JINDALSTELNSEQ2 FY2023November 17, 2022

JINDAL STEEL LIMITED

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119turns

12analyst exchanges

4executives

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Management on call

Amit Dixit

ICICI SECURITIES LIMITED

Bimlendra Jha

MANAGING DIRECTOR - JINDAL STEEL & POWER

Ramkumar Ramaswamy

CHIEF FINANCIAL

Gourav Sancheti

INVESTOR RELATIONS - JINDAL STEEL & POWER

Key numbers — 40 extracted

2.01 million

e can open up for Q&A. Let me start with the sales volumes. For the quarter, our sales volume was 2.01 million tonnes. This was higher than the last quarter by around 16%, primarily driven by the higher domes

16%

uarter, our sales volume was 2.01 million tonnes. This was higher than the last quarter by around 16%, primarily driven by the higher domestic sales of around 36%. This was offset by lower exports of

36%

gher than the last quarter by around 16%, primarily driven by the higher domestic sales of around 36%. This was offset by lower exports of 48%. Because of the export duty, we have seen the share of e

48%

primarily driven by the higher domestic sales of around 36%. This was offset by lower exports of 48%. Because of the export duty, we have seen the share of exports declined to roughly around 11% of

11%

of 48%. Because of the export duty, we have seen the share of exports declined to roughly around 11% of our overall volumes as against 25% last quarter. The production was 1.82 million tonnes. This

25%

e have seen the share of exports declined to roughly around 11% of our overall volumes as against 25% last quarter. The production was 1.82 million tonnes. This was lower versus last quarter by aroun

1.82 million

ined to roughly around 11% of our overall volumes as against 25% last quarter. The production was 1.82 million tonnes. This was lower versus last quarter by around 9%. This was primarily driven by shutdown in

ast quarter. The production was 1.82 million tonnes. This was lower versus last quarter by around 9%. This was primarily driven by shutdown in our Raigarh plant during August. There were also schedu

13%

in Angul during the quarter. Let me now talk about the realizations. Our NSR was lower by around 13% versus last quarter. Our domestic realizations declined by 9% and our exports declined by around

21%

versus last quarter. Our domestic realizations declined by 9% and our exports declined by around 21%. If I were to give you a current view, currently, we are seeing realizations stabilizing and our

nd our October realizations is broadly around Q2 level. Costs; our SMS costs declined by around 8% versus last quarter. This was primarily driven by lower coking coal prices of around 6% and lower

by around 8% versus last quarter. This was primarily driven by lower coking coal prices of around 6% and lower iron ore prices of around 24%. If I were to translate this into rupees per metric ton

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Guidance — 20 items

Kamlesh Bagmar

“In terms of tax, we will be making the final provisions by end of the year.”

Siddharth Gadekar

“When can we expect all the coal mines to be operational?”

Siddharth Gadekar

“If I am not wrong, we had one coal mine in the past six to nine months, so when can we expect all the mines to be operational and contributing at 80%, 85% utilization?”

Siddharth Gadekar

“Second, in terms of iron ore also we had to ramp up the second mine, so when can we expect 100% utilization in that mine?”

Bimlendra Jha

“If you do it earlier, there will be great luck.”

Siddharth Gadekar

“Okay, you mentioned fourth quarter of FY2023, the coal mines will be operational?”

Siddharth Gadekar

“Okay and when can you expect 80%, 85% by FY2024 end or early FY2025?”

Indrajit Agarwal

“I think earlier, you had said that ideally, we will have 20% odd of your volumes as exports in this year of your volumes of 8.1 million to 8.2 million tonnes, does that guidance still hold or do you think that because of the export duty, your export proportion could be much lower than earlier anticipated?”

Bimlendra Jha

“Let us not go by any guidance on percentage.”

Bimlendra Jha

“We are not giving you any guidance on percentage.”

Risks & concerns — 6 flagged

We are not finding it difficult to sell the material that we are producing.

— Bimlendra Jha

Assuming export prices remain where they are, would there be a risk to the 8.1 million to 8.2 million tonne number as well or that number remains as is?

— Indrajit Agarwal

Are you seeing any concerns, rate availability or actual shipment availability or that is not a concern?

— Indrajit Agarwal

Pricing could be volatile, but actual material availability, is that a concern?

— Indrajit Agarwal

Absolutely no concern other than if something else happens that we do not know into the future.

— Bimlendra Jha

Once again, when we hope for it, it all depends upon all the clearances, everything that happens and which we are seeing no reason for concern, but who knows when what happens.

— Bimlendra Jha

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Q&A — 12 exchanges

One question on the part of this cash flow. In the cash flow, we have made one footnote that cash neutral to the extent of Rs.4386 Crores with respect to the sale of strip in JPL; what does that mean and how much tax we have provided for that particular transaction? Ramkumar Ramaswamy: This is really loans that have been transferred to JPL. That is what has been reflected over here. In terms of tax, we will be making the final provisions by end of the year.

Kamlesh Bagmar

This Rs.4386 Crores is the net which we have realized or I believe Rs.3000 Crores was the equity component and roughly if we say Rs.4400 Crores, so does that mean that Rs.1400 has been in the debt reduction? Ramkumar Ramaswamy: The equity consideration was Rs.3015 Crores and the loan that was transferred is Rs.4386 Crores. Okay, but what does that mean that transaction to the extent of Rs.4386 Crores? Ramkumar Ramaswamy: Sorry, can you repeat your question, please? What does that footnote mean that it is cash flow to the extent of Rs.4386 Crores? Kamlesh, I think, we will give you the details

I have just two questions. First is on the coal mines. When can we expect all the coal mines to be operational? If I am not wrong, we had one coal mine in the past six to nine months, so when can we expect all the mines to be operational and contributing at 80%, 85% utilization? This is my first question. Second, in terms of iron ore also we had to ramp up the second mine, so when can we expect 100% utilization in that mine?

Bimlendra Jha

Okay. Thanks, Siddharth, for this question. First of all, with all fingers cross, all caveats, I do hope in this country when I say that this is the date where I can do something. I do hope everything falls in place. By that, Q4 of the current fiscal is what we are expecting our coal mines to be operational and start giving us results. If you do it earlier, there will be great luck. If it is later, then it is bad luck. But otherwise, that is what is visible as of now to us from our plants. As far as iron ore is concerned, we are actually in a very sweet spot in India. When we get iron ore chea

Thank you for your question. We have a fully owned subsidiary called Jindal Steel Odisha and most of the investment that we are talking about under this number that you said, which is without considering GST, under that most of the investments are coming up in under Jindal Steel Odisha, because it is a 100% owned subsidiary, that does not mean we have to sell any assets or anything else other than the transfer of land that has to be there, which has to be under Jindal Steel Odisha. Does that answer your question? Prashanth Kumar Kota: No. Where I am coming from is in the past, for example, the

Bimlendra Jha

I can categorically say no, because this is an integrated facility with the rest of the plant site and doing anything like that would not be advantageous to us. It is much better to have this integrated site as a part of JSP, with a fully owned subsidiary, giving some benefits and that is what we can explain. Prashanth Kumar Kota: Understood and allays of concerns of the investors. Thank you so much and wish you all the best.

Good evening. Could you actually give some more color on what exactly is this forex one- off; we had this item actually even in the first quarter, so what exactly is this nature? Is it an exceptional item or it recurs every quarter? Ramkumar Ramaswamy: Thank you for your question. As I mentioned, we have close to $1.5 billion of loans that have been given to our overseas subsidiary, JSP Mauritius and we have been accruing interest on this loan and we have also been revaluing this loan based on the current forex, so the gain that you see is based on the revaluation.

Pallav Agarwal

But in the consolidated accounts, would not that not be knocked off or you still see a gain in the consolidated accounts? Ramkumar Ramaswamy: We will still see a gain on the consolidated level because the overseas entities are dollar repatriates. Okay, so is it more of a translation effect? Ramkumar Ramaswamy: That is right. The other question was on coking coal, what can be the reduction in cost in Q3 compared to Q2 in terms of coking coal? Third quarter is, your guess is as good as mine, so rather than making any forward-looking statement, what I would say is keep our finger crossed that it

Good evening everyone. Thanks for the opportunity. Two questions. One is, in this quarter, how our thermal coal prices have moved and impacted our profitability and what is the status right now and second question is on …

Bimlendra Jha

You are saying thermal coal prices, how they have moved in the last quarter with respect to the previous quarter. Is that the question? Yes. My first question is that because you have mentioned about iron ore prices falling by Rs.3000 and coking coal down by Rs.3800, but you have not mentioned about thermal coal prices, which hit profitability. 800 or 3800? Ramkumar Ramaswamy: 800 not 3800. Thermal coal has moved negative by Rs.600 to Rs.700 per tonne. Per tonne of steel? For the quarter. Rs.600 per tonne of steel, you are talking about, thermal coal? Yes, per tonne of steel. What is the statu

I had a couple of questions. First, in the press release, the one-off in the EBITDA that you mentioned, is it also related to the loans given to JSPML because that should ideally appear on other income or below EBITDA, just trying to understand if that understanding is correct or is this to any other item? Ramkumar Ramaswamy: No, as I mentioned, this is entirely related to the loans that were given to JSPM.

Indrajit Agarwal

My second question is on the export mix. It has reduced in this quarter. I think earlier, you had said that ideally, we will have 20% odd of your volumes as exports in this year of your volumes of 8.1 million to 8.2 million tonnes, does that guidance still hold or do you think that because of the export duty, your export proportion could be much lower than earlier anticipated? If the international prices improve, we may be able to find it better to sell abroad. We are not finding it difficult to sell the material that we are producing. We have, in fact, liquidated most of our inventories. We c

Good evening and thank you for the chance. My first question is on the coal mines. Now I believe, in the previous question, you did mention some time in fourth quarter, fingers crossed, so in a base case budgeting, what sort of volumes are we factoring for FY2024 and 2025? If you can just versus linkage coal, what sort of cost savings could come in from the captive coal mine?

Bimlendra Jha

You are again asking me forward-looking questions. I will only give you a little bit of a hint that it is going to be substantially lower cost than our purchased coal cost. Now beyond that, giving any specific numbers is not something that I would like to engage in because it is a forward-looking statement. Okay. In terms of volume ramp up, I understand there are a lot of externalities, which can impact, but in your base case, what is the volume which you are expecting in 2024 and 2025? Base case volume impact on this is that we would like to use at least 50% of the thermal coal that from our

Thanks for the opportunity. My first question is for Mr. Jha. I just wanted to understand what are your key priorities, when we look at next three years or five years? That is the first question.

Bimlendra Jha

Thanks, Mr. Shah, for this question. Priorities, number one is stable operations; number two is to continually reduce our energy costs because it is great for the environment and great for costs. It is also from an ESG perspective that we want to continually be in the right direction as far as our ultimate aim of net zero is concerned, so we would continue to work on our projects that allow us to move in that direction. There is, of course, readiness that we would also have in our DRI for accepting green hydrogen as and when that becomes commercially more viable. We would be conducting experim

Good evening and thanks for the time. You briefly touched about the demand, but could you be a little elaborate on the domestic and also on the international market demand trends that you are seeing?

Bimlendra Jha

On the domestic market, you may be already aware, that India is the only country in the world, which is growing in terms of steel demand and consumption. In India this year, we are expecting 2023 to be around 121 million tonnes in calendar year 2023 as against 113 million tonnes in calendar year 2022. Compare this to the Chinese demand of 914 million tonnes that was last calendar year, which remains stagnant and EU plus U.K., 159 is coming down to 157. At the world level, therefore, if you look at the numbers, 1796 last year is likely to be at 1814 this year, which is around 18 million tonnes

Thank you for giving this opportunity. Just going back to the coal mine projects where you stop giving...

Bimlendra Jha

We have stopped hearing your voice. Whatever we stop giving, the coal mines, please unmute yourself. It was sort of referring to the coal mine projects that you were saying you are targeting around average 50% utilization level. In terms of sort of what I understand is the total project potential would be around 15 million tonnes, so would that mean that 6 million to 7 million tonne of the production across five mines we are targeting in FY2024 and could you also give us a start-up date for each of the five mines that you are targeting and typical ramp-up period to achieve 100% capacity output

Thank you. Good evening everyone. A couple of questions on the coking coal, just wanted to understand. I think from the press release also, it seems like there is a slightly slower ramp-up in the Australian coking coal mine. Initially, the expectation was for a certain volume target and FOB delivered after washing cost of, if I am not mistaken, $150 to $200 per tonne. It looks like it has not been able to achieve that number yet. But what is surprising you at that mine compared to other expectations and can we expect some improvement in future? That is the first question.

Bimlendra Jha

Yes. For the Australian mines, we have faced certain issues there and it was related to some equipment, it was related to washeries, it was related to the way we were planning for our mines and we have taken some actions to tighten those kind of things and make sure that we have the washery that comes up. These things are going on as we speak and the performance improvement we can see on a day-to-day basis. However, there are also in an underground mine, there are lots of uncertainties that are there. These uncertainties we are dealing with, but we are seeing a constant improvement trend and w

I would like to thank everyone for attending the call and thoughtful discussion we had this evening. I would now like to hand over the call to Mr. Jha for any closing comments. Over to you.

Bimlendra Jha

Thank you very much. I think these were very good questions and a nice conversation that we had, at least I enjoyed it. I hope you did. It is good to ask these questions and keep us thinking. With your questions, we also start thinking of new things. So please keep coming back to us with your intelligent questions like these so that we can keep thinking of new things that we can do. I hope that you have been able to see that as far as operational performance is concerned, hopefully, you are able to see very clearly that JSPL has returned on operational basis much better results than any of the

Speaking time

Bimlendra Jha

Moderator

Ashish Kejriwal

Kirtan Mehta

Pallav Agarwal

Sumangal Nevatia

Vishnu Kumar

Kamlesh Bagmar

Indrajit Agarwal

Satyadeep Jain

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Opening remarks

Amit Dixit

Thank you, Faizan and good evening, everyone. On behalf of ICICI Securities, it is my pleasure to welcome all the participants for JSPL's Q2 FY2023 Conference Call. At the outset, I thank the JSPL management for giving us an opportunity to host this call. From the management, we have with us Mr. Bimlendra Jha, MD and Mr. Ramkumar Ramaswamy, CFO. Without much ado, I would like to hand over the call to Mr. Gourav Sancheti from Investor Relations, JSPL, to take this forward. Over to you, Gourav.

Gourav Sancheti

Thank you, Amit. Good day, everyone. On behalf of Jindal Steel & Power, we welcome you all to this call to discuss our results for the second quarter of FY2023. We have with us our MD, Mr. Bimlendra Jha; and our CFO, Mr. Ramkumar Ramaswamy. I would request our CFO Mr. Ramkumar Ramaswamy, for his opening remarks. Ramkumar Ramaswamy: Thank you and good day and good evening everyone. Let me give a brief overview in terms of our operational and financial performance and then we can open up for Q&A. Let me start with the sales volumes. For the quarter, our sales volume was 2.01 million tonnes. This was higher than the last quarter by around 16%, primarily driven by the higher domestic sales of around 36%. This was offset by lower exports of 48%. Because of the export duty, we have seen the share of exports declined to roughly around 11% of our overall volumes as against 25% last quarter. The production was 1.82 million tonnes. This was lower versus last quarter by around 9%. This was primar

Gourav Sancheti

Thank you CFO Sir. As always, we request all of you kindly ask more strategic questions. IR team is always there to give you the data points. With that, I will probably hand over the call to Faizan. Over to you, Faizan.

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