Jindal Steel & Power held a conference call on 09 February 2022 to discuss the results for the quarter ended Dec'21 and way forward. Mr. V.R. Sharma - Managing Director of the company addressed the call.

Highlights of the Concall

• Q3FY22 witnessed a sharp improvement in domestic demand on a sequential basis. However, the quarter continued to be marred by unseasonal rains, lack of railway rakes and muted demand amidst rising COVID-19 cases. Steel demand in India registered a 7% Y-o-Y fall in Q3FY22

• The company sold more domestically this quarter, reflecting the industry trend (domestic sales up 19% sequentially, -6% YoY). Government's infrastructure push in the recent budget, increased rake availability and rising private capex should further boost domestic steel demand.

• The company is optimistic on pick-up in domestic demand as funds are released to state governments to push infrastructure spends post the recent union budget. Export markets are also expected to remain strong with higher demand from European countries as the US and Europe end the tariff regime and higher energy prices in Europe impact production.

• Exports declined to 23% of the overall sales in Q3FY22 from 40% in 2QFY22 due unavailability of rakes and lower export prices. The company expects higher exports at 30-35% of the total volumes in Q4FY23 given the higher prices in international markets. Exports (majorly finished goods) are currently to Europe, SE Asia, and America.

• Steel realizations have inched up well over February 2022, supported by strong demand. Current prices are similar to or slightly higher than end November 2021 prices and well above the December 2021 lows across long & flat products.

• The domestic steel industry continues to grapple with the sharp rise in the coking coal prices. Premium Hard Coking coal has risen more than 3 times so far in FY22.

• The company spent Rs 871crore in Q3FY22 which largely entailed premium payments for taking over and operationalising the Kasia iron-ore mine. JSPL had won the 278 mt reserves mine at a premium of 118%. The company expects to see incremental contribution in Q4FY22 and ramp up to 5 mtpa production in FY23

• The company is confident about of achieving the targets set for FY22. It seems hopeful of completing FY22 with Rs 59000 crore of sales revenue, Rs 15500-16000 crore of EBITDA, net profit of about Rs 8800-9000 crore with steel production of 8~8.05 million tonne with sales of 7.9-8 million tonne of steel. JSPL is confident of maintaining 28-30% of sales in the form of exports

• Consolidated net debt has declined further to Rs 10,981 crore in Q3FY22 (from Rs 11164 crore in Sep'2021). Its net debt has declined by around Rs 35,500 crore from a peak of around Rs 46,500 crore in FY16. Conclusion of Jindal Power (JPL) divestment (accounted as asset held for sale) will result in net debt declining further, taking JSPL a step closer to its vision of becoming a net debt free company by FY23. The company is currently in the process of getting relevant approvals from the lenders and aims to conclude the divestment by the end of this financial year.

• The company expects coal production from overseas coal mines at 1.2-1.4 million tonne in FY23

• Capex spent in 9MFY22 was Rs 1000 crore and expects capex for FY22 would be lower than guidance of Rs 2400 crore. The company expects capex of Rs 4700 crore in FY23 and Rs 4300 crore for FY24.