed to reducing costs by diversifying coal sources and enhancing techno-economic parameters.

Expansion Plans

The company is progressing with several expansion projects. One major project involves the IISCO plant, which is set for stage 1 approval with a total investment of around INR 37,000 crores for a 4 million tonne annual capacity. Other plants, including Bokaro and Durgapur, are undergoing discussions for brownfield expansions. Bokaro will increase its capacity to 7 million tonnes, while Durgapur will add approximately 1 million tonnes.

Capital Expenditure

For FY 24-25, the company has projected a capital expenditure (CapEx) of around INR 6,300 crores, with similar expenditures expected in the following year. The more substantial CapEx will commence from FY 26-27 onward.

Earnings Call Transcript

Earnings Call Transcript
2025-Q1

from 0
Operator

Ladies and gentlemen, good day, and welcome to the Q1 FY '25 Earnings Conference Call of Steel Authority of India, hosted by Nuvama Wealth Management. [Operator Instructions] I now hand the conference over to Mr. Ashish Kejriwal from Nuvama Wealth Management. Thank you, and over to you, sir.

A
Ashish Kejriwal
analyst

Thank you, Sidhant. Good afternoon, everyone. On behalf of Nuvama Institutional Equities, we welcome you all again for SAIL Q1 FY 25 post-result call. We are pleased to have with us Mr. Anil Tulsiani, Director Finance, along with his team. Now I will request Mr. Tulsiani for his opening remarks, and then we can open the floor for Q&A. Over to you, sir.

A
Anil Tulsiani
executive

Thank you, Mr. Ashish. Good afternoon, everyone, and welcome to all our investors and analysts who are joining this results con call for the financial results of SAIL for the previous Q1 financial year '24 -- '25. The performance of the industry in general and SAIL, in particular, has impacted significantly due to the softening of the steel prices on the back of international price trends. I believe you would have already seen the results on the website of the company and stock exchanges. I would briefly run through the same before we move to the question-and-answer session, where we would be happy to address your questions. Coming to the world economic scenario.

The economic scenario across the globe has been impacted in recent times by inflationary forces and consequent monetary tightening policies to counter the same, supply chain disruption, geopolitical crisis, et cetera. The scenarios has, however, been showing a gradual improvement, especially the emerging and developing economies have outperformed the advanced counterparts. As inflation subsides gradually, the banks have also eased monetary policies. These have dropped a steady path for the economy with estimates for current year -- for the calendar year '23 at 3.3%.

As for the IMF World Economic Outlook published in July of '24, predictions for calendar year '24 and '25 stands at 3.2% and 3.3%, respectively. At the same time, the renewed geopolitical tender risk of elevated inflation, especially in the services sector due to higher nominal wages accompanied by relatively lower productivity was a downside risk to the growth with economic need to guard against.

Now coming to the Indian economics, India has countered the forces of inflation better than the other economies. Thereby maintaining relatively stability in the market. The revised data on financial year '24 has led to practically all agencies raising the estimates for the year upwards. As per MOSPI, the estimates for the year now stand at 8.2% instead of earlier projection of 7.6%. The sustained momentum in manufacturing and services, high frequency of investment activity, government's continued thrust on infrastructure development, expansion in steel consumption, improved prospects in private consumption, et cetera, all point to a robust outlook.

The projection by major agencies like RBI, World Bank, IMF, et cetera, the economy is poised to grow between 6.7% to 7.2% over the next 2 years helping maintain its position as one of the fastest growing amongst the major economies.

Now coming to the world steel scenario. The global steel industry continues to be impacted on account of several factors like high inflation, rising geopolitical uncertainties, et cetera. The demand in China, the biggest producer and consumer of steel is a cause of worry. The consumption in the real estate investment has been consistently coming down. Though production in China during H1 calendar year '24 declined by 1.1% over CPLY but the growth in steel demand continues to be negative. As per WSA, the same is expected to contract by around 1 percent in 2025.

Also, the steel growth in European Union remains the region with the biggest challenges. Multiple factors with geopolitical shifts, high energy and commodity prices led to a substantial 10% decline year-on-year. The region is however expected to recover in coming years with a growth of 2.9% and 5.3% in '24 and '25, respectively. The overall growth in demand is poised to turn positive with WSA forecasting a 1.7% and 1.2% growth in steel demand during '24 and '25, respectively, with countries like India, Russia, Germany, France, et cetera, driving the growth.

Indian steel industry has consistently been growing in terms of production as well as consumption numbers in the past -- in the post-COVID area. During H1 '25 as well, crude steel production as well as finished steel consumption has grown by around 5% and 15%, respectively. As per the WSA, India remains one of the strongest drivers of demand for steel since 2021, and projected to grow at more than 8% in near future. Indian steel demand will continue to charge ahead driven by continued growth in all steel using sectors and especially by continued strong growth in infrastructure investment.

With the price of imported coal declining of late, the industry can also give a sigh of relief on the cost front. However, with prices of steel softening in the international market, this may impact the margins for steel plant. The company's performance for the quarter is that crude steel production stood at 4.683 million tonnes, whereas saleable steel production stood at 4.182 million tonnes. Saleable steel sales volumes stood at 4.012 million tonnes, registering a growth of 3.3% over CPLY.

In fact, the domestic sales have grown by 5%, but exports have registered a substantial decline. The turnover stood at INR 23,764 crores due to decline in the price realization. On the profitability front, the company registered an EBITDA of INR 2,420 crores an improvement of around 16% over CPLY of INR 2,090 crores. In the area of operational efficiency, the company has been making steady progress for reducing coal-coke consumption increasing the use of CDI, bringing down the specific energy consumption and improving BF productivity. Continuing with the drive towards improving the product mix, the proportion of semis in saleable steel production stood at 15% by engaging conversion services in and around the plant and the demand sector, and the percentage share of semis in sales has been lower at 7%.

Going forward, the boost from the various measures being taken by the government on infrastructure spending orders well for the steel demand in the country with the overall outlook positive for the sustained growth in domestic consumption. We are hopeful of the realization and consequently the margin will improve for the company in the quarters to come. As mentioned earlier, the company is making all out efforts to bring down the cost by diversifying the sources of coal, improving the techno-economic parameters, et cetera.

With these words, I hand it over to Mr. Kejriwal for opening the Q&A session. I'm sure you all have lots of queries on the performance.

A
Ashish Kejriwal
analyst

[Operator Instructions] The first question is from the line of Amit Dixit from ICICI Securities.

A
Amit Dixit
analyst

I have two questions. The first one is on your coking coal cost. What was the cost in this quarter? And how much decline do you expect in Q2? That was the first question.

A
Anil Tulsiani
executive

Yes. The coking coal cost during this quarter, actually, we have got the imported as well as the indigenous component of that. The imported coking coal was in the range of around about INR 24,500 per tonne landed at our steel plant and the indigenous was around INR 13,500 per tonne. So the average is working out to around about INR 23,000 per tonne.

A
Amit Dixit
analyst

Okay. And what is the expectation for Q2, sir?

A
Anil Tulsiani
executive

It should be in the similar range because what is happening is that not much of a fluctuation is taking place and whatever coal we have purchased in the first quarter, it will be consumed in the second quarter. So it should be more or less in the similar range.

A
Amit Dixit
analyst

Because some of your peers actually have guided for roughly $30 to $40 decline. So that's why I was wondering that why it would be in the similar range for us? Whether it is due to inventory effect or I mean, the different procurement policy maybe?

A
Anil Tulsiani
executive

Yes, it's that. And there is just one thing that I have got some extra stock of coal, lying out here. So I'll be consuming that. So it's -- during the first quarter. So it will be, I think, more or less -- it will be in the more or less in the same range.

A
Amit Dixit
analyst

Okay. The second question is around debt. If I look at debt that has actually went up significantly compared to last quarter. And I also assume that finished product inventory also would have gone up. So whether the -- most of this debt is due to the working capital? And if so, when can we expect this unlocking of working capital? And also if you could highlight the finished product inventory as on date?

A
Anil Tulsiani
executive

Actually, the debt has gone up by around about INR 5,000 crores during this quarter. The main reason is, as I was telling you that we have accumulated some coal stocks. Actually, we had some long-term agreements with some of the coal miners and they were having their shutdowns during the second half of this financial year. So we had to take some stock in advance from them. So that has had an impact. So this, we will be gradually bringing it down. And our levels are normally at 30, 35 days of stock level, which is that. So it will come down by, you can say, December or January. So this will surely help us in reducing our this thing -- our borrowings because we'll not have to pay for the coal for -- we'll have to pay less for the coal in the coming months.

Yes, the inventory of finished steel as well as semis has gone up. The finished inventory has gone up by -- has not increased much -- but the inventory of semis has gone up by around about, you can say, by roundabout -- you can say 0.5 million tonnes it has gone up. So this is a matter of -- actually, what has happened is in our Bokaro Steel plant, we had a shutdown for our hot strip mill. So -- but we did not stop the production because we kept that slab. We started producing, we kept the slabs in our stock. So this slabs will be liquidating now gradually. So this has an impact also. So basically, if you see the finished steel inventory, finished and semifinished steel inventory has gone up around about INR 1,000 crores in this quarter itself.

A
Amit Dixit
analyst

Okay. And what could be the finished product inventory in million tonnes as of now?

A
Anil Tulsiani
executive

The finish -- It is at 1.84 million tonnes.

A
Ashish Kejriwal
analyst

The next question is from the line of Rohan Vora from Envision Capital.

R
Rohan Vora
analyst

The first question was under semis mix and how to see that going forward because it was around 13% in this quarter. So how do we plan to bring it down? Or what is the outlook on that?

A
Anil Tulsiani
executive

The semis will remain at versus at the same levels. It will not come down drastically. The only thing is that our basic target is to maximize conversion through our conversion agents and wet leasing agents. So this we'll be doing it. But I don't see much of a reduction in the percentage of semis.

And the expansion which we are planning, we will have -- we are planning a few more mills. We are having TMT mills at Durgapur Steel plant. Then the Saleable now will come down to more or less, you can say when -- you can say, it will not be there at all.

R
Rohan Vora
analyst

And what would be the timeline for that?

A
Anil Tulsiani
executive

That's the timeline of around about 3 years. 3 to 3.5 years.

R
Rohan Vora
analyst

So in 3 years, semis will be negligible is what you're saying?

A
Anil Tulsiani
executive

It will come down to -- you can say, virtually zero level.

R
Rohan Vora
analyst

Got it. And sir, I was also seeing the mix of value-added products have gone up in this quarter. However, on the mix side, when we report our bridge for the EBITDA, we see a negative on that. So how to look at that?

A
Anil Tulsiani
executive

Actually, see, what has happened is that adverse variance, whatever has been shown, that impacted basically because of Bokaro. Bokaro, we had this -- the hot strip mill had not worked for, you can say, most part of the quarter. So that said, the volume mix, the mix has changed.

R
Rohan Vora
analyst

Got it. I was referring to the value-added mix that you reported. So you've reported a value-added mix of around 55.2% in Q1. And still the mix is negative on the EBITDA bridge. So can we connect these and how to see that?

A
Anil Tulsiani
executive

See, that is on the volumes. Volumes are -- it's basically a combination of volume and mix. So volumes have come down. You are probably comparing with Q4 of '24. Isn't it? '23, '24?

R
Rohan Vora
analyst

Yes, sir.

A
Anil Tulsiani
executive

So basically, what happened in the last quarter, the volumes are substantially high as compared to the first quarter. So it is mainly because of volumes.

R
Rohan Vora
analyst

Okay. Mix has positively contributed is what you're saying.

A
Anil Tulsiani
executive

Yes.

Operator

The next question is from the line of Kirtan Mehta from Bank of Baroda Capital Markets.

K
Kirtan Mehta
analyst

This quarter, we are reporting a coke rate at 428 kg/thm, versus 440 kg/thm of average in FY '24. What is the driver for this reduction in coke rate? And will this remain at this level? Or will it move up again?

A
Anil Tulsiani
executive

Come again with your question?

K
Kirtan Mehta
analyst

In our slide pack, we are showing the coke rate at 428 kg/thm during Q1 versus 440 kg/thm in FY '24. So what is driving the reduction in coke rate?

A
Anil Tulsiani
executive

See, there is one more thing that our operational efficiencies are improving. We are emphasizing more on better quality of iron ore also. And besides that, we are also -- the CDI rate is also going up. So the CDI rate -- the moment the CDI rate goes up and this thing, your SC quality improves. So we get a better coke rate then in these cases. And we are planning a further reduction in the coke rate in these coming months and with an improved quantity of CDI push.

K
Kirtan Mehta
analyst

In terms of the CDI rate shown on the slide has remained more or less like from 106 kg/thm to 107 kg/thm . So there was a sort of proportionate change in the CDI rate, but coke rate had gone down. I mean that's the reason I was asking the question.

A
Anil Tulsiani
executive

See, can you come again with your question, please?

K
Kirtan Mehta
analyst

I was saying that in terms of the CDI rate has remained sort of more or less similar between Q1 and FY '24. It is shown as INR 107 kg/thm versus INR 106 kg/thm in Q4 FY '24. But despite that, the coke rate had come down. So is it more due to the better quality of SC, as you were saying?

A
Anil Tulsiani
executive

It is because of better quality of SC, and better and improved efficiencies in the blast furnaces also. Like no oxygen pushing and all also helps to a very large extent and bringing out the operational efficiency.

K
Kirtan Mehta
analyst

And what would be the target for this year?

A
Anil Tulsiani
executive

This year targeted 440 kg/thm, but we may not be able to achieve that. We may not be here. But I'm sure that another you can say 6 to 8 kg of [indiscernible] will be during the balance period.

K
Kirtan Mehta
analyst

Right -- and what about the CDI rate?

A
Anil Tulsiani
executive

CDI will go up. Because CDI basically, we were -- we have got new sources for supply of CDI. So the CDI portion will increase in the coming months. So that will also increase by at least 10 to 12 Kgs.

K
Kirtan Mehta
analyst

One more question was what are the sort of the CapEx fees which are running, which could have a benefit either increasing the volume or sort of the big volume mix. So in terms of the [indiscernible] that we are adding at couple of locations or the [ TMT ] could you sort of run us through all the projects which are running currently? You are under execution currently?

A
Anil Tulsiani
executive

See, basically, we are -- we have got our capacities around 20 million tonnes. But we are going to have some de-bottlenecking schemes. I can just give you a few examples like with the blast furnace 3 of Durgapur. That is going to be revamped and that will give us higher volumes. Similarly, the [ casters ] are coming up in Rourkela and Bhilai. And these will be also giving us higher volumes.

So these things have been added so that with the [indiscernible] like modifications in the existing system or adding certain capacities in certain areas where there was some bottlenecks, they are trying to bring it up. So we are planning to bring it up by 3 million tonnes in the next 3 to 4 years by putting in something like INR 10,000 crores to INR 11,000 crores of impact. So these are basically action plans for like increasing the capacities by investing the least amount.

K
Kirtan Mehta
analyst

And when are the casters at Rourkela and Bhilai be? When are we targeting it for completion?

A
Anil Tulsiani
executive

Bhilai has already done, and it is under trials. And Rourkela, it is 2 years down the line.

K
Kirtan Mehta
analyst

Right. And what about BF-3 revamping at Durgapur?

A
Anil Tulsiani
executive

Yes, BF-3, we'll be placing the order for that, and I think it is 18 months from the placement of...

K
Kirtan Mehta
analyst

Sure. And in terms of the two new sort of the revamp of the plants proposal that we are progressing. Is there -- where we are working on the DPR and sort of we finalizing the cost estimates. Could you gives us a bit more insight into -- what is the progress been during the quarter?

A
Anil Tulsiani
executive

One particular plant, IISCO plant, already the Board has accorded stage 1 approval for that. And it is that -- it's a 4 million tonne plant, and the total investment will be around INR 37,000 crores. And the other 2 plants which are there, they are basically brownfield expansion in which Bokaro is going to be ramped up to 7 million tonnes. And Durgapur, we'll be going up by around about, you can say 1 million -- around 1 million tonnes. So these 2, they are still at discussions table, and they will be put up to the Board shortly. We are just looking into it because the cost driven by the consultant appears to be on the higher side. So we are having it evaluated again.

K
Kirtan Mehta
analyst

And for IISCO steel plant, when are we targeting to go to the Board for the Stage 2 approval?

A
Anil Tulsiani
executive

Actually, Stage 2, I think it will -- the tendering will start now very shortly. And the moment we freeze the major packages for the BOF and BF and SMS -- so the moment we finalize these packages, we'll come back to the Board.

Operator

The next question is from the line of Sumangal Nevatia from Kotak Securities.

S
Sumangal Nevatia
analyst

I joined the call late, so please excuse if it's a repeat. Is it possible to share what was the blended NSR for 1Q? And how are we looking at 2Q based on how the July month has gone by?

A
Anil Tulsiani
executive

Yes. The NSR for Q1, it's in the range of INR 53,700. Going forward, like we are -- it has declined further in the month of July by, you can say, around about INR 500 to INR 600. And there is a further reduction in the month of August also.

S
Sumangal Nevatia
analyst

Sir, was August around INR 1,000 or INR 1,500 decline or more?

A
Anil Tulsiani
executive

It could be in that range or maybe slightly more than that also.

S
Sumangal Nevatia
analyst

Okay. So from the average somewhere around INR 1,500 to INR 1,000 to INR 1,500 for 2Q, it looks like based on July, August?

A
Anil Tulsiani
executive

I think so. I think of.

S
Sumangal Nevatia
analyst

Sir, on the coking coal, you're saying flat. Is it possible to share what is the cost in 1Q. And given the declining trend, why are we expecting flat prices in 2Q?

A
Anil Tulsiani
executive

See, what is happening is, as I had explained earlier, that we have accumulated some stock of coal. They are imported coal during this April to June because some of our suppliers had some issues of supplying in the second half of the financial year. So we have accumulated the stocks. So we'll be basically that is the more or less the stock of the -- whatever is the stock rate in Q1, it will probably be in the Q2 also because we'll be basically liquidating that stock, which we have already accumulated.

S
Sumangal Nevatia
analyst

Understood. So is it possible to share the net debt number as on 1Q end?

A
Anil Tulsiani
executive

Q1 was INR 35,659 crores.

S
Sumangal Nevatia
analyst

And I mean what would be the reason behind the sharp increase? Is it largely working capital buildup?

A
Anil Tulsiani
executive

Yes. It is basically working capital build up. As I explained earlier, it was basically we got some accumulated coal out here. And moreover the inventory has also gone up to some extent. So these are the two major reasons, because of this -- and we expect to bring it down in the balance period of...

S
Sumangal Nevatia
analyst

So is it possible to share net debt number because this, I believe, is gross debt, right?

A
Anil Tulsiani
executive

It's the same thing. We don't have much of cash in hand.

S
Sumangal Nevatia
analyst

Okay. Roughly the same. Okay. And sir, just one last clarification in the previous question you answered, some 4 million tonnes for INR 37,000 crores. I did not get that. Is it possible to share what exactly the expansion and the cost estimate?

A
Anil Tulsiani
executive

Okay. So basically, we are having a flat product plant out there which will have blast furnaces -- which will have 1 large blast furnace. And along with that, the steel making dealers and hot strip mill. So these are the major 3 facilities. Besides that, all the raw material handling plants and the evacuations, all those things taken together, plus the power supplies and other things. Even I think on [ Helip ] plant is also there. So putting all these things put together, it's working out.

S
Sumangal Nevatia
analyst

So this number is right? INR 37,000 crores for 4 million tonnes?

A
Anil Tulsiani
executive

Yes, for 4 million tonnes. This includes all the hard and soft cost. We are talking about [ PVC ] -- expenditure during construction, whatever we have got the consultancy, that interest during construction. So it includes all these elements also.

S
Sumangal Nevatia
analyst

Okay. Sir, I mean when -- I mean a few of the other peers are expanding brownfield, the capital cost is around $600. -- ours is around $1,100, $1,200. So what are the key reasons behind such higher cost even for brownfield expansion? And then what sort of....

A
Anil Tulsiani
executive

I think this is not a brownfield expansion. If you see. This is not at all a brownfield. This is absolutely a new plant, which is being set up outside.

S
Sumangal Nevatia
analyst

Okay. So is the land and...

A
Anil Tulsiani
executive

Because at the moment, IISCO is around the 2.5 million to 2.8 million tonne plant. It's a long product plant. So in the area which is available, we are going in for these facilities. But everything can be new for this.

S
Sumangal Nevatia
analyst

Okay. And sir, what is the CapEx guidance? When do we start spending for this?

A
Anil Tulsiani
executive

This -- we will be going on for the tendering activities for this very shortly, maybe in a month or 2. And finalizing it should take around about 6 to 8 months. And then after that, you can say the CapEx guidance for this will be from -- the initial payments can be from the end of '25. And I am taking about calendar year '25. And the majority of the expenditures will start coming in from you can say '27, '28.

Operator

The next question is from the line of Kunal Kothari from Centrum Broking Limited.

K
Kunal Kothari
analyst

Sir, firstly, can you give a breakup on the NSR of long strip price and HRC price? And how much in that segment as we have seen fall in 12 months -- in last month and in August?

A
Anil Tulsiani
executive

Yes. In the long segment, the NSR was in the range of, you can say, around about INR 54,000 crores. And in the flat, it was INR 53,500 crores. Then the average was coming to around about INR 53,700 crores.

K
Kunal Kothari
analyst

And in both how much fall we have seen in July and August?

A
Anil Tulsiani
executive

July, there has been a dip of round about, you can say, INR 700 crores to INR 800 crores in case of long. And in case of flat, it has been around about INR 1,500 crores.

K
Kunal Kothari
analyst

Okay. Okay. Sir, any medium-term outlook you can provide on the pricing front, like from this price front, how you see the price to go from here?

A
Anil Tulsiani
executive

You see July and August has been back. We expect at least with some infrastructure expenditure being pumped in by the government, the long segment should start looking up. Flats, there is a challenge because there are some imports also. So those imports percentage is very low, but it is pulling down the overall price in the market. So let's hope that there is something -- some bright spot in the future for the flat also.

K
Kunal Kothari
analyst

My second question is in regard of CapEX. So what expectation one can build on the total CapEx in FY '25, '26, '27 per year basis?

A
Anil Tulsiani
executive

For FY '24, '25, we have projected around about INR 6,000 crores. It's actually INR 6,300 crores, which we have given to the ministry. And the expenditure in the coming year also will be in the similar range around about INR 7,000 crores or something. The real jump in the CapEx will come from, you can say, '26, '27 onwards.

K
Kunal Kothari
analyst

Okay. And lastly, sir, there are reports about the merger between RINL NMDC steel with SAIL, any assessment of yours in these reports, sir?

A
Anil Tulsiani
executive

We are not aware of it.

Operator

Next question is from the line of Raashi Chopra from Citigroup.

R
Raashi Chopra
analyst

Sir, just to clarify on the pricing correction, the INR 700 crores, INR 800 croresin long and INR 1,500 crores flat. That's the July correction. Is it?

A
Anil Tulsiani
executive

Yes, that's the July.

R
Raashi Chopra
analyst

In August, what is that number [indiscernible] on that?

A
Anil Tulsiani
executive

You can say another dip of around about INR 1,000-odd crores maybe more than that also, INR 1,500 crores odd in the long products and similar thing in the flat products.

R
Raashi Chopra
analyst

So -- and during this quarter, essentially, as in the quarter has gone by, flat prices almost flattish sequentially, but long witnessed the correction. And ongoing both are witnessing a correction.

A
Anil Tulsiani
executive

See, already, there has been a fall off quite a lot in these 2 months. So if you see the quarter, I don't think there will be any improvement over the previous quarter. It has to be lower than the previous quarter.

R
Raashi Chopra
analyst

Sorry, just to be clear, my question was the first quarter number that you reported, that was anywhere down on a quarter-on-quarter basis? For the long and flats are largely sort of flattish, right? On the -- on the CapEx side, what was spent on the first quarter?

A
Anil Tulsiani
executive

On the CapEx side, the expenditure in the first quarter?

R
Raashi Chopra
analyst

Yes.

A
Anil Tulsiani
executive

It's INR 986 crores.

R
Raashi Chopra
analyst

Okay. And the expansion at the IISCO you said it will 4 million tonnes and what you're evaluating at Bokaro and Durgapur, they are both around 1 million tonnes each?

A
Anil Tulsiani
executive

No. Bokaro, it's nearly 3 million -- 2.4 million tonnes. And Durgapur, it is around 0.9 million tonnes. So it will go up to around about 3-odd, 3 plus million tonnes.

See Bokaro will go up to 7 million, and this will go up to 3 million tonnes, Durgapur 2.1 million tonnes.

R
Raashi Chopra
analyst

And just 1 last question, what are your volume targets for this year? Has there been any change in what you said last time around [indiscernible].

A
Anil Tulsiani
executive

Volume target for this year, we are planning a crude steel production of around 20.87 million tonnes and sales volume of around about 19.26 million tonnes.

Operator

The next question is from the line of Abhishek Poddar from HDFC Mutual Fund.

A
Abhishek Poddar
analyst

Two questions on this expansion. First is regarding the funding. If we look at you're already sitting on a debt of INR 35,000 crores, and the CapEx for this you highlighted is INR 37,000 crores -- and if you look at your annual cash flows also today, given the sustaining CapEx of INR 6,000 crores to INR 6,500 crores and then the interest payment on the debt -- it doesn't leave a lot of cash flows left. So how would you fund it? And would it leverage your balance sheet a lot in 3, 4 years' time frame if you continue with this expansion?

A
Anil Tulsiani
executive

Yes. Actually, when we had made an earlier projection, we had worked it out that we'll be giving around 1 lakh crores for all our expansion with 15 million tonnes expansion. But -- and then we had worked out the cash flows -- and you were seeing that we will probably -- at any point of time, you will reach the highest of 1.1% of debt-to-equity ratio.

But now with the current market, we'll again have to work it out how we are going to end up maybe probably what is going to be the debt equity ratio and how much further funds will be required. We'll have to have a recalculation of that.

A
Abhishek Poddar
analyst

Okay. Sir, any sense of peak debt you could see in the next 3, 4 years? What number would it be?

A
Anil Tulsiani
executive

We have not assessed that immediately. And again, I was telling you, because of this change scenario where suddenly these prices have come down and the margins have come down. So we will have to hear on work on that actually.

A
Abhishek Poddar
analyst

Right. But irrespective of market conditions, you will continue with this expansion?

A
Anil Tulsiani
executive

Yes. We are continuing with this expansion.

A
Abhishek Poddar
analyst

And sir, any IRR or payback analysis we have done for this Bokaro plant for INR 37,000 crores.

A
Anil Tulsiani
executive

It's IISCO plant and we have made an analysis. It's quite favorable. I think it's 18% -- 18% is IRR.

A
Abhishek Poddar
analyst

Okay. And what steel price assumption is building in that number, sir?

A
Anil Tulsiani
executive

The assumptions were again -- were given earlier of the steel prices which are prevailing in the last average of last 3 years. We have considered back and worked it about -- and the other things which you have assumed is some [indiscernible] price of input coal will be reduced to a large extent -- and a lot of other techno-economic improvement parameters, which hasn't worked into it.

So it's based on that. Of course, latest technology has been taken, so we'll be benefiting on that. But we just have to work it out again, before we're going for the Stage 2 clearance of the project.

A
Abhishek Poddar
analyst

Understood. And sir, just last question. Any sense on the this Durgapur and Bokaro CapEx. This 3.5% total will be how much?

A
Anil Tulsiani
executive

See, there was an indicated figure driven by the consultants, and we were not too happy with it. So we are centered back to the consultants with the current guidelines of reworking on that. So nothing is concrete at this point in time.

Operator

The next question is from the line of Pallav Agarwal from Antique Stockbroking Limited.

P
Pallav Agarwal
analyst

So just want to check, are there any implications due to the recent Supreme Court judgment on the states having the power to levy [indiscernible] because in the annual report of last year, I couldn't really find any major contingent liability. So is there any provisional impact that could have on us?

A
Anil Tulsiani
executive

See, there are certain state-related taxes, which we are already paying. That is in Chhattisgarh and Madhya Pradesh. And in case of Jharkhand, we have recently announced that they'll be imposing INR 100 per tonne -- per tonne for iron ore and coal.

This is going to have a prospective effect of around INR 150 crores to INR 100 crores -- you can say, under INR 200 crores. I mean in case of Odisha, we are high, we also have on mind. There's no clarity as well. So we are just waiting for further clarity on them.

P
Pallav Agarwal
analyst

Okay. So because we saw -- the other steel companies and mines in Odisha, they have been providing for the continue liability for many years now, so which is not there in our books of accounts or...

A
Anil Tulsiani
executive

No, it is there, I think, [indiscernible]. There was earlier in case of Odisha, they had the goals of 15% tax on the ore which was being extracted from there. But then I think that ruling went in our favor. So we did not provide any continuing liability thereafter. And after that, there has been no claim by the Odissa government, nor have they have gone further litigated the thing. So we don't have anything much on that count.

But yes, we do not know what is the final direction which will be given by the Supreme Court. So based on that, we will have to assess our liabilities or if there is any other thing we will have to assess that at a later stage.

P
Pallav Agarwal
analyst

Sure, sir. So also even you mentioned that we have some coking coal inventories. So benefits will not flow in the next quarter. But Q3, maybe we can see some reduction in coking coal?

A
Anil Tulsiani
executive

Yes, Q3, there will be a reduction of around about you can say -- But then again, it depends on the supply or the rates which are being finalized in this August, September quarter -- in this August, September month. So it will then that will flow into the third quarter.

P
Pallav Agarwal
analyst

If you assume that spot rates sustained, then we should see some benefit in the...

A
Anil Tulsiani
executive

Yes. Some benefit.

Operator

The next question is from the line of Rajesh Majumdar from B&K Securities.

R
Rajesh Majumdar
analyst

So sir, my first question was that normally 2Q bounce on quarter is a weak quarter for the industry. But last year also we saw decent volume in 2Q. Now with the recent price correction do you effect the system to build up inventories and the volume can actually be much better than Q1. That was the first question, sir?

A
Anil Tulsiani
executive

Yes. The volume should be better than Q1 especially when our Bokaro plant has also now come up. So the volumes will start flowing from there, too. And yes, always you must have seen in the industry that Q1 and especially sales is no exception, that Q1 is normally not very good. And this year also, it has not been too good mainly because of Bokaro because of which we had substantial impact on our profitability. And then we also have to take a hit of around about INR 300-odd crores this year for some exceptional items. So that is the main reason where to our EBITDA is good, but our PBT and PAT are lower.

R
Rajesh Majumdar
analyst

Yes. And sir, my other question was that we have been carrying sub-grade iron ore fine inventory for some time. And currently, the market -- with the current condition, there is a strong demand for this so do we expect to realize some extra sales from this in the coming quarters?

A
Anil Tulsiani
executive

Yes, we will see if we get a good price for it. It's not that we are in any hurry to sell it off. Because we have a lot of plans for this sub-grade fines besides selling them off we have got plans of using them [indiscernible] steel plant also because though we can say, though we are being told -- though we always mentioned that it's sub-grade fines but the quality of these fines is very good.

It's more or less equal to what has been mined now. So this is that -- besides that, we have got plans for setting up pellet plant. We are also having plans of setting of pellet plants on [indiscernible] basis. So these signs will be utilized by us also.

R
Rajesh Majumdar
analyst

Yes, just a follow-up question. When the [indiscernible] pellet plants and what capacity will like to come up over the next couple of years?

A
Anil Tulsiani
executive

We have -- you can say not in the next couple of years. But I think the comp plan will be set up, you can say, 2, 2.5 years -- 2 years time or 2.5 years. We have our own plans of setting up a plant at Goa [indiscernible], a pellet plant at Goa mines of 4 million tonne. So this should take around of 3.5 to 4 years from now.

Operator

The next question is from the line of Somaiah V from Avendus Spark.

S
Somaiah Valliyappan
analyst

Just want to understand a bit on the coking coal cost front, so this INR 25,000 per tonne, which you are referring roughly comes to around $300 per tonne. So is that the carrying cost one for this quarter? And also if I go back last 2, 3 quarters, this number the import price that you're referring to is more or less flat around INR 25,000, 26,000 per tonne, but international benchmarks have come off. Just want to understand on that.

A
Anil Tulsiani
executive

See, basically, what is happening is this is the price landed at our steel plant. Okay so there are some other calls in all like there is customs duty involved. And besides that, there are handling costs at the port and the transportation cost. So all these are included while we're intimating you the landed price of imported coal at our plants.

S
Somaiah Valliyappan
analyst

Understood, sir. I was looking more from the last 2, 3 quarters, this number has been more or less flat, INR 24,000, INR 26,000 and INR 25,000. But generally, the coking coal International benchmark prices have come off.

A
Anil Tulsiani
executive

No, but I don't think -- see, what is happening is I'm just seeing the figures which I have got with myself. The Q4 figures were INR 26,500 and now it's INR 24,500. This is a landed price at our steel plant. So there is a reduction of around about INR 2,000.

S
Somaiah Valliyappan
analyst

Understood, sir. Got it. Sir, also on the domestic coking coal that you said, so the current mix would be roughly 15%, 20% of your total requirement? Is that right understanding?

A
Anil Tulsiani
executive

Yes.

S
Somaiah Valliyappan
analyst

And is there any limitation in terms of how much we can use to [indiscernible] to what extent we can go? And also what is the scope for increasing -- I mean, in terms of production or I mean or taking intake of this domestic coal, will it kind of go up in the next 2 waters thereby helping us a bit on the cost front?

A
Anil Tulsiani
executive

See, we don't -- we can go up to down about 25% also. But the only thing is that the availability of the coal is not there. And for this, we have already taken a very big step, like we have our own mines, [ Barsua mines ]. So these mines will be developed a lot. We have already given -- awarded the job to an [ MDO] . And these mines will start -- this mine will start producing. It's already started producing limited quantities and we expect around about 4 million tonnes per annum of production from this. So this will work out you can say around about 2 million tons of coking coal that will be given -- that will be available to us in the future from this particular mine.

Operator

Next question is from the line of Shweta Dikshit from Systematix Group.

S
Shweta Dikshit
analyst

I needed the clarity on debt. If I'm not mistaken, I think the FY '24 closing net debt was around INR 35,000 crores, was it -- and this number that you've given today INR 35,659, is it as of FY '24?

A
Anil Tulsiani
executive

No, no actually. I would just clarify that is Ind As and this is Non Ind As what we are talking. It was INR 30,000 crores. At the end of the financial year, as of 31st March, it was INR 30,593 crores, which has now gone up to INR 35,659 crores.

S
Shweta Dikshit
analyst

All right. Sir, any target by the end of this year? Because last year, I think the target was to bring it to around INR 22,000 crores or INR 23,000 crores kind of a number, but any target that you're setting for this year?

A
Anil Tulsiani
executive

We are trying to bring it down to the INR 30,000 crores level. See, with the liquidation of the stock, we will be getting at least INR 3000 crores to INR 4,000 crores from there. And besides that, of course, cash realized will be much better in the coming 9 months. So we expect it to come down to at least INR 30,000 crores by the year.

S
Shweta Dikshit
analyst

And I missed the number, what is the expansion plan which is under discussions for Bokaro right now?

A
Anil Tulsiani
executive

For Bokaro, we have only given you the figures of ISP IISCO steel plant, which is INR 37,000 crores. The figures for Bokaro and Durgapur, they are being revoked.

S
Shweta Dikshit
analyst

No, no, not the CapEx volume wise, like you mentioned Durgapur 0.9 million tonnes and Bokaro?

A
Anil Tulsiani
executive

Bokaro should be 2.4 million tonnes.

Operator

The last question is from the line of Falguni Dutta from Mansarovar Financials.

F
Falguni Dutta
analyst

My question has been answered.

Operator

Ladies and gentlemen, that was the last question for the day. I now hand the conference over to Mr. Ashish Kejriwal for closing comments.

A
Ashish Kejriwal
analyst

Yes. Thank you, and thank you, everyone, and many thanks to, sir, for giving patient answers to all the questions. Sir, my only last question was on account of our expansion at IISCO. Even if greenfield plant, if we consider, normally, we consider INR 7,000 crores per tonne. But in case of IISCO despite having land, we are having 4 million-tonne at INR 37,000 crores, which is more than INR 9,000 crores per tonne. So anything specific or extra what we are doing with others are not incorporating the numbers? -- or it seems to be very, very high.

A
Anil Tulsiani
executive

See, we haven't yet gone in from the tendering part of it. Okay. And see, what happens is when we talk about others, they don't have these -- I do not know how much of the expenditure during construction. So what happens is the entire project salaries and all they are put into the cost of the project. So these are there. And the fact that there is just 1 figure which we have got -- that's for 1 million tonnes, it's $1 billion. So basically, if you see, it was around INR 34,000 crores to INR 35,000 crores.

A
Ashish Kejriwal
analyst

Okay. Okay. Fair enough. And best wishes for future. Any closing remarks, sir, you want to give?

A
Anil Tulsiani
executive

I thank all my -- all the investors for reposing faith in us and I'm hopeful that they shall continue to do so in future also. Thank you.

Operator

On behalf of Nuvama Wealth Management, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

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