JINDALSTELNSEQ4 FY22June 04, 2022

JINDAL STEEL LIMITED

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83turns

8analyst exchanges

4executives

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Management on call

V. R. Sharma

MANAGING DIRECTOR, JINDAL STEEL & POWER

Ramkumar Ramaswamy

CHIEF FINANCIAL OFFICER, JINDAL STEEL & POWER

Nishant Baranwal

HEAD (INVESTOR

Ashutosh Somani

JM FINANCIAL

Key numbers — 40 extracted

5.5 million

t present. They have also contributed a lot in the overall growth of the company. We started with 5.5 million tonne in 2019 and 6.3 million tonne production, then 7.2 million tonne production and 7.6 million

6.3 million

ributed a lot in the overall growth of the company. We started with 5.5 million tonne in 2019 and 6.3 million tonne production, then 7.2 million tonne production and 7.6 million tonne and now 8 million tonne

7.2 million

of the company. We started with 5.5 million tonne in 2019 and 6.3 million tonne production, then 7.2 million tonne production and 7.6 million tonne and now 8 million tonne production. So, we have done 8 mil

7.6 million

5.5 million tonne in 2019 and 6.3 million tonne production, then 7.2 million tonne production and 7.6 million tonne and now 8 million tonne production. So, we have done 8 million tonne last year, whatever we

8 million

and 6.3 million tonne production, then 7.2 million tonne production and 7.6 million tonne and now 8 million tonne production. So, we have done 8 million tonne last year, whatever we promised to the state a

rs,

on. So, we have done 8 million tonne last year, whatever we promised to the state and to our lenders, Financial institution and to our shareholders, we have fulfilled. We took a target of 15, 15, 50 a

Rs.15,000 crore

nd to our shareholders, we have fulfilled. We took a target of 15, 15, 50 and 8 million, That was Rs.15,000 crore and above should be the EBITDA, Rs.15,000 crore or below should be the debt level and m

Rs.50,000 crore

should be the EBITDA, Rs.15,000 crore or below should be the debt level and more than Rs.50,000 crore should be the overall revenues and 8 million ton should be our production. So, with the support o

Rs.8500 crore

eded the expectations. Like the debt levels, they have come down to a level of four figures i.e., Rs.8500 crores and now on May 30th this has come down less than Rs.6000 crores. So, we are aiming to make the

Rs.6000 crore

to a level of four figures i.e., Rs.8500 crores and now on May 30th this has come down less than Rs.6000 crores. So, we are aiming to make the company to make that zero within this financial and then we have

120 million

ny to make that zero within this financial and then we have overseas the payments are about only $120 million this also will be done and then we will not have any obligation in the overseas investments also.

Rs.56,000 crore

r the business economics. Now coming back on the last year Rs.15,000 crores EBITDA, we achieved Rs.56,000 crores of sales turnover . We did 7.64 million tonne steel, if you see the overall average EBITDA in th

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Guidance — 20 items

V. R. Sharma

opening

“We took a target of 15, 15, 50 and 8 million, That was Rs.15,000 crore and above should be the EBITDA, Rs.15,000 crore or below should be the debt level and more than Rs.50,000 crore should be the overall revenues and 8 million ton should be our production.”

V. R. Sharma

opening

“So, we are aiming to make the company to make that zero within this financial and then we have overseas the payments are about only $120 million this also will be done and then we will not have any obligation in the overseas investments also.”

V. R. Sharma

opening

“We are thinking that the market for the Indian steel products will always be there and we will be in a position to export as much as possible.”

V. R. Sharma

opening

“So, we have put up our people on the job the complete development people, our R&D people to find out those products in the market where the value addition is very high and where the customer will be willing to pay this 15% or little less .”

V. R. Sharma

opening

“So, we feel that out of 2.5 million tonne at least 2 million plus will be duty free and balance 500,000 will be covered under duty but those products will produce in 500,000 tonne which are very high valued product where paying 15% duty by a customer will not be a problem.”

V. R. Sharma

opening

“Hopefully, by the end of this year, we will be in peak of the construction we have plan to cover the entire product line.”

V. R. Sharma

opening

“We are online and there will not be any delay and we will be completing our projects on time and this is going to be the total scenario.”

V. R. Sharma

opening

“We are hopeful that we will be exceeding our expectation in times to come and hopefully the company will always show the glitterness in market as well in true sense in the overall steel business from the origin of the country.”

Nishant Baranwal

opening

“Just the last question which has come is regarding the Mozambique EBITDA, you will be pleased to know that we have been increasing and ramping our production in Mozambique while the EBITDA reported number is roundabout 12.3 million.”

Amit Dixit

“So, just wanted to understand when we will be able supply, what are the approval process and when should we expect and whether it is more an export-oriented unit or something.”

Risks & concerns — 15 flagged

But in fact, it is not lower, instead of adjusting the books in all four quarters our auditors they did it in one quarter only and we accepted their recommendations and that is why you are seeing some pressure on the balance sheet of the quarter four which is actually not there, we are very comfortable.

— V. R. Sharma

So, these are the areas where we can get the benefit and we will try to nullify the impact of duty either by way of the points I explained or by getting the additional price for the specialty products which are now developing, our iron ore team and production team are working very strongly, very hardly in last four weeks’ time and we are now working may be in next 2-3 weeks’ time we will cover it.

— V. R. Sharma

We appreciate their concern, they have reduced the duties of many other products.

— V. R. Sharma

They have also imposed duty on the exports, we appreciate their concern and we feel that these are temporary measures any government would like to take it in the interest of the nation and we and JSP, we have taken a pledge that the only single product which is requires by MSME in our company what we produce that is wire rods and these wire rods will not be exported in the interest of the nation.

— V. R. Sharma

As far as the CAPEX is concern as I told you, Rs.18000 crores is the capex what we envisaged.

— V. R. Sharma

Another question that has come up is, the quarter-on-quarter decline in terms of the EBITDA in foreign geography i.e., Australia.

— Nishant Baranwal

So, we are looking the future and we are discovering a future in this particular product and as far as the approvals are concern the government of India has a straight policy.

— V R Sharma

So, the impact of the coking coal that comes all of sudden, when the market is at its peak and it remains for about 2-3 months in the same level.

— V R Sharma

So, there is a little pressure on the international energy businesses and the worldwide.

— V R Sharma

So, if you could guide, where are we as far as development of the coal block is concern and when do we expect the monthly production and what is the potential cost hitting on that?

— Sumangal Nevatia

As far as the export duties are concern, these are having negligible effect because as I told earlier at least Rs.7000 we are getting from cost reduction as well as from currency exchange rate and balance the products what we are going to produce will be those products where the value addition is very high and the customer will be willing to pay additional price.

— V R Sharma

Now as far as the overall cost is concern, today as I told you from $520 about five weeks back and today is $465.

— V R Sharma

So, that you have to keep into consideration while computing the cost of or impact of coking coal vis-à- vis coking coal impact on other companies.

— V R Sharma

Now to the impact of the coking coal on our numbers is largely differential depending on the captive coking coal, Now as MD Sir, said we have Australia and Mozambique.

— Nishant Baranwal

Because of the impact of the coking coal captive money our cost is expected to about $25 lower on a sequentially basis.

— Vishal Chandak

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Q&A — 8 exchanges

The question is with respect to the arrangement towards contemplating the GIFLO Steel of Hungary for supplying steel for this wagon wheel projects. So, just wanted to understand when we will be able supply, what are the approval process and when should we expect and whether it is more an export-oriented unit or something.

V R Sharma

This is rail wheel set business. We are working on rail downstream business for a long, I think now the government of India is going to add more and more tracks, more rolling stock. You might have seen the news about 15 days back. The railway minister has declared that they ordered about 30,000-wheel sets from China. So, there is a big gap today in India. We are looking for the DRI technology and called forging grade rail wheels in 800 mm and 1000, 20 mm diameter specially for goods trains as well as high speed trains. Since many of the high-speed trains are coming in country under the tag lin

First question is on capex coal block. So, if you could guide, where are we as far as development of the coal block is concern and when do we expect the monthly production and what is the potential cost hitting on that?

V R Sharma

First of all, I would like to thank government of India for their very liberal approach in doing the privatization of the coal mines and that is the need of day. Last eight years it was a big problem, the new coal mines were hardly opened. Most of the mines, were owned by CIL, Coal India Limited and their subsidiaries and the energy cost, energy prices, requirement of energy was increasing at a rate of 15%-20% year-on-year basis. So, now the government of India, felt the necessity that we should now liberalize the coal mines and we should be privatized. As you all know that our coal mines were

You have sort of in the initial questions explained the EBITDA movement quarter-on-quarter, would you be also be able to set of explain us how the net debt reduction has been achieved during the Q4 and FY22 and how do you plan to reach to zero net debt status over FY2023? Ramkumar Ramaswamy: From an inflow perspective we had an inflow of around Rs.5400 crores and what was the primary drivers for this there was working capital release of around Rs. 900 crores, tax refund of around Rs 500 and of course from an EBITDA perspective we had Rs.2800 crores and export repayment of around Rs.1150 crores

Nishant Baranwal

Kirtan I hope that answers your question? Yes. Would you be also sort of lay down a part to achieving the debt 0 status. So, how do you see the cashflow that will us go down to the 0 status from here. Ramkumar Ramaswamy: That is purely from a business performance perspective. We expect to have a good performance this year and we are going to use the cash that we generated out of EBITDA to really repay debt as our MD said before we expect to be net debt free by the end of this year. That is the ambition we are working on. Right and the net debt number that we currently are indicating as of May

Would we think of deferring this pellet to come in and syn with other hot metal expansion or we will go ahead with the pellet plant expansion.

V R Sharma

I will tell you. First of all, as I told you the government policies imposed all of a sudden that does not change the ongoing work because we know that the government policies are basically designed, drafted implemented in the interest of country, in the interest of mankind but we do not have to worry about it because these are the temporary measures taken by government in the world. But we have to see what Prime Minister has told today morning, you must have seen in all the newspapers that post-COVID India is the fasted growing economy in the world. So, with 300 million tonne of grain, with $

Sir on the opening remarks you said some export incentives have been removed, I understand that has happened 12 months back, is there any new thing which has happened in the China or on a certain product category?

V R Sharma

Yes. It is a new thing, day before yesterday, the government has taken the decision. These are on which product category? There is a list of various products. I can share with you. Nishant will share. Okay this is over and above which happen a year back where all the export rebate, incentives were removed on majority of the products. We will share both the list with you. The earlier list and the exclusion in that list those are covered now So, this benefits you and some products which I have included in list yesterday JSP makes that product. Yes, we are, as I told you. First of all this will s

One question on the part of like say last quarter guidance of around Rs.20,000 per tonne even if I take Rs.300 crore of one-time so EBITDA comes at Rs.15,000 so like I am really amazed to tell that like from a guidance of Rs.20,000. We stock at Rs. 13000 and that guidance was at February 2nd so by that time we were well aware of the cost like say we have been maintaining that we carrying inventory for three, three-and-half months much higher than the industrial average. So, what happened in this particular quarter?

V R Sharma

Yes, you are right, we discussed in the last meeting and first of all may be some confusion, I must correct myself and yourself. If you are right then I am correcting myself. My point of view is that the average EBITDA for the year, what it should be, last year with a simple mathematics I am telling Rs.15000 crores of EBITDA with 7.64 million tonne that comes to over Rs.19,800 with simple mathematics and we do not have any other income from anywhere else in the country. Now coming back on the one-off business and as I told you the 600,000 tonne of stock which got stuck up in our plants because

I just wanted to understand what is the current monthly production run rate and dispatch run rate from your coking coal mine and what is target for full year, I understand you were expected to do about 100,000 tons starting March itself and where are we in that position right now. That is my first question.

V R Sharma

We started with a very humble beginning of 40,000 tonne per month. Now we already reached the production of about 70,000-80,000 tonne per month. There was some logistic issues in between but I think business is stabilized we could earn a positive EBITDA of more than 13 million dollars last year and this will increase further. Sir just wanted to understand what is the target for the production and dispatches and not the EBITDA part sir. I told you about a million tonne. One million tonne is what we intent to produce and dispatch to India or sell outside whichever it is. No outside. Sell to JSP.

Thank everybody for joining the call with us today. Apologies we were delayed by 15 minutes, I would like to apologies on that part but thank again and thank you for your support for this. Thank you JM for organizing the conference call. Over to you Ashutosh.

Management

Speaking time

V R Sharma

Moderator

Nishant Baranwal

Vishal Chandak

V R Sharma

Sumangal Nevatia

Bhavin Chheda

Kirtan Mehta

Kamlesh Bagmar

V. R. Sharma

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Opening remarks

Ashutosh Somani

Thanks operator. Good afternoon, ladies than you for dialing into JSP Q4 FY22 Earnings Call hosted by JM Financial. We have with us the top management of JSP to discuss the Results. I will now handover to Nishant Baranwal to do the introductions and to take it forward. Over to you Nishant.

Nishant Baranwal

Thank you Ashutosh and thanks Azar. Good day everybody, thank you everybody for us for this conference call to discuss out Q4 FY22 and FY22 Results. Today from our management side we have with us our MD, Mr. V. R. Sharma. Also, we are pleased to inform you, that we also have with our CFO, Mr. Ramkumar Ramaswamy on this call. Before going further, we will request our CFO to say a few words. Ramkumar Ramaswamy: Thank you Nishant and good day to everybody on the call and a warm welcome to our conference call. This is Ramkumar here. I am a chartered accountant with 25+ years of experience across different organization and different industries. I am really pleased to be joining JSP and working with them for delivering the future growth and profitability agenda. Thank you.

Nishant Baranwal

Also just to add, just to give a brief on Mr. Ramaswamy. Mr. Ramaswamy has worked with Vedanta, Shell, Cadburys and such companies before joining us. And so he brings with him wealth of experience to JSP. Going further we have with our MD, Mr. V.R. Sharma and I would request him for his opening remarks.

V. R. Sharma

Good afternoon, ladies and gentlemen, welcome to this investor’s dialogues, conference and meet. We have done a wonderful job in the last year. if you see the last three years of our score card right from getting into red list to black and from BBB- to AA-. So, we covered a great journey with the corporation of everybody present here and those who are not present. They have also contributed a lot in the overall growth of the company. We started with 5.5 million tonne in 2019 and 6.3 million tonne production, then 7.2 million tonne production and 7.6 million tonne and now 8 million tonne production. So, we have done 8 million tonne last year, whatever we promised to the state and to our lenders, Financial institution and to our shareholders, we have fulfilled. We took a target of 15, 15, 50 and 8 million, That was Rs.15,000 crore and above should be the EBITDA, Rs.15,000 crore or below should be the debt level and more than Rs.50,000 crore should be the overall revenues and 8 million to

Nishant Baranwal

Thank you Sir. Before we move on to question, before the call we have got certain common question which we believe will take it up. So, that a lot of those questions of lot you people would be answered. Let me just the first one, the first one is regarding the EBITDA movement quarter-on-quarter while I understand that you are seeing round worth of Rs.3750 per tonne movement on the EBITDA, would just like to throw some light on the moving parts. So, in that EBITDA movement there is a c. Rs.300 crores one-off. It is a non cash item which is there which you can point out. The other is on the coking coal front, quarter-on-quarter movement has been close to $60 per tonne of coking coal while iron ore has remained flat the cost has increased on account of the thermal coal and ferro alloys to the extent of Rs.1000 per tonne. At the same time we have got benefit of NSR going up to the tune of roundabout Rs.800 per tonne and because the volumes were up. We have been able to get an efficiency in

Nishant Baranwal

Just the last question which has come is regarding the Mozambique EBITDA, you will be pleased to know that we have been increasing and ramping our production in Mozambique while the EBITDA reported number is roundabout 12.3 million. It does take into account negative charge of roundabout $14 million on account of foreign exchange for the loan which was repaid by it. So, therefore, that is not the EBITDA being reported does not reflect the good performance by Mozambique. So, those were the questions which we had got, operator now we pass on to you and then lets take the questions. one request is that please limit your questions to strategic questions, we and IR team here can always help you with data questions.

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