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Steel Authority of India Ltd
Earnings Call Analysis
Q2-2025 Analysis
Steel Authority of India Ltd
The latest earnings call highlighted the impact of global economic trends on the steel industry, particularly high inflation and tightening monetary policies. However, the global economic scenario is showing signs of improvement, with the IMF projecting a growth rate of 3.2% for 2024. For emerging markets, growth is expected to slow slightly. In contrast, the Indian economy continues to perform robustly against global pressures, maintaining stability with projected GDP growth around 6.7%.
Despite challenges like fluctuating steel prices and reduced demand from major consumers such as China, the Indian steel industry has demonstrated resilience. Crude steel production rose by 3.6% year-over-year while finished steel consumption soared by 13.5% in H1 FY '25. The government’s continued investment in infrastructure is expected to sustain this growth, with projections indicating an 8% annual increase in steel demand during 2024 and 2025.
During the first half of FY '25, the company produced 9.46 million tonnes of crude steel but experienced a 6.3% decrease in steel sales volume to 8.11 million tonnes. Domestic sales were slightly better, dropping by only 4.5%. Revenue was reported at INR 48,262 crores, reflecting a nearly 10% decline over the same period last year, impacted mainly by a 5% drop in market selling price (MSR). The EBITDA stood at INR 5,593 crores, with a profit after tax (PAT) of INR 844 crores.
The company acknowledged losing market share compared to peers, primarily due to increased domestic supply as exports dipped. For instance, production issues at the Bokaro Steel Plant impacted overall sales. However, the company noted recovery in October, with sales reaching 1.648 million tonnes and a projected total of around 5 million tonnes for Q3.
The management discussed the effects of coking coal prices on profitability. The effective pricing decreased from around INR 24,000 in Q1 to approximately INR 20,000 in October, endorsing a per-ton reduction of about INR 1,600. If the trends continue, anticipated savings from lower coal prices could positively influence the bottom line in Q3.
Looking ahead, management is optimistic about improving revenues driven by a stronger product mix and better pricing for long steel products. They expect H2 FY '25 performance to improve, assuming market conditions stabilize. The guidance included a target of maintaining an annualized sale of approximately 18 million tonnes for FY '25.
The debt figure at the end of October was INR 34,224 crores, having peaked at INR 39,162 crores in August. The goal is to reduce debt by INR 4,500 to 5,400 crores by the end of FY '25. Announced capital expenditures for the year are pegged at INR 6,000 crores for modernization and expansion, with further investments expected in future projects as approvals come through.
The company is focused on expanding production capacity, with a target of reaching 35 million tonnes by FY '31. Several projects are at various approval stages. Initiatives aimed at improving operational efficiency are underway, including reducing specific energy consumption, which the company aims to bring down by 12% to 2.1 tonnes per tonne of crude steel by FY '31.
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Ladies and gentlemen, good day, and welcome to Steel Authority of India Q2 FY '25 Earnings Conference Call, hosted by Nuvama Institutional Equities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashish Kejriwal from Nama Institutional Equities. Thank you, and over to you, sir.
Thank you, Yusuf. Good afternoon, everyone. On behalf of Nuvama Institutional Equities, we welcome you all for Q2 FY '25 Conference Call of Steel Authority of India. We are delighted to have Mr. Anil Tulsiani, Director of Finance, along with his team for this call. And I would like to thank the management for giving us an opportunity to host this call.
Now I will request Mr. Tulsiani for his opening remarks. And thereafter, we will open the floor for Q&A. Over to you, sir.
Thank you, Mr. Ashish. Good afternoon, everyone. I welcome all our investors and analysts, who are joining this results con call for the financial results of sale for the period Q2 and H1 financial year '25. Though I'm sure most of you would have already seen the results on the website of the company and stock exchanges I would briefly run through the same for the benefit of the house.
First, I will deliberate on the world economic scenario. The global economy has been relinked under the impact of several factors like high inflation and consequent monetary tightening policies to counter the same rising geographical, political uncertainties, supply chain disruption, et cetera. The scenario has, however, been showing a gradual improvement with headline inflation moderating leading to rate cuts by major central banks.
While this will support growth, economies need to watch out for downside risk like resurgence of monetary [indiscernible] and deeper slowdown in China. These have led to revisions in the projections for global economic growth. IMF, in the World's Economic Outlook released during October '24 has retained the projections for 2024 at 3.2%, but the same has revised downwards to 3.2% during 2025 from earlier projection of 3.3%.
The projection for emerging and developing economies are set to decline in 2025 to 4.2% as compared to the estimates for 2023 at 4.4%. On the other hand, the advanced economies see a marginal improvement in the projections for the 2 years at 1.8%, compared to estimates for 2023 at [ 1.2% ]. .
Now coming to the Indian economy, the Indian economy has also been impacted on Global Q with the GDP growth for Q1 FY '25 being estimated at 6.7% down from 8.2% achieved during similar periods during FY '24. However, bolstered by the strength of policy frameworks and increasing demand, it continues to fare much better than its counterparts. India has countered the versus of inflation better than other economies, thereby maintaining relative stability in the domestic market.
The sustained momentum in manufacturing and services higher frequency of investment activity, [indiscernible] continued such of infrastructure development, expansion in steel consumption, improved prospects in private consumption have all pointed to a robust outlook. The projection by major agencies like RBI, World Bank, IMF, et cetera. The economic [indiscernible] to grow between 6.5% to 7.3% over the next few years, helping it maintain its position as one of the fastest growing amongst the major economies.
Coming to the world's sale scenario, the slowdown in China -- this is the biggest tradition and consumer of steel has led to major impact on the performance of the global steel industry. The demand for steel in China has been particularly impacted as investments in the real estate sector has been consistently coming down. The demand for steel is estimated to be 3.3% lower in 2023 than previous year and expected to remain negative at 3% in 2024 and 1% in 2025.
Meanwhile, the production in the country has also come down by 3.6% during Jan to September '24 over CPLY. The surge of exports from China has dented the international prices in a big way. And the performance of the industry in general and sales in particular, has impacted significantly on the back of international price trends.
The developed world is projected to experience a 2% decrease in steel demand in 2024, as major steel using economies like the U.S., Japan, Korea and Germany, [indiscernible] significant decline. At the same time, the demand growth for steel in the European Union also remains a big challenge. The demand is set to decline by around 5% in 2024 and by 0.7% in 2026.
The overall growth in demand -- for the world is poised to remain negative by 0.9% in 2024, before coming positive at 1.2% during 2025, respectively, as countries like India, Germany, Brazil, U.S. and Japan will drive the growth. Coming to the Indian steel industry. Despite all challenges, including the softening of the steel prices, India steel industry has consistently been growing in terms of production as well as consumption.
During H1 '25, as well, crude steel production has grown by 3.6% over CPLY. At the same time, finished steel consumption has -- has grown by 13.5% during the period over CPLY.
As for WSA, India has emerged as the strongest drivers of demand for steel since 2021 and projected to grow at more than 8% during 2024 and 2025. Indian steel demand will continue to charge ahead driven by the continued growth in all steel using sectors and especially by continued strong growth in infrastructure and [indiscernible].
The top line and bottom line for Indian services has impacted as the prices declined consistently till August 2024, as there have been signs of prices strengthening, especially for long products, especially after the monsoon season, the industry is hopeful of better results in the coming quarters. With the pricing of imported coal also remaining in check, the industry can also heave a sigh of relief on the cost front.
Now coming to the performance of the company for the half way. The company -- the performance of the company during H1 '25 [indiscernible] follows. The crude steel production at [ 9.4567 million tonnes ] with this similar contributed [indiscernible]
[indiscernible] steel sales volume at 8.108 million tonnes, registered a decline of 6.3% over CPLY of 8.651 million tonnes. The percentage decline in the domestic sales has been lower at 4.5% to stand at [indiscernible]
With the MSR declining by around 5%, the turnover nearly 10% over CPLY to stand at [ INR 48,262 crores ]. On the profitability front, the company registered an EBITDA of [ INR 5, 593 crores ] of [ INR 1,127 crores ] and PAT of [ INR 844 crores ]. With the concerns of rising borrowings, we are happy to share that the borrowing stands at a similar level as compared to Q1 financial year '25.
Volume at end of Q2 financial year '25 stood at [ INR 35,596 crores ]. In fact, the borrowing during August peaked to [ INR 39,162 crores ], and since then, it has been reduced by almost INR 5,000 crores, and it scans at [ INR 34,224 crores ] at end of October [ 2024. ]
In the area of operational efficiency, the company has been making steady progress for reducing coal for consumption, increasing the use of TDI, bringing down the specific energy consumption and improving their productivity. [indiscernible] is undertaking various trends towards agonization in 3 phases with the first phase having brought down to set [indiscernible] consumption by almost 20%. The company is not gearing up to bring it down by 12% to 2.1 tonnes per tonne of crude steel, by financial year 2031.
Continuing with the drive towards improving the product mix the proportion of semi and saleable steel production stood at around [ 15% ]. By engaging conversion services in and around the plant, demand sectors, the percentage share of semi intake has been lower at 9%. Other for a [indiscernible] of MTP capacity at the Durgapur Steel Plant has been placed which will further reduce the percentage of sense.
Going forward, the boost from the various measures being taken by government on infrastructure spending always well [indiscernible] 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.
With these words, I hand back to Mr. Kejriwal for opening the Q&A session. I'm sure you all have lots of queries on the performance. Thank you.
[Operator Instructions]
First question is from the line of Amit Dixit ICT Securities.
I have 2 questions. The first 1 is around the price provision and the benefit of [ INR 137-odd crores ] that has been recognized in this quarter for prior periods. So just wanted to understand what is the quantum of FY '23, towards rail price revision still left? And is there something for FY '24, if you can quantify it? And when do we expect to get the money for that?
Yes. This rail price increase whatever is there. It is based on -- see, there's a system wherein we have -- normally, the railway give us an adhoc price for the rail, for a particular financial year. Subsequently, the cost is finalized by the CA cost. And after that, based on that, we put up the recommendation of costs for a discussion with the railways. So this is for [ 2022-'23 ]. Here, our adhoc price was around INR 75,000 and the CA cost now revised to round about [ INR 89,000 ]. And the benefit of this is down about [ INR 40,000 ] per ton.
Now in this particular quarter, we'll be submitting the cost for '23, '24 also to see a cost. And probably by the end of this financial year, we will be able to assess what will be the pricing for the rate for '23,'24. Now I think I answered both your questions.
Sir, just a little bit of clarification margin for FY '23, there is a difference of INR 14,000, you have already recognized [ INR 16,000 ]. How much is remaining now to be recognized for FY '23?
No, for FY '23, there will not be anything. There will be some -- there will be a couple of rounds of talks to the railway. And if this price is agreed to, then we'll raise the invoices in line with this on the railways.
And when do you expect the cash inflow to happen?
It should happen in the -- probably from end of this quarter and will continue in the next quarter. The fourth quarter also.
And this will also reduce ...
Pardon? Will reduce now?
This will also reduce your leverage -- better stated.
Sure. It will clearly [indiscernible]
Okay. The second question is around coking coal. So is it possible to let us know that what kind of coking coal reduction we saw in Q2? And what do we expect to see in Q3? Also, if you could highlight the realization uptick that we might see in Q3 based on the price increase we've taken so far?
In Q2, the pricing or the imported coal price which we had was at round -- about in the range of around about INR 22,000. And if you see that in Q1, it was around INR 24,000. So the average is coming to around about INR 23,000 for H1. This is the thing.
And going ahead, we have got a projection of round about -- it is working out to around about INR 20,000 in the month of October and November. But again, in the month of December, there may be a slight upward increase because the plats and [indiscernible] has increased a bit during these 2 months.
Okay. And what about realization, sir?
Realization -- you want to know about the peers of October and November?
Yes.
October and November, the average realization has been in the -- in October, it was lower at around about INR 48,000 odd. And in the month of November, it is round about INR 49,500, It is mainly increased in normal because of the thing because of long products, flat products, it still remains a challenge.
Okay. And how does it compare on an average with the realization in Q2?
With Q2, it is -- the Q2, the realization was around INR 50,500 on the overall basis. And H1, it was INR 52,000.
Next question is from the line of Sumangal Nevatia from Kotak Securities.
Sir, my first question is on our sales volume. We've seen a very significant decline. And if we compare with all the peers and industry which has reported, our performance is much worse. So what is the likely reason for this? Any reason why we are losing market share versus peers as well?
Yes. Actually, there has been a decline because basically, I'll just give you the data for that. There has been a decline of around -- in the home sales, there has been a decline of around about 5.2%, because of -- see, what has happened is that due to the lower exports from the country, more of the product has come into the market. So that has had an impact on our sales also.
But if you really see, in Q2, we have improved over the Q1. In Q1, we had around sales of round about [ 4.01 million tonnes ]. And in Q2, it has become [ 4.10 million tonne ]. The impact is basically we have not been able to export much material. So that has also had an impact on our sales -- overall sales quantities.
But in the month of October, I would just like to tell you that in the month of October, we have been able to sell quite a lot of quantity. And this has helped us reduce our stock by around 1 lakh tonnes. So the sales during the month of October has been [ 1.648 miilion tonnes ]. So if we actually take it as -- like going ahead for the entire quarter, it could end up to around 5 million tonnes.
Understood. And sir, in previous question, you answered NSR. Was it blended? Or was it only long for any particular...
I give you the blend.
So roughly, we are looking at maybe around [ INR 2,000 -- INR 1500, 2,000 ] drop in 3Q. And on the cost side, you shared coking coal for October, November, but given the inventory lag, what sort of cost reduction we are looking in 3Q from coking coal front?
Coking coal front, we expect a drop, see, because already I mentioned to you that in Q1, it was -- in Q2, it was [ INR 21,681 ] and now we are getting at around about INR 20,000.
So if we continue, I think we should get the benefit of the lower coal prices in the month of October and September and October, we'll surely get into the month of November also for our consumption. So it should be in the range of around [ INR 20,000 ] so there should be a benefit of around, you can say, INR 1,600 or INR 1,700 on Q2 prices. And on H1, if you see, it will be onwards INR 2,000-odd.
Understood. Understood. Got it. Sir, my second question is on the balance sheet. Our net debt -- I mean, we've not started any growth CapEx, but our net debt has been on the rise over the last 2, 3 years. What sort of annual CapEx are we looking at this year, next year? And when do we start the growth CapEx for the new expansion?
From this year, we have actually projected to the ministry of around about INR 6,000-odd crores of CapEx. But next year, of course, it will go because many of our major CapEx -- we'll be freezing most of our contracts for our ESCO modernization also. And also some of the major projects which we have taken up, like the blast furnace of revamping of the blast furnace of Durgapur and the [indiscernible] Durgapur -- so the major expenditure for this will start coming in from next year onwards. So next year, we are -- I'm not able to predict the exact figure to you, but it should be surely more than what it is for this particular financial year.
Got it. And sir, if I can just squeeze in one more. For the last few years, we've just been able to sell around 2 million, 2.5 million tonnes of iron ore, and we are holding around 40 million tonnes of iron ore inventory, which we have basically recording in the balance sheet at around INR 4,000-odd crores. Sir, I mean, are we -- I mean, what are we looking practically over the next 1, 2 years? And are we looking to write it off because this is unnecessarily inflating our book value and impacting our return ratios.
There is no question of writing it off. Actually, it's an asset which we have got. And this is, as I said, this is not just -- which was like it came into a book sale on about 3 years ago, but it is an asset, which is there -- I don't know clients are not going to diminish it's value, since we are laying out there for another 3 years because we are [indiscernible] can more than 40 to 50 years old also. So they were just valued around 3 years ago.
And yes, we have a plan of reducing the stock. We have already got our pellet plant and manufacturing plant at Goa in the pipeline. So once that comes in, there will be a depletion of around about 3 million to 3.5 million tonnes of iron ore from Goa, which is a main place where the majority of the stock is there. And now we have got permission also to dispatch from there to our steel plants also. So we are gradually dispatching material from there to our steel plant.
Next question is from the line of Amit Murarka from Axis Capital.
So just on Wales not to price booking, just wanted to understand generally how do you do it? Like typically, let's say, if prices going up. Is it also possible that the sale that there is overbooking of rail realization? And then there is, let's say, some write-back that happens later. Is that also possible for you always book it on a conservative basis?
Actually, what happens is we have got a system [indiscernible] pricing. Like normally at the beginning of the year, the railways normally tell us that this particular add-on price for a particular year. So we consider that for raising invoices on them.
Subsequently, we take up immediately because that is based on some historical data, then we pick up with the railway that the prices have gone up or there are indications of the prices and the cost going up. And the request for -- because the railways to give us an adhoc price. So once the revised adhoc price is given, we do the accounting on that, invoicing as well as accounting on that.
Subsequently, when we submit our details to the CA Cost Organization. So once the CA cost finalizes the prices for us, we are committed to the railways. Now based on whatever prices have been finalized by the CA costs, we have discussions with the [indiscernible]. So when we have discussions with the railway, so there are some sort of negotiations with them. And normally, a few -- you can see some certain percentage of prices, they request for a reduction, which we negotiate and we finally come to our final price. So that is the final price for a particular year
So this is the base on which we work. So basically, it and every step, whatever is the price available with us, we do our accounting on that.
So also to understand, let's say, the notional price that but add on price that railways would have shared with you, let's say that price is actually higher than the current market trends. So would you kind of then advise the railways about it and accordingly book the realization at a lower price? -- or maybe...
Normally, what happens is -- We, for example, we just give the railways that our price is going to be [indiscernible] figure. So railways is also a bit conservative. Normally on that day, it is another [ INR 5,000 or ] something like that engage to us as an ad uprise. They will not give us that exact price. So then once the CA cost finalizes then we get the benefit of that.
The bottom line, it is always lower than the real market price and there is always a higher recovery that comes in the ...
Yes, except when the final pricing negotiation goes on with the railway at that point of time, we have to -- we normally have a reduction in that. Because that when we take it into the particular quarter where the impact comes in, where we finalize it.
And the final price that is decided, is it a cost-plus mechanism? Or is it simply linked to how, let's say, the historical prices have ...
No, No. It's [indiscernible] absolutely. The adviser costs the agency will actually take all the cost details from us. And based on that, the cost -- the pricing of the rate is right.
So, it's a fixed margin business in railway?
Yes, yes. It's a fixed margin.
Understood. And the receivables again would be subject to railway budgets, right? I mean now how good the budgets are...
Actually, normally, what happens is railways -- we haven't faced much of a challenge for budgets from the railways because our'e is a very small portion of the entire railway budget. But there were some challenges in the year 2021 in the [indiscernible] and 2021 when the budgets are [indiscernible]. So then they give us extra support that we know our financial year [indiscernible].
Understood. And also lastly, could you also refresh about the CapEx plan for this year and next year?
Well, this year, like I told you that we'll be having a CapEx of around about INR 6,000 crores -- around INR 6,000 crores. Though initially, we had estimated in our budget estimates for [ '24 ] at INR 6,300 crores. So we expect that it should be around about INR 6,000 crores. We have already spent over INR 2,250-odd crores in the H1 period. And normally, the CapEx picked up when we -- during the second half.
Sure. Understood. And the big CapEx program will mostly start from FY '27. The expansion...
Not -- FY '25. I think some major expenditures will start coming in from '26, '27. '25, '26, we may -- we will have these initial advantage which we have to give -- and for the gains and engineering and all these things, we will have to give some money for that. And some expenditure, which I had also told you earlier that we have already placed orders for some of the major packages.
So like the Barnat Durgapur and the blast furnace also at Durgapur -- and also stand battery for Rourkela. So there are some progress payments will start coming in from next year onwards '25, '26 onwards.
Next question is from the line of Kirtan Mehta from BOB Capital Markets.
This quarter, we are seeing an improvement in the structural steel production to 16% from historical trend of 8% to 9%. What has helped to increase the structure in steel production this quarter?
Actually, what has happened is that we have got 2 major new mills. One is an MSM at Durgapur Steel Plant. And the other one is this is a medium structure [indiscernible]. And then we have the universal structural mill in Cisco. So these mills have now stabilized, and the products have also been accepted in the market. So because of that, there has been quite a good increase in the volumes of sales of these products.
But in terms of the profitability, when we look at around INR 3,100 per tonne, this is still not sort of fading to the profitability. So what will be the reason that despite the increase in structure and steel production, we are not seeing the corresponding increase in the process?
In the profit means -- see, basically, what is happening is that the price of flats has not gone up getting the flat products has not gone up during this quarter. So this is a major challenge, which is there. As far as long is concerned, which also includes the structure the improvement in prices is there. And further in the month of October also, we see a further improvement in prices following over the surprises of long [indiscernible]
Typically, this structural product from MSM and the U.S. and how much additional realization it will generate over the benchmark indicator?
It will see what happens is now see, we have got basically these 2 major mills, which are there -- from this, we will be trying to market the products. There will be some mills for the -- we'll be gradually phasing it out like we have a section mill in Durgapur. So the product from that will be gradually phased out over the years. So we can say that whatever indication of the pricing is that is is little of these [indiscernible] .
Right. Another question in terms of when we look at the sellable still it was around 4.2 million tonnes, again, we [indiscernible] production of 2.7 million tonnes. That has changed to 4.6 million tonnes during this quarter, versus coal production of around 4.8 million tonnes. What is the reason for lower sellable steel availability during Q1?
Yes. We will just tell you what has happened is our Hosted mill at Bokaro. It was under major maintenance. It was, of course, a planned maintenance during Q1. So that is why there is a difference of the sellable and crude steel.
And what is the reason for increase in the semi proportion to around 16% this quarter, which was sort of trending down to 13%, 14% in the earlier quarter?
It could be -- it is similar as the thing because what is happening is we have produced flats, which are also constructed of semi. So that production has entire -- has actually gained this ratio to some extent. That's for the Bokaro, where we were not able to take HR cost. We are not able to produce the finished products.
Understood. But in terms of the expansion projects that we are undertaking in the app, what stage of approval we are in, at this point of time?
Really the Durgapur Steel Plant -- yesterday in the Board meeting, the Board has considered a proposal of brownfield expansion of Durgapur Steel Plant also.
So we have now the Stage 2 approval to go ahead would be ...
We don't the Satge 2 approval. See, we have stage where we will be having the stage on accrual for this brownfield expansion of Durgapur . And we already have the sales on approval for [indiscernible] Steel Plant also.
Right. And how far we are from the Stage 2 approval now?
Stage 2 for the -- Durgapur should take another -- you can say, 8 months or something, 6 to 8 months because we'll immediately start on the tendering and then come back to the Board for the Stage 2 approval. And in case of [indiscernible] Steel Plant, already out of the major technical packages, I think out of 14 major technical packages, I'm not sure of the figure, but it should be 14 out of which already 8 packaging we have tendered out. So we'll start getting the offers now and evaluate it -- probably by middle of next year, we'll be able to freeze that also.
Right. So probably the CapEx spend will start after basically in the second half of the next year once we get the Stage 2 approval?
That is what I had already explained earlier also. That maybe the initial payments like upfront payments against some -- some milestone payments will be made next year, '25, '26 by the end. And some progress payments of all these are projects which are already for which we have placed orders like the [indiscernible] battery and the mill and the blast furnace of the Durgapur, they will start in '25, '26.
Next question is from the line of Pallav Agarwal from Antique Stockbroking.
i have a question on the segment -- segmental data. So if I look at the segment assets and liabilities for this quarter, is it sharply lower than previous quarters across all plants. So has there been some reclassification or usage or there some [indiscernible] in reporting these numbers?
Yes. Pallav, this is Amit. Actually, yes, you've noted it correctly, there has been some inadvertent error while reporting those numbers. We've already taken action against that. and the revised numbers will shortly be put up on the website. Maybe you can refer to the Q2 numbers that are -- H1 numbers that are being displayed there. These are the numbers which will hold true for Q2 as well.
Okay. At least in terms of the assets liabilities -- Okay. The other question was on coal cost, you mentioned of INR 20,000 that you expect. So this is really imported coal or this is a mix of both imported and domestic coal?
No, this is imported coal.
And what will be the mix right now of imported coal?
See, basically, we are having a [ 85%, 15% ] mix. 85% of imported coal and 15% is [indiscernible] coal.
And how would the domestic coal...
Indigenous domestic coal. It's in the range of round about -- it is also linked to the imported coal prices. And it will be in the range of around about [ INR 13,000 to INR 13,500 ] .
Sure, sir. Sir, lastly, so what is the utilization levels that you're operating at in terms of crude and saleable steel. Because if I remember, we had some, I think, debottlenecking and the cast or something of this plan. So are you operating close to optimum capacity right now? Is there some headroom -- still level?
No. Actually, we are basically operating at a very good capacity. So -- so we will be having an annualized true production of around 19.2 million tonnes. So this is more or less, I think it will be more than 95% of our capacity.
Okay. So unless we go for the next year of expansion, volume growth may not really happen in a material way?
It's not like that. Actually, we have got some of our debottlenecking schemes also, which will be coming up now. And we are trying to set our assets also so that they go up by -- means another 2.5 million to 3 million tonnes are added during the coming 2 to 3 years.
Next question is from the line of Raashi Chopra from Citi Group.
Just on the MSR, you mentioned that the average was about [ 5,500 in ] this quarter. Could you split it up for flats and longs, please?
Yes. For this quarter are, the long will be around [ 52,000 ] and the flat will be round about [ 49,000 ].
And on a spot basis, what is the data -- where are flat and where are long?
In the month of October, it was -- for the flat, it was around [ INR 46,500 to 41,000 ]. And for the flat, it was [indiscernible]
This is October -- and November as I speak?
November, a slight marginal improvement -- marginal improvement in both the cases.
Then on the volume side, how much initial inventory we have at the end of the quarter?
Come again, I didn't get your question.
The final steel inventory, which was about [ 1.8 million ] as of June -- the end of the June quarter. What is that standard of September?
It's at [ 1.93 million ] .
And what sales volume are you targeting for the full year FY '25?
Around [ 18 ]
Just lastly, on your last question, on the growth plan, are you maintaining that the 35 million tonne targeted by FY '31?
Yes, yes. We are still maintaining. And we going in line with that.
So, as of now, it's creating capacity by about 3 million tonnes, you have got [indiscernible] 4 million tonnes, Bokaro at about 2.5 million tonnes and Durgapur for about [ 1 million tonnes ].
[ 1 million tonnes ]. And then we have got Rourkela Steel Plant, which will also be coming in. So that is also there around 3.8 million tonnes.
When is this expected?
This will be -- we are awaiting for some clearances of land -- so once those clearances of land come in place, so then also that we'll take up this expansion plan. But then we -- it is planned within -- by '31.
Next question is from the line of Rahul Gupta from Morgan Stanley.
A couple of questions. First, just taking forward there is expansion pipeline. I remember you talked about Bokaro expansion as well of 2.4 million tonnes. Any update on what's happening on its approval? Durgapur, you got the first round of approval, but any update on Bokaro?
Bokaro, will be -- actually a PFM has already been made for Bokaro Steel Plant. And the final DPR it has already been prepared, but it is under examination.
OkayGot it. Another question that I have is on coking coal. I remember last quarter, you talked about some long-term coking coal contracts booked which would have run off by December or January. So what -- and what's the update on that? The reason I ask this question is because you talked about coking coal -- international coking coal prices coming up by [ INR 1,600, INR 1,700 ] quarter-on-quarter. So just trying to -- we -- both the data over here.
See, basically, these long-term agreements, we have a system of having a long-term agreement for 3 years, which is extendable for another 2 years. So the majority of these are now in the year '24-'25, we'll be coming to end, but then we'll be continuing this contract with these long-term suppliers. And the pricing, of course, see the pricing is very clear that it is a percentage or a discount or a premium on the [indiscernible]. So that will be negotiated. This is normally negotiated by all the steel companies there normally for the next financial year -- just in the quarter booked prior to the beginning of the financial year.
So that is what we are doing. And regarding these agreements already we have taken up with all the suppliers to finalize these agreements, which are mainly the commercial terms which will be finalized before we go in for these negotiations with the suppliers regarding the quantities and the rates, which will take place in the month of April.
Okay. Got it. So just trying to understand this better. So when you had done this contract earlier this year, so where are prices now versus the contracted prices then?
As I explained to you, all our prices are based on the indices. Okay. So whatever is the price, which is right. I suppose I have a supplier from whom I have negotiated and taken [indiscernible] discount. So this [indiscernible] discount prevails for throughout the year based on -- and the base of that is the [indiscernible].
Next question is from the line of Pratim Roy from BNK Securities.
I have just 1 or 2 questions here -- fastly. [indiscernible] how much more real size sinew can expect the second half. That is the first question. And the second question is that what kind of deduction you can expect in the next 2 to 3 years. [indiscernible] there is no major CapEx in the pipeline. So how much did you can expect to [indiscernible]
Regarding the pricing of Vale, the system, which normally is there is now see its -- steel cost has submitted its pricing to the railway for 2023. Now '23, '24 rail pricing has to be submitted by CA costs to the railways. So for that, the rail rates have to submit request to the cost to finalize the pricing. So that we are now following up with the railways to request the CA cost to start that activity. once that activity starts, we submit the deals to the CA costs.
And then normally, they finalize it within 2 to 3 months' time. So this is the [indiscernible] price. So if the CA cost is able to indicate pricing for '23, '24 -- within 31 March '25, then we'll be taking the benefit of that in '24 '25. As it can get carried over to the next year.
Second half is an [indiscernible]
Regarding the debt reduction, -- we are -- from today's level, like it's round about INR 34,500. We are planning a reduction of around about another INR [ 4,500 crores to 5,400 ] crores in the remaining part of this financial year. provided the -- Supporters.
In this financial year, we are expecting that INR 5,000 crores [indiscernible]
[indiscernible] from today. So you can say it should be in the range of INR 29,000 crores, INR 29,000 corers to INR 30,000 crores.
On the end of the financial year, rightl?
Yes, yes.
Next question is from the line of Vikash Singh from Phillip Capital.
Sir, now that we have also decided to grow the Durgapur plant as well -- just wanted to understand with Isco and Durgapur already the finalization happen. What is the peak level of debt which we will be comfortable with? Because as you see that are the interest cost is very high and we are very suspectable to the EBITDA levels.
See, we have planned our entire expansion considering a debt-to-equity ratio of 1:1. So in that, the maximum debt, I think we will reach is -- this will be at around INR 1 lakh crore. The debt equity -- that one -- The debt debt will be in the year, it will maximize that in the financial year '28, '29 and the debt equity ratio at that point of time will be around [ INR 1.1 crore ]
Understood, sir. And sir, sir, any update on our normal pellet plant side, if you could like to give?
The pellet plant, there are quite a few pellet plants in the offing. Tamacoming on farm basis, construct on and manage and maintain construct operators maintained. So this 1 plant is coming up at life of 1 million tonnes, then we are having another plant, which is coming up at Rourkela Steel Plant. So this will also be there of around about 2 million tonnes. And then we have one large plants, which we are planning to set up at [indiscernible]. So this plan also it's a design a 4 million tonne pellet plant, which we are planning out there. So this is also -- there's also some jobs have already been started by our consultants -- to procure the final DPR for this. And the fact that for and is quite tele security we will also be having a comp plant of this.
Understood. Sir, just 3 last question. Though we have heard about a INR 1 lakh crore CapEx number. As a far, we only understand that the scope would be INR 35,000 crores. So could you give me what -- how much plant wise we are thinking about spending this bifarcation of this INR 1 lakh crore over plant size?
See, the DPR of the other plants have not yet been frozen. So this is just an indicative figure which we have taken for the time being. And once the DPS program and maybe not only the DPR once all of the place, we will come to know what is the actual CapEx outflow for this modernation and expansion projects. So for the time being, we are only considering this on some sort of an assumptive basis. It is the moment any of the projects is frozen or the expansion plan in even, then only we'll be able to declare of what is CapEx.
Understood, sir. Sir, just one clarity on these assumptions of INR 1 lakh crores, this INR 1 lakh crore assumption is average or on the higher side, the business just wanted to understand once we start funding, I think what is the probability of this number going up?
We really do not know what is going to happen. This is our calculation. This is the calculations by our consultants and our team of expert and all. So we maintain that for the time being.
Let that be your last question, we take balance offline.
Ladies and gentlemen, we will take this as a last question for the day. I now hand the conference over to the management for the closing comments.
Thank you very much. Quite a lot of good questions asked by the various analysts. And I appreciate that the thinking about sales -- and I assure you that this company has improved in the coming months with a lot of emphasis on cost reduction and profit maximization. And so -- thank you, everyone. all the best.
On behalf of Novation mites, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.