Jindal Stainless Limited (JSL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Jindal Stainless Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining us on Jindal Stainless Limited Q1 FY '21 Earnings Conference Call. We have with us Abhyuday Jindal, Managing Director; Mr. Anurag Mantri, Chief Financial Officer; and Mr. Goutam Chakraborty, Head, Investor Relations of the company. We will begin the call with brief opening remarks from the management, following which we'll have the forum open for an interactive question-and-answer session. Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation that was shared with you earlier. I would now like to invite Mr. Abhyuday Jindal to make his opening remarks.

Thank you. Good afternoon, everyone. On behalf of the management team of Jindal Stainless Limited, I welcome you all to this forum. And I sincerely hope you and your loved ones are safe and healthy in these unprecedented times, especially since now a second wave seems to be coming. So even more important that we are again keeping extremely, extremely safe. I would like to first share the key financial highlights of -- key highlights of the -- key -- for the period, following which Anurag will take you through the operational and financial highlights of the quarter ended 30 June 2020. Entering the new fiscal year, it was full of uncertainty with the spread of COVID-19 and, as a result, extension of lockdown with various restrictions had put all economic activities under unparalleled challenges. We also got badly impacted, and our plant operations had to be suspended from 20th of March until 4 May. This shutdown, along with supply chain issues, primarily impacted our performance during the quarter. However, we believe that more than ever, this extraordinary situation has highlighted the operational strength of the company. JSL has demonstrated agility to ensure continued operations and seamless transition to newer ways of functioning in the face of multiple challenges. For instance, in the face of constraints and muted sentiment in the domestic markets, the company was able to successfully target export markets. Additionally, JSL's ability to seamlessly switch series-wise production levels to match the ongoing market demand also contributed towards better average utilizations during Q1 of this year. I am pleased to state that the demand- and operational-led challenges that had emerged now have been abated. We are already witnessing an improvement in the domestic demand scenario and are -- therefore, expect business returning to normalcy by the end of September 2020. Uptick in the health care and 2-wheeler segments, along with likely improvement in retail segment during the festive season, is expected to boost the demand for stainless steel. Additionally, the demand from conventional sector, the construction, transportation, process industries are also seeing tractions, actually. As far as the change scenario is concerned, the Indian stainless steel industry continues to face challenges due to the increasing import from FTA nations, especially Indonesia. Having said this, I would also like to welcome DGTR recommendation to impose CVD on stainless steel flat products from Indonesia to save the domestic manufacturers from subsidized imports. The Ministry of Finance will take the final decision regarding the same, which is still awaited. As an industry leader, JSL remains well placed to benefit as Indian manufacturers would gain traction under the government's vocal for local call. Looking ahead, we believe that our strong manufacturing excellence, nationwide distribution network, coupled with a unique set of capabilities and comprehensive offerings, will enable us to navigate the multiple uncertainties ahead of us. JSL's business fundamentals remain intact to address the inevitable rebound expected in the overall stainless steel industry. With this, I would now like to go to Anurag, who will take us through the operational and financial highlights of the quarter ended 30 June 2020. Thank you.

Thank you, Abhyuday. Good afternoon, and warm welcome to everyone joining us on the call today. I will briefly take you through the company's operating and financial performance for the quarter ended 30 June 2020. As discussed by Abhyuday, the macro-level challenges primarily impacted the Q1 FY '21 performance of the company. On a quarter-on-quarter basis, our sales volume declined to 88,814 metric tonnes, primarily due to widespread disruption in supply chain and suspension of manufacturing activity. The plant operated at average run rate of 33% during Q1 FY '21. Similarly, EBITDA for the quarter was also impacted due to the COVID-19-induced business environment, and it was at INR 78 crores. The interest cost for the quarter was at INR 131 crores, [ bolstering ] a year-on-year decline of 8%. During the quarter, the company availed moratorium benefit of INR 44 crores on interest and INR 61 crores on repayment from its lender as per the RBI guideline, which has helped us to maintain our cash flow in quarter 1. We expect debt reduction of INR 350 crores to INR 400 crores during FY '21 after considering this moratorium. Over the years, the company has been taking multiple initiatives to sustainably improve its balance sheet. As a testimony to this, recently, CARE has upgraded and Fitch has reformed JSL's credit ratings to BBB with a stable outlook. This emphasizes JSL's convertible debt and improved financial position after the CDR exit. Furthermore, this development also reflects a resilient business strategy despite the interruption caused due to the pandemic over the last few months. It underscores the consistently improving performance in the asset turnover, healthy operating profit and reduced debt levels, which validates the strength and balance sheet profile of JSL. Company's Board recently approved the fundraising of INR 162.8 crores by issuance of warrants convertible into equity shares of the company to promoters and Kotak Special Situation Fund, subject to revisit approvals. The pricing of the issue has been derived as per the SEBI guidelines, and 33% of the issue will -- issue proceeds will be payable upfront, and the balance will be given the SEBI prospect time line. The proceeds of the issue will augment cash flow and be utilized for strengthening the long-term working capital. Upon conversion of promoter stake or -- conversion of these warrants, the promoter stake will increase by 1.75% from 68.11% to 69.86%. We believe this is a very positive development, and the equity inclusion like the promoters, reaffirms the confidence in the long-term prospects of the company. To conclude, with our strengthened balance sheet position, JSL was able to navigate a truly challenging period for the global economy. With the demand outlook for stainless steel witnessing an update across industries, and as a dominant player in the industry, we are well positioned to capitalize this opportunity going forward. This brings me to the end of my address. I would now expect moderator to open the line for the Q&A session.

[Operator Instructions] The first question is from the line of Amit Dixit from Edelweiss.

Yes. Congratulations for a stable performance in a very challenging quarter. So I have 3 questions. The first one is on volumes. Given that volumes were quite impacted in Q1, what kind of volume we are looking at in FY '21?

Okay. So maybe FY '21, Amit, overall basis, we are expecting around not more than 15% dip on a full year basis. So we expect to regain the volume in next 3 quarters. Obviously, the quarter 1 was badly hit, but still we will regain some of these lost momentum. And overall basis, we still expect the year to close not more than 15% lesser than the last year volume.

Okay. And sir, the second question is on overseas subsidiaries. So this quarter, we reported that EBITDA is north of INR 136 million. I mean if I subtract consolidated and stand-alone, that's how I have got the number. So the EBITDA that is north of that INR 136 million compared to profit of INR 582 million in the previous quarter. So as I understand these subsidiaries are quite stable in nature, but what resulted in such a drastic shift? And how do you see things going ahead?

So right, Amit. So basically, the -- what has hit in Indonesia, also similar thing which we faced in India earlier and being a smaller part, similar Chinese competition, really hit bad for the Indonesian market also. So that actually took some of the meeting on this subsidiary -- on our subsidiary based out of Indonesia. But a few business measures which we experienced there are taken in last 3 to 6 months to completely change our business strategy in Indonesia. So one is that now instead of 300 CNVs, which is more competitive in terms of the Chinese and some of local Chinese manufacturer in Indonesia, we started to now more focusing on 200 CNVs in Indonesia. Second, overall, we have restructured that entity with -- and reduced our employee cost 60% and administration cost by 38% basically to realign the complete business model. So we are even breakeven profitable at even the lower volume. So this plant has a larger capacity. But even when the -- when we don't see a volume pickup, it still be -- can be profitable in those scenarios. So second is that we entirely aligned our overall cost structure within that entity. Third, we started focusing on the fewer of the niche product, especially for Europe and U.S. market for export purpose, so -- which should also give us a good result. So overall, we expect just our entity to have a more a cash breakeven situation in the next few months. In terms of other subsidiary, I thought, it was more an exception last quarter, I would say, because the early closedown in the -- some of the Europe in Spain is -- actually has resulted inventories -- large inventory level in [indiscernible], which -- but this loss is more temporary because then they have to dilute some of the inventories at lower prices. But we believe that this is a more temporary phenomenon, either Jindal will again come back into the same profitability, too.

Okay. The third question is essentially on the series split. So what was the split of series tilted between 200, 300, 400 in Q1 FY '21? And what do you see within FY '21 overall?

So Q1, the series mix was actually more tilted towards 300 because largely -- and since the market demand at that point of time was created. So again, this talks about our ability to quickly shift the series mix in our portfolio because in Q1, the large demand was actually of 300 series. So 64% was 300 series, 400 series was 17% and 200 series was 19%. However, on a full year basis, we still, as last time, Abhyuday mentioned, our strategy was to actually keep continuing to focus on 400 series. And now we are seeing the auto demand coming back again into that, which is it consumes a bit of net series. Overall basis, we still believe that 400 series, we will be able to gain approximately 25%, and 300 series should be around 30%. So Q1 was more an exception, I would say, on the mix.

The next question is from the line of [ Chetan Shah ] from Abakkus Asset Management.

Just one quick question. A bit of a clarification. You mentioned about the series mix of 300, 400 and 200, which is 50, 25, 25, that we have seen that the remaining 9 months, we'll be able to do better in 400 series than we'll do in 300 series. Is that right to understand?

No. No. That will not -- basically, the percentage of 400 will rise from what it is, what we saw in the previous 3, 4 months. But 300 series will still be the highest quantity, as we said.

Understood. And sir, in terms of understanding the balance sheet profile, what you think will be our end of the year that will look like? And if you can give us some color on what the debt prepayment schedule we have for next year.

Yes. So [ Chetan ], in terms of overall debt prepayment in this year, we still expect even after taking the moratorium of debt reduction of around INR 350 crores to INR 400 crores on a full year basis. So earlier, our targeted debt repayment, if you recall in the last call, we mentioned around INR 550 crores. It may not be INR 550 crores, but it's still -- we are targeting to reduce by INR 350 crores to INR 400 crores basis in this financial year. Now from next financial year, the schedule debt repayment is around next year is -- in FY '22 will be around INR 300 crores and FY '22, '23 will be around INR 290 crores. So close to INR 300 crores in next 2 year, I would say, on an average, the next FY '22 and FY '23 year.

[Operator Instructions] The next question is from the line of Vishal Chandak from Emkay Global.

Given the fact that on Slide 21 to 23, we are targeting close to a reduction of about INR 1,000 crores, and this would obviously improve our balance sheet position very comfortably. We actually -- follow-up would be what are the CapEx plans now? And how do we look at expanding our capacity at Jajpur facilities?

So good. Thank you for your question. Still, whatever decision, we are definitely looking at if we need to expand, depending on what the demand/supply conditions are. But whatever we do will be completed from a sound financial planning. We are not going to go for any major big-bang expansion if we don't see the growth coming from the market. So I would still say it's a little too early to comment on what our CapEx plans are. We are still working on them. Hopefully, by our next investor call, we will have better information for you. But as of now, because of the pandemic, and we are still evaluating how the export market vis-à-vis the domestic market will perform. And that is in the walls right now. So I'm expecting by next investor call, we can have a better answer for you.

Sure, sir. So that I would presume would be from a growth CapEx perspective. But on a sustenance CapEx, what should we -- it look like, sir?

So sustenance CapEx, Vishal, typically remains in the range of around INR 150 crores maintenance/sustenance CapEx, and it's going to be the same for us even in the next 2 years.

So my next question was, with respect to the favorable restructuring at the group level, when we talk about this question, we have, if you go from several investors as well, how do you allocate the business between JSL, JSHL? And what are the plans on long-term merger if at all? Are there any thought process on that side?

Okay. So again, these things are still, if I say, being broke out at the management level because we have just exited CDR now, and what our plans are in terms of CapEx, in terms of merger, this is all jointly we are currently discussing. So it's definitely something that we are working towards or thinking towards that. When will we do it? Does it make financial sense? Does it make sense for all our shareholders, stakeholders? So that is what we are currently discussing right now. And again, next few months, we should have a little more clarity there.

By end of this calendar year, we should -- we will come back with the best option available for us in the -- which can actually -- which is in the best interest of all the shareholders. So we are -- as you rightly said, I think, we are actively evaluating the various options, which is in the best interest of the shareholders. And by end of this calendar year, we'll commit with the plan.

The next question is from the line of [ Asha Patel ] from India SME Investments.

First of all congratulations on a good sort of numbers. Despite challenging time, we were able to be EBITDA-level positive, and we also managed to repay INR 83 crores on this quarter. So first of all, my question is regarding the anti-dumping duty with the final findings, which DGTR gave. So post that announcement, are you seeing some price improvement in terms of our product realization or reducing competition, something on those lines?

So just to clarify, this is actually what DGTR has currently recommended is CVD on platform products from Indonesia. Anti-dumping is -- investigation is separate, and that is on. It will take a little longer. But DGTR has recommended. Even right now, just to make clear, Finance Ministry still has to confirm that. So until that does not happen, duty is not levied. Secondly, CVD, because what will happen is actually the domestic players will come to a level playing field against these imports from Indonesia. But it will not really be able to improve our prices as such because the stainless steel industry is still completely governed by raw material prices. And if import from Indonesia, for example, does reduce because of the CVD, we still -- India still have FTAs with many other countries, Japan, Korea, Malaysia, Vietnam. So then it reduces in Indonesia. What ends up happening is that it can pick up from these other countries. So in terms of a price increase, it is, again, too early to say. But I really feel it will not have a direct impact on our price, but more that it will be at a level-playing field with imports coming from Indonesia at least.

So level -- when you say sort of level-playing field, can we get a sense that we can attain double-digit margins like we did in FY '17 and FY '18?

So again, if Indonesia imports reduces but then imports increase from Japan and Korea. So again, we would have to look at the demand/supply conditions. We will have to look at the raw material prices, and then only we can do pricing. Just with this duty coming in, will we be able to take a price increase? That is not going to happen.

So what would be the #1 driver, sir, if you want to attain double-digit margins again?

So double-digit margin, as we mentioned, that we will regain the lost volume. So we are still expecting to achieve that up because double-digit margin will be able to sustain because at least eventually, imports will not be there, as I mentioned. So that surely is our target is not going to -- our target is not to remain in the single-digit EBITDA margin. So at least double-digit EBITDA margin is surely on the cards.

Sure. And my last question would be that as we see from past 3 years, we have been able to generate average cash flow of INR 1,300 crores, whereas our repayments are only INR 300 crores per annum going forward. There are no bullet repayments as well as such. So financially, we are in a very sound position. Now do you think it is a good time to give some thought on dividend payment or related to -- on those lines? Because shareholders in our -- both of our company are not able to -- have not made any money -- decent money in past, say, more than 5 years.

Yes. No. I think -- so what we will do -- you are right. Now and going forward, as the cash flow starts accruing, I think, we will -- what will be the best value creator for shareholders now onward because of, obviously, last almost 10 years, we were struggling under the CDR and then the deep losses, so which has now -- the balance sheet is now in a very sound position. And so it will always be a balancing between then how gradually depending on the accrual cash approval coming and what kind of fee -- because then in, Odisha, we have a very multiple CapEx opportunities in the smaller parts also, which would actually give a much larger booster in terms of the overall shareholder value. So like if you -- if I give you the example of just INR 40 crores of investment, we actually increased our capacity by 35% last year, so 0.8 to 1.1. So obviously, we'll have to balance between what can -- and those could be a larger value creator for the shareholders' overall perspective. But yes, you are right. I think we'll have to balance with what kind of value-creation opportunity we see in terms of some of the extended expansions as well as the dividend payment, and we'll take a call accordingly.

Sure. So sir, my only limited point is that promoters are already showing very good positive indications to the market by increasing, say, INR 150 crores. So if the declared dividend, the market would take it very positively, but after a gap of, say, more than 1, 2 decades, we are declining dividend, so that will be considered as a very positive sentiment for market.

Yes. So we take note of your suggestion. And yes, we will take order dividend in the best interest of shareholders.

[Operator Instructions] The next question is from the line of [ Pavin Sheda ] from [ Enam ] Holdings.

Yes. Can you update what the current utilization levels would be in the March -- July, August, September, how the utilizations have been shaping up?

Okay. So in terms of capacity utilization, July, we were, I would say, at about 75%. August, we were at 85%. And September, we are almost 100%. I will say between 95% to 100%.

This is based on 1.1 million of SMS, right?

Yes. Correct. Correct.

So September, you are saying you are already at 100%.

Yes. We are almost at 100%. I won't say it's 100%, but almost, 95% plus.

So when the things normalize, they are almost normalized. So probably in FY '22, you can probably deliver close to 10 to 11 lakh tonnes of volumes. I think your historic high volumes, I believe, was INR 9,73,000. So probably you can cross that number in FY '22.

Yes, definitely.

So on an operational side, we don't have any bottlenecks to reach close to 95% to 100% capacity of roughly around 6.5 to 11 lakh tonnes of [indiscernible].

No. Not at all.

And after that, you will probably try to debottleneck that 11 lakh number into a new number, right?

Correct. That, we're still working on -- like I mentioned, we're still working on our future expansion plan and CapEx plans. But in terms of at least delivery in 1.1, we have no bottlenecks.

Right. Now in terms of cost-saving initiatives, I'm sure you would have tried to reduce some fixed cost here and there and also on the operational side in the pandemic period. So if you can guide what were the steps taken by you in last 3 to 6 months. And what part of cost savings would be permanent in number? And what can come back?

So a few of the majors [indiscernible], which will have a long-term impact, so one was this ICD. Our internal [indiscernible] is now operational. So -- which will give us a close to almost a 5 container basis of almost INR 4,500. So overall, if we put it in a number, basically, 2,200 container movements happen. And just in overall terms, we still have almost INR 11 crores annual impact because of other saving in terms of the EBITDA. But the largest saving in terms of invest through this way is that we'll be reducing our retention leverages risk as well as improving the working capital, so -- which will have a confidential at larger strategic impact of this. Similarly, as -- if you recall, Abhyuday mentioned in terms of last call, the multiple sourcing initiatives which we have taken. So shifting to the near shore, asking our large stockyard to open and set up the facilities next to our plant to reduce our commodity exposure as well as the transit time. So all these will be more long term, which directly cannot be a quantifiable impact there. But yes, it will surely have a much larger long-term implications on the EBITDA side. OpEx side is a continuous process in terms of the various right from power and fuel to standardizing -- strategizing our, whatever, employee cost in terms of the overall people deployed in the production processes. So those are actually ongoing processes, I would see. So which will -- and this pandemic has given us that a few of them, as Abhyuday narrated in his opening remarks, the new ways of working and manufacturing also, which include manufacturing also. So which will -- which we have taken certain steps into that, and we believe that in the long term, but obviously, we are increasing the production. So we can say that within the same people cost, we can actually deliver the larger volume.

Sure. And what would be the current domestic and export volume mix be like?

So if I say during the long-term period and the pandemic, I mean, where the first quarter, it was almost, I would say, 60% domestic, 40% export. And now it will again switch back to our original levels of 80%, 85% domestic and 15% to 20% export.

So on a higher capacity utilization, almost 80% is getting sold out in domestic market.

Domestic market, correct.

Right. And you mentioned of 200 -- close to INR 200 crores of debt prepayment in FY '21 and, after that, INR 300 crores per annum for '22 and '23. That would be correct, right?

No. So [indiscernible], what I mentioned is that long-term, short-term put together, overall, we are still targeting debt reduction of INR 350 INR to INR 400 INR in this year.

[indiscernible] in this year [indiscernible].

And after that, next 2 financial years, FY '22, FY '23, it will be around INR 300 crores.

Okay. So this year will be higher because you are anyway raising 160 also, right? But this would be in warrants. So money would come -- 25% would come over 18 months, right?

No. So 33% will be coming in October. So it's minimum requirement. You're right, it's 25%, but it's been decided that 33% of the money will be -- 1/3 money will be put upfront. And the 25% will be within a year's time as for the -- within that stipulated time, it will come.

The next question is from the line of Ritika Garg from Aequitas Investment.

I wanted to know, the utilization that trended upwards in Q1 of FY '21, how do we see them for the remaining part of the year?

See, Ritika, in stainless steel, the realization is largely driven by the mix and the underlying raw material prices. So in Q1, the raw material prices were stable, but as we mentioned, the mix was highly tilted towards 300 series. It is a costier series, okay? In terms of the [indiscernible], it is a larger [indiscernible] series. Therefore, we -- you see a very high realization in Q1. But overall, as we mentioned, it was more aberration and which 300 series because the market -- when the lockdown started opening up initial demand was for that particular series. But now we are seeing railways and auto started picking up. So again, 400 series will start gaining momentum. And so it's more -- actually, realization doesn't give too much of insight in terms of the EBITDA because that 2 extreme series, it's -- the average realization is between, say, 400 and 300, almost 1.5 to 2x. But that said, similar is not the case in EBITDA margins.

Okay. So can you tell us EBITDA margins for each of the series then?

See, on -- the best way to look at is that overall EBITDA, what we are targeting is despite -- if you see in this quarter, our EBITDA per tonne was badly hit. It was just INR 8,737 crores.

Right. That was under-absorption, right?

Right. So -- but still we -- despite this quarter, we still expect to maintain our guidance of 12,500 to 14,500 average EBITDA per tonne during FY '21. So we still -- because of what kind of momentum we are seeing and the volumes to higher volume, which will deliver this still maintain our guidance of 12,500 to 14,500 for a full year basis despite being a quarter 1 -- challenging quarter 1.

Okay. And I really thought that we were impacted in the last few quarters, have seen all Abhyuday's statements in the press release regarding being impacted by the imports from Indonesia. So why is the CVD not going to impact us financially as in like in our profit and loss statement?

See, because, again, it's the same thing, because, again, Indonesia is definitely the biggest importer. But what these companies and these Chinese organizations are very quick to react, we can start supplementing and routing it through our other FTA countries. So like I mentioned already, there are investigations already on for CVD and other CVDs from other countries as well. Indonesia, if you see over the course of last 3 years, from only about maybe 5% import into India, it went up to 60%, 65%. So that is why that volume impact will definitely reduce. Will we be able to directly impact our bottom line? That is still very early to say because exactly, same thing happens. You see China bought some CVD on it. They started out in through Indonesia. Now Indonesia has some CVD. They can again start routing it through these other countries. So which is why I'm still a little cautious, and I still feel that it's still too early to say because these are generally what you've seen happening in the market.

But I understand that the government is also planning to do country of origin, right?

So Ritika, you are right. There are good things. There are good steps which includes the country of origin and [indiscernible] mentioned laws, which are becoming more restrictive than you have provisioned. So therefore, I think shortly, this type of things should remove the non-level-playing field. So our talent was actually -- our talent -- we are not second [indiscernible]. We were always second [indiscernible] in terms of the subsidized input, not to have a level-playing field. So what Abhyuday is saying, we'll have to still cautiously watch. But having said that, I think, therefore, we are still not changing our guidance on a full year basis despite the bad quarter 1. Otherwise, if you see on an average, we would not have been able to deliver this 12,500 to 14,500 EBITDA per tonne, which we are still continue to maintain our guidance. So this is on the back of -- we expect at least -- national imports should come down. But obviously, we'll have to really watch very closely because people are always smart to find other ways.

Okay. How has imports been in Q2?

Q2 imports, I think, we still need to get the data. I think it's still early to say Q2 imports.

Yes. It has been fluctuating. July was bad, and August picked up again. September, obviously, we are in September, so I can't comment for it is fluctuating.

Right now, this CVD has not been coming to core just to clarify because Ministry of Finance still has to approve it. So right now, there is no CVD currently.

Yes. Okay. So we've done quite a good job in our operational efficiency. But how do we improve our interest cost? And where do we see them in FY '22?

Yes. So in terms of overall, what is that repayment which we continue to make? So as I mentioned, that INR 350 crores to INR 400 crores repayment will be there in this year, and the next year INR 300 crores to INR 400 crores. Now since our rating has started moving up in terms of the performance, and as we continue to deliver better performance, our rating should further improve. So we are targeting the more -- move towards the A category of rating, where we can start actually getting the good rate benefit. But having that said, that is -- this year on overall portfolio, we are expecting 0.5% still dip on overall portfolio built because, mind you, a large part of this loan, INR 800 crores, we raise it actually in just early March, okay? So we may not get a great benefit on those because those are actually part of the CBR exited, and those are taken accordingly. So we may not get on that, but it's still happening. One is that volume impact we will get on term loans; and second, at least 0.5% on net interest cost basis, we will get a reduction in next year. On the second bigger component is actually of our interest cost is the running capital, which obviously will be always a function of the volumes also. But as move -- keep moving, we have taken multiple measures to reduce our working capital cost also.

Right. So in absolute terms, what is our -- what interest cost outcome do we expect in FY '21 and '22? It was around INR 500 crores, if I'm not -- INR 505 crores in FY '20, if I'm not mistaken.

FY '20 interest outcome was -- just let Mendon�a get this. I think it was INR 570 crores, INR 565 crores. INR 567 was FY '20 outlook. FY '21, we expect -- because some of the loans more of which we have taken so which have a certain increase in the interest cost because the moratorium loans will also get added for [indiscernible]. I'm assuming the interest on insurance, not banking on annual Supreme Court decision there, so the total interest cost in this year is expected to be around INR 540 crore in the P&L. However, the cash outflow will be only INR 466 crores because INR 74 crores will be booked in P&L, but the cash outflow will not be just the moratorium.

Okay. And like going forward for the next few years, because I understand like still we don't improve our interest costs, like our profitability improvement is going to be marginal.

Yes. So next year, as I told you that it's -- we will get a benefit of the repayment as well as 0.5% reduction on the term loan. On -- in working capital side, I think we will continue because since we are improving the volume also. So we may not -- our working capital costs will not increase, but the same working capital costs will deliver the larger volume.

[Operator Instructions] Next question is a follow-up question from the line of Amit Dixit from Edelweiss.

I have just one question. Can you [indiscernible] for the cash flow from operations in this quarter and whether there was any working capital release as well?

Sorry, Amit, I did not get your question. Cash flow from operation and...

In this quarter and whether there was any working capital release as well in the quarter, Q1.

Yes. So see, Q1, if you see on overall basis, there was a -- basically, if I say the PBT was INR 138 crores, and the INR 44 crores was the interest moratorium. So overall, excluding exceptional items, that's around INR 95 crores of PBT. With this, the depreciation and taxes [indiscernible]. So overall, there was a almost INR 47 crore impact but -- which was actually being met up by the after moratorium, which has been met up by the increased working capital utilization.

So, what was the cash flow from operations in this quarter?

So it was the negative of INR 47 crores.

The next question is a follow-up question from the line of [ Asha Patel ] from India SME Investments.

Sir, I just wanted to know that in terms of production -- cost of production, how well are Chinese dealers compared to us? So do we have any cost of production, and we are just able to export it at subsidized rate just because of the government incentives, which they are requiring or they are really -- they really have lower cost of production compared to us?

It's actually very, very difficult to answer both questions because information coming out of China is never ever absolutely clear. So it is whatever information we get from our own sources and little bit on the government sources. But in terms of -- if I tell you then subsidies are definitely provided, they have cheaper power. They have cheaper logistic costs. Their funding rates are much, much cheaper. So, in terms of -- other than our operating cost, they have definitely subsidies in all other areas. In operating cost, I can still say we can be comparable to Chinese, even though they might be getting some raw materials benefit in terms of now -- I give you an example. India has duty on imported raw materials, which is not there in the country. We have taken this up with the government multiple times, like there is duty on [indiscernible]. There is duty on scrap, and scrap, whereas China has import -- export on these items. So that is the kind of difference that is there between our country and the countries we're competing with. So in terms of operational cost, I see because of our efficiencies and the kind of work we continuously do, we are comparable. But because of the subsidies, because of the additional infrastructure benefit, banking, financial benefit we get, we are not able to compete on that.

Sure, sir. And you mentioned 50 bps lower interest rates from next year. So that will be applicable to the entire long-term loans.

It will be applicable to almost 60% of the loan portfolio, but 35% are the new loans, which we have taken. It will still be at least 60% of the loan portfolio.

60% of the loans, including short-term loans, right?

Yes.

The next question is from the line of [ Saket Kapur ] from [ Kapur ] and Company.

Sir, [indiscernible] prices have been on an upward trajectory. So what was our large quarter purchase -- average purchase, right? And what are the prices ruling currently? And how is this going to affect the math in translation at the finished product?

Yes. Am I audible?

Yes, Abhyuday, please.

Yes. So in Q1, the [indiscernible] prices averaged at around INR 63,875. Prices were actually falling, and there was a lack of demand from Chinese market. And that is the reason why prices were falling earlier. But after that, there was some stability in the prices that we have observed now. And there was some kind of increase in the overall prices. In fact, for Indian market, if you look at India, it's actually a net exporter of [indiscernible]. And in a couple of months back, there was no export demand. So the prices are depressed in the domestic market. But after that, there was some improvement of it.

What are the current prices ruling, sir? I mean...

Around INR 74,000, INR 73,400.

Okay. So for this quarter, sir, our blended cost will be in that vicinity on the upwards of 70,000, and that would have an impact on the margin.

So basically, [indiscernible] prices accordingly with the increase in tariff. We have to move with the raw material prices. So we will move with the movement of [indiscernible] that is happening. And I don't think so the prices are expected to stay so strong. It should come down to the range of 68, 69, I believe.

Okay. So there are other stories on the South African mines being closed, and there's a vacuum for the production side. And there's scarcity there in the market, and only 2 [indiscernible].

[indiscernible] has gone up so drastically. If you see, otherwise, last year -- totally completely last year, it was around 60,000. And because of the news on South Africa and also India, that has led to the increase -- such a drastic increase in prices. So in this context, because we are also fully captive in terms of [indiscernible] also, so we don't purchase [indiscernible] as such from the market. So that way, to a large extent, we are protected.

I didn't get the point, sir. How are we...

So I'm saying that [indiscernible], we have a captive facility of 2,50,000 tonnes of Fe Chrome in Jajpur.

Okay. Okay. So we are purchasing Chrome ore and then processing the same?

You're correct.

Okay. Okay, sir. And then the Chrome ore prices would be also -- sir, in that case. So how will that be mitigated here? Chrome ore, we don't have our own mines. So when we are purchasing from spot market, the Chrome ore prices have also moved up.

So yes, that market volatility always is there, but it is already, to a large extent, is mitigated because of our in-house production. And also since we use Fe Chrome in liquid form, we save a lot of energy costs in that process.

Okay. And lastly, sir, on the graphite front also, electrode front, can you give some idea of the price? How have the graphite electrode prices behaved for last quarter and now in the quarter, which is ruling September quarter?

Yes. So graphite electrode prices also have been falling compared to, let's say, on a year-on-year basis, we have seen almost 50% reduction in graphite liquid prices this quarter. And -- however, there's no -- we can't take all exactly what will happen and all in terms of the graphite liquid prices at that. But we see more or less stability probably in this kind of level because if you look at on a year-on-year basis, the reduction would look very significant. But on a quarter-on-quarter basis, still about 9% to 10% reduction that we have seen.

From June to September, also the price have reduced at 10%, this is what you are trying to say?

This is more or less stable almost on a quarter-on-quarter basis as of now.

From June to September. Post June quarter, also July, I guess, September, price will remained stable a part from the price.

Yes.

Correct, sir. And sir, lastly, on the utilization levels that I missed the earlier commentary. So what kind of utilization levels are we about to close for this quarter, sir, expected line?

Utilization should be above 95%. So for the quarter, or LNB for this month, I was talking, sorry, the quarter will be around 85%, you can say, 80% to 85%.

Because all we are reaching the pre-COVID level faster.

Correct. Correct.

And by this month have set 95 around that. Then it is a commendable [indiscernible].

Yes. Yes. We appreciate the [indiscernible].

Okay. Now we are only waiting for the duty part to come to place, sir. That would be...

No. Duty is not something that we walk towards and that is not something that -- it's a very short-term thing. So we are continuously focusing on developing the market, reducing the costs, focusing on better efficiency. Duty, comes, doesn't come, is separate from what our daily activities are.

Okay. So you were talking about level-playing field, as you were explaining. So that would be added to the margins only if it happens.

Again, not really to the margins, but it will definitely impact in planning that, I would say.

Right. Right. And sir, the conversation, the promoter for infusing further capital would be, I think, it's scheduled in a day or 2, so a good step taken for not taking loan and including equity at this pace. So it's a good step, and it gives the right direction to manage shareholders, sir.

Thank you.

Congratulations to you, sir.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for their closing comments. Thank you, and over to you.

Thank you, everyone, for attending this call and for showing interest in Jindal Stainless Limited. JSL remains positive that its strong positioning in the stainless steel industry and improving macros would help it to deliver steady and consistent growth going forward. With this, I hope we have been able to answer all your questions satisfactorily. Should you need any further clarifications or would like to know more about the company, please feel free to contact our Investor Relations team or Citigate. Thank you once again for taking time to join us on this call. And also just wanting to add our new website, we will also be launching by the end of this month, beginning of October. So further communication we would also be sending, but I just wanted to inform everyone from my side as well. Thank you.

Thank you very much.

Thank you.

Thank you. Ladies and gentlemen, on behalf of Jindal Stainless Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.