Jindal Steel & Power held a conference call on 10 August 2021 to discuss the results for the quarter ended June'21 and way forward. Mr. V.R. Sharma - Managing Director, JSPL and Mr. Hemant Kumar - CFO, JSPL of the company addressed the call.

Highlights of the Concall

• The company remains optimistic on pick up in domestic demand as funds are released to State governments to push infrastructure spends. The company has orders booked up to the next two months. Export markets are also expected to remain strong.

• The company expects production of more than 8 million tonne (mt) in FY2022 as the Angul plant is operating at rated capacity.

• Exports formed 34% of the overall sales in Q1FY22. The company expects higher exports at 30-35% of the total volumes in FY22 given the higher prices in international markets. Exports are currently to Europe, SE Asia, America.

• Steel realization was up by Rs10,000 per tonne in Q1FY22 compared to Q4FY21 but simultaneously the cost have gone by Rs7,500 per tonne. Therefore the overall impact on realization is Rs 2500 per tonne. Also export is the major contributor to better realization in Q1FY22.

• The company exhausted its free Sarda iron ore inventory in Apr'21. The company does not see any challenge in procuring iron ore from the market. It has a tie-up with NMDC, OMC, and other merchant miners for supply of iron ore.

• Iron ore prices have increased from Rs 6000 per tonne in Q4FY21 to Rs11000 per tonne in Q1FY22, but at present price have come down to US $160 per tonne from US $220 per tonne in international market. This has forced domestic iron ore merchant to reduce the price. Hence Rs 2000 per tonne price reduction is passed to steel mills which will have effect in Q2FY22

• The company has booked coking coal at lower price till September 2021; Also 44% 45% of coking is procured from captive mines in Mozambique and South Africa.

• The company expects net sales realiastions (NSR) to increase by Rs 2,000-3,000 per tonne in Q2FY22 from average prices of Q1FY22

• Domestic steel prices are at 10-20% discount of international steel price

• The company has capex plan of Rs 18000 crore to increase its capacity to 15.9 mtpa by FY2025 to be funded primarily from internal accruals. The company expects capex of Rs 2000-2500 crore for FY22 primarily towards starting the proposed capex projects.

• JSPL has accepted the revised offer from Worldone for divestment of its 96.4% stake in its power subsidiary JPL (Jindal Power). Under the new offer, Worldone has agreed to simplify the deal structure by netting off the value of preference shares (payable after 20 years) issued by JPL to JSPL against the inter-corporate debt issued by JPL to JSPL. Worldone would pay a cash of Rs 3010 crore and take over the inter-company loans/deposits of Rs 4380 crore to be paid by JSPL to JPL. It would receive rights for the Rs 7050 crore preference shares issued by JPL to JSP, which are redeemable in 20 years. The company would now seek shareholders' approval at the EGM. The deal is expected to be closed in 12 months.

• JSPL's consolidated net debt reduced to Rs15230 crore against Rs 22150 crore in Q4FY21. This was largely due to exclusion of Rs 6000 crore JPL (categorised as discontinued operation) debt. The company expects consolidated net debt to fall to Rs 8000 crore by the end of FY22 after accounting for the planned Rs 2500 crore capex.