JSLNSENovember 04, 2022

Jindal Stainless Limited

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135turns

12analyst exchanges

6executives

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Management on call

Abhyuday Jindal

MANAGING DIRECTOR – JINDAL STAINLESS LIMITED AND JINDAL STAINLESS

Anurag Mantri

GROUP CHIEF FINANCIAL

Ramnik Gupta

CHIEF FINANCIAL OFFICER -

Goutam Chakraborty

HEAD-INVESTOR

Shreya Sharma

INVESTOR RELATIONS – JINDAL STAINLESS LIMITED

Ashish Kejriwal

NUVAMA WEALTH MANAGEMENT

Key numbers — 40 extracted

95%

ffectively increase our sales volume and achieved highest ever quarterly domestic sales of around 95% on the total sales volume. Demand continued to remain steady in the automobil

28%

Demand continued to remain steady in the automobile sector registering a growth of nearly 28% quarter-on-quarter basis. The company supplied new stainless steel grades, including 432 along

41%

436L and 439 to various auto majors. In the P&T segment, average sales in Q2 FY '23 increased by 41% over Q1 FY '23. Demand was also strong in the lift and elevator segment. Indian Railways continue

25%

Indian Railways continued its trust on increasing its share of business in freight. This led to a 25% jump in our sales to the Railway wagon segment. We also see strong opportunities in core segment

INR 80,000 crore

major focus area for the railways. It is also heartening to note that India is expected to invest INR 80,000 crores in metro projects over the next 5 years, which will further increase the opportunity for our pre

rs,

g to note that India is expected to invest INR 80,000 crores in metro projects over the next 5 years, which will further increase the opportunity for our premium stainless steel offerings. On the expo

relief on the export duty front. During Q2 FY '23 and H1 FY '23, combined exports stood at around 5% and 13% of the total sales, respectively. Domestic sales volume on the other hand, has remarkably

13%

on the export duty front. During Q2 FY '23 and H1 FY '23, combined exports stood at around 5% and 13% of the total sales, respectively. Domestic sales volume on the other hand, has remarkably increas

1 lakh

dition to this, the company has set an organizational goal to reduce its carbon emissions by over 1 lakh tonnes in FY '23 for the merged entity. We are cognizant of our environmental responsibility and

24%

w material prices do continue to remain volatile during the quarter with nickel prices falling by 24% quarter-on-quarter and those of ferrochrome by 18% on quarter-on-quarter. This impacted the reali

18%

ring the quarter with nickel prices falling by 24% quarter-on-quarter and those of ferrochrome by 18% on quarter-on-quarter. This impacted the realization and profitability of domestic manufacturers.

10%

and H1 FY '23. Backed by strong sales volume, the pro forma combined revenue of Q2 FY '23 rose by 10% and 6%, respectively on Y-o-Y and Q-o-Q basis to INR 8,628 crores. EBITDA impact were recorded at

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Guidance — 20 items

Ashish Kejriwal

opening

“We are pleased to note that this quarter, despite a difficult situation company has reported EBITDA per ton of 15,000 plus, which makes first half ‘23 total EBITDA per ton of around 18,000 plus, which is inline with their guidance.”

Ashish Kejriwal

opening

“However management will continue to maintain that guidance.”

Abhyuday Jindal

opening

“On the ESG front, let me update you that we have initiated Project Samanvay with EY in order to – for two-prong strategy; A, to achieve its environmental, social and governance goals; and two is, predict greenhouse gases emissions and set carbon neutrality targets in accordance with the science-based target initiative.”

Abhyuday Jindal

opening

“JSHL has successfully commissioned a 3.5-megawatt rooftop solar power generation project.”

Anurag Mantri

opening

“Hope you had a chance to go through our earnings presentation, which was shared with the stock exchanges and today's call discussion will be on the same lines.”

Amit Dixit

“Just wanted to understand better where this growth is coming from, particularly in 200 cities, whether it is 300 or 400, was there any pent-up demand in certain segments that you expect to taper off?”

Amit Dixit

“And what about the volume guidance for the year?”

Amit Dixit

“Because we heard that last time, it was slightly muted guidance for, would you revise the guiding upward?”

Anurag Mantri

“So last time, we gave the guidance of 5% to 10% volume dip expected in the FY '22.”

Anurag Mantri

“Now I think with this trend, we are expecting, we will close at least a flat volume growth in line with FY '22 of -- so at this stage, so we will -- we are upgrading the guidance in terms of the volumes, which was earlier expected to be down by 5% to 10% from FY '22 level?”

Risks & concerns — 15 flagged

We are pleased to note that this quarter, despite a difficult situation company has reported EBITDA per ton of 15,000 plus, which makes first half ‘23 total EBITDA per ton of around 18,000 plus, which is inline with their guidance.

— Ashish Kejriwal

Globally, demand for industry has decelerated throughout Q2 FY '23, primarily on account of high energy costs, inflationary pressure, aggressive rate hike, rate hike by the US Fed and recession risk in key economies.

— Abhyuday Jindal

As Abhyuday mentioned and as you all know, that this quarter witnessed a major impact of the export duty, coupled with the ongoing challenges in the global macro situation.

— Anurag Mantri

Raw material prices do continue to remain volatile during the quarter with nickel prices falling by 24% quarter-on-quarter and those of ferrochrome by 18% on quarter-on-quarter.

— Anurag Mantri

Performance of the global subsidiary was adversely impacted, as mentioned by Abhyuday, due to the tough global headwinds, inflationary pressures and recession risk in the key economies and export duty.

— Anurag Mantri

So with the decrease import pressure and our own volume growth, that should give you a lot of confidence actually to deliver good volumes in H2 also it imports well, I mean, or go down further, I guess?

— Amit A. Dixit

That's the reason we are revising our guidance of -- instead of volume decline, we are seeing at least the flat volume looks achievable at this stage now with our confidence level what we delivered in Q2.

— Anurag Mantri

So it's difficult to segregate the inventory valuation number in a concrete manner.

— Anurag Mantri

So in a downward raw material trend, we always get a negative valuation impact, which was there in the quarter also because of the downward movement in the prices, but quantifying that number looks rigorous so that's why that guidance we gave is actually 18,000, we are taking care of everything which could come into the play during these volatile times.

— Anurag Mantri

And my second question was, sir, recently, we've been seeing a hardening of the spread in SS 300 series, particularly where the product prices have been firm and increasing somewhat, whereas from September onwards, there is a sharp decline in the scrap prices.

— Rajesh Majumdar

So it's not -- it's difficult to -- because see, what happened when the raw material and the scrap prices starts falling, the spot prices of the finished goods also start adjusting immediately.

— Anurag Mantri

How in between, obviously, it was challenge at the court.

— Anurag Mantri

Maybe because see, right now, there was obviously a recessionary risk and inflationary trend and all sort of things in both the market, but I'll let Abhyuday answer this question that how the recovery can come in export market.

— Anurag Mantri

Basically, definitely, with the export duty overhang, it is going to be a big challenge for us.

— Abhyuday Jindal

And like as you said, this section 232 in US and restrictions in Europe, as of now, it is a challenge, but because of our long-standing quality approval that we have, our customers are still sticking with us.

— Abhyuday Jindal

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Q&A — 12 exchanges

Congratulations for a good set of numbers in a very challenging quarter. I have three questions. The first one is on essentially volume growth. We saw very impressive volume growth Q-o-Q in both JSL and JSHL, while you have highlighted certain segments, railways, autos that contribute to growth. Just wanted to understand better where this growth is coming from, particularly in 200 cities, whether it is 300 or 400, was there any pent-up demand in certain segments that you expect to taper off? And what about the volume guidance for the year? That is the first question.

Anurag Mantri

Thanks, Amit. So as just we mentioned, the volume growth was in the domestic market for us came across the segment. And because most of the volumes we actually then diverted to a domestic market due to the export duty. And good thing was that some of these growth which came into the premium segment, which is like auto. Auto average sales grew almost 28% on a quarter-on-quarter basis due to the steady demand in this. Similarly, railway, the growth primarily came from access users in the vegan. So vegan because freight side, the railway continued to increase focus, which wagons took as the good

Congratulations once again for decent set of numbers. So my question was, we have seen the effect of high-cost inventories also in this quarter, getting liquidated because of the high increase in volumes. So what would be the extent of that inventory liquidation impact? And since the prices are again forming now especially ferrochrome, etcetera, what kind of inventory-related loss can come back in 3Q and 4Q? That was the first question.

Anurag Mantri

Rajesh, in our business, actually, because it's a balancing between the volume and the realization and the margin. So it's difficult to segregate the inventory valuation number in a concrete manner. But typically, the trend which we have been saying, we get almost a time lag of 40 days to 45 days to pass on to the customer. So in a downward raw material trend, we always get a negative valuation impact, which was there in the quarter also because of the downward movement in the prices, but quantifying that number looks rigorous so that's why that guidance we gave is actually 18,000, we are taki

I have four questions. First question is, one is on JSL, JUSL, what are the incremental milestones that we have to look at? Secondly, if you can just help the debt and EBITDA numbers for JUSL for first half. So that's the first question. The second question is any update on MCL? Third question is if at all reduction in pledges by when can we see that? And the fourth question is what will make us, again, competitive on exports. We know that we have Section 232 Europe. There are additional duties which are there, given by European Union press, the government's 15% export taxes. So if the export

Anurag Mantri

Thanks, Ritesh. Sorry, let me just try to see if I missed some questions, I think you can again ask me that question, I think because you have asked too many questions. But let me try to see what I captured. One is that you asked about the JUSL debt and EBITDA. Where the JUSL current debt is around INR 1,965 crores and the EBITDA for the H1 was INR 275 crores. That's one question. Second question was on the pledge side, the reduction of the pledge. Reduction of pledge as we mentioned, the banks are completely aligned. I think it's taking a more a process time to how to actually navigate that i

Sir, I just wanted to understand this 20% growth in FY '24, which you are envisaging, so is it taking into assumption that the exports have would resume or you do the scope that only from the domestic demand, you would be able to take up that let's say, 15% or 20% growth in FY '24. And if so, we are obviously talking about much higher growth than the industry level. So where this growth are coming from basically?

Anurag Mantri

See, one, let me just clarify that. It's not that we are guiding right now for the growth on FY '24 over FY '23. That's what I said, you will have to directionally, we should target that, but it's not the guidance right now. And we have to watch for another two quarters that's what I mentioned. So that's first clarification. Second, what we -- the question was asked about the capacity utilization. So earlier, we would have -- obviously, we would have ramped it up much faster. But at this stage, also we are working through ramp up at least the 30% of the enhanced capacity utilization during thi

The capex in H2 should be in the range of around maybe INR 600 crores to INR 700 crores.

Ritwik Sheth

Both the entities combined? Yes, both the entities combined around INR 600 crores, INR 700 crores capex we can trade. And F '24, what will be the maintenance capex? Maintenance capex between these two companies combined together runs close to INR 350 crores of the number. And sir, my next question is on JUSL, what is the expansion states there to 3.6 million tonnes. And when will it be completed? So JUSL expansion is on time, I think by end of this fiscal year, that also should be completed. So it will be at 3.6 million, right?. Yes. And it seems that debt has decreased from March '22 numbers.

Just a couple of questions. One, on the JUSL acquisition, any specific milestone or by when we expect to pay out anything in H2 or everything in FY '24?

Anurag Mantri

So we have got the shareholder approval now, and we expect to close this in FY '23 itself. We gave the time line till June '24 last time -- June '23 last time. But I think long priority in our approvals have been received. We will close this transaction during this financial year. Okay. And in terms of capex in JUSL, are we undertaking any blast furnace capex or something? There were some press releases around orders given to BF projects or something? So current capex or... No, there is no blast furnace. This JUSL will be coming with the hot strip mill and cold rolled unit as it is to the exis

Just two questions. the NCLT status, what happened in the last year in -- I mean what's the expected are we still confident of closing this by the financial year, the merger.

Anurag Mantri

See, the hearing is to take into account of all the NOCs received from the various regulators, which is the tax authorities, GST authorities and all these things, which has been filed already, filed the note different certificate, we have got from all -- has been tied to the court. Hearing is on 11th. Now I'm not too sure whether this will be closed in this hearing or may have another short gearing, which is we have seen typical pattern in the Indian court. But even with that, short gearing, we are -- now we know that all the authorities have submitted by NOCs to the court. So it's more of cou

Congratulations on good set of numbers. Am I audible? Yes. So I had a few questions. Firstly, on why there is an employee cost reduction in this quarter, any one-off? Or can you throw some color on that? Also, if you can share some details on the coal cost this quarter versus the last quarter and the current prices and how the sourcing is done?

Anurag Mantri

So employee cost was just some provision thing which we do on the certain thing, which was actually a certain adjustment on the provision. Your second question was on that one was employee cost, second was? Coal cost for power. Power. Actually, we did a very flexible thing on the power side. So for the overall coal cost, if we look at the linkages cost and the other costs on the spot prices were pretty much on a higher side. But strategically, how we plan it is that we also procure the power from the grid. So are power cost is mixed cost in the terms of the per unit cost and own production cos

Yes. So I just wanted to know the JUSL debt number. Is it 1,955?

Shreya Sharma

It's 1,965. 1,965.

I just have a couple of questions. The first one is on finance cost of JSL. So I see that it has increased by around 19% this quarter on a sequential basis. If you could provide some detail on this -- and second one is that some of the recent media articles suggested that government is planning to improve an anti-dumping duty from stainless steel, stainless steel supplies from China. So are you aware of these events? Or -- and how likely is the possibility of implementation of this? And if this is implemented, what could be the impact on volumes?

Anurag Mantri

So let me answer first on the interest cost. This quarter, there was one-off items of around INR 8 crores and the JSL cost, which was -- one was on the interest on the income tax advance tax, which was because last year, obviously, as we progressed on EBITDA the advanced tax because at the end of the year, the EBITDA increase in initial advance tax was than the shortfall. So that was on this thing as well as there was one interest payment on the settlement with the NESCO, which is the power utility company. So that was the one, which was there, which is coming into interest cost. And some of t

If you could provide us, historically, what was our domestic and export mix as we have seen that we are currently more -- 95% towards the domestic market to the 2, 3 years average, if you could provide?

Anurag Mantri

See, Saket, as we mentioned with our agile model, we keep fluctuating in our export and domestic mix depending on the margins and the volumes that we can get. So typically, you see that quarter four of last year, we reached to almost as high as the export volume of 30%. On a full year basis, FY '22, export volumes were 21% and currently, this quarter it has come down to 5%. So it's quite fluctuating. Last quarter, it was still in Q1 was 17%. H1 overall, we still maintain 12% now. I can keep giving you that many numbers, but I think overall, the blended volumes and the margins which we target.

Let me thank everyone for attending this call. Sorry, Abhyuday is actually just on the call. So I'm taking this on his behalf. We have been focusing on our agile business strategy to mitigate the external challenges. I'm confident that our strategic steps will augment the future performance of the company. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarification or like to know more about the development, please feel free to contact our Investor Relations team. Thank you once again for taking the time to join us on this call. Have a great

Management

Speaking time

Anurag Mantri

Moderator

Abhyuday Jindal

Ritwik Sheth

Dhaval Shah

Amit Dixit

Ritesh Shah

Vikas Singh

Hitesh Arora

Saket Kapoor

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Opening remarks

Ashish Kejriwal

Yes. Thank you, Vivian. Good afternoon, everyone. So on behalf of Nuvama Wealth Management, we welcome you all for this Q2 and H1 FY '23 post results conference call of Jindal Stainless and Jindal Stainless, Hisar. We are pleased to have Mr. Abhyuday Jindal, Managing Director, JSL and JSHL; Mr. Anurag Mantri, Group CFO Jindal Stainless; Mr. Ramnik Gupta, CFO Jindal Stainless Hisar; Mr. Goutam Chakraborty and Ms. Shreya Sharma from the IR team. We are pleased to note that this quarter, despite a difficult situation company has reported EBITDA per ton of 15,000 plus, which makes first half ‘23 total EBITDA per ton of around 18,000 plus, which is inline with their guidance. However management will continue to maintain that guidance. And after that, I can just hand over the call to Goutam for further decisions. Over to you, Goutam.

Goutam Chakraborty

Thanks Ashish, and good afternoon, everyone and thank you for joining us. We'll begin this call with a brief opening remarks from the management, following which we’ll open the floor for an interactive question and answer session. Before we start, I would like to state that some of the statements made in this -- today's conference call may be forward-looking in nature, and the disclaimer in this regard is available in our results presentation, which was shared earlier with you. I would now hand over the floor to Mr. Abhyuday Jindal for his opening remarks.

Abhyuday Jindal

Thank you, Goutam and good afternoon, everyone. On behalf of the management team, let me welcome you to the earnings call for Q2 FY ’23 of Jindal Stainless Limited and Jindal Stainless Hisar Limited. I would first like to discuss the key business highlights of the quarter following which Anurag will take you through our operational and financial performance. Globally, demand for industry has decelerated throughout Q2 FY '23, primarily on account of high energy costs, inflationary pressure, aggressive rate hike, rate hike by the US Fed and recession risk in key economies. But on the domestic front, demand from end user segment continued to be strong. Development and supply of niche value-added stainless seal grades and critical materials across various sectors and our agile business model allowed us to effectively increase our sales volume and achieved highest ever quarterly domestic sales of around 95% on the total sales volume. Demand continued to remain steady in the automobile secto

Anurag Mantri

Thank you Abhyuday. Good afternoon, everyone, and a warm welcome on the call today. Hope you had a chance to go through our earnings presentation, which was shared with the stock exchanges and today's call discussion will be on the same lines. As Abhyuday mentioned and as you all know, that this quarter witnessed a major impact of the export duty, coupled with the ongoing challenges in the global macro situation. Raw material prices do continue to remain volatile during the quarter with nickel prices falling by 24% quarter-on-quarter and those of ferrochrome by 18% on quarter-on-quarter. This impacted the realization and profitability of domestic manufacturers. Despite these challenges, we could adopt to the changed market dynamics quickly and emphasize our focus on the domestic sales through development and supply of niche value-added stainless steel grades and efficiently increasing our volume across segments, especially into auto, railways, pipe and tubes and lift and elevators. Let

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