JSW Steel Limited (500228) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of JSW Steel. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashwin Bajaj from JSW Steel. Thank you, and over to you, sir.

Yes. Thank you very much, operator. Good evening, ladies and gentlemen. This is Ashwin Bajaj, Head of Investor Relations for the JSW Group. It's my pleasure to welcome you to our earnings call for JSW Steel Q3 FY '22. We have with us today the management team represented by Mr. Seshagiri Rao Joint MD and Group CFO; Dr. Vinod Nowal, Deputy Managing Director; Mr. Jayant Acharya, Director, Commercial and Marketing; and Mr. Rajeev Pai, CFO. We will start with opening remarks by Mr. Rao, and then open the floor to Q&A. So with that, over to you, Mr. Rao. .

Good evening. Good evening to everybody. The Q3 FY '22 is just always, it is a mixed quarter -- why I am saying it is a mixed quarter? The steel consumption in India in this quarter, month after month has gone up. The overall demand growth in the quarter was 9%. And in the month of December, the steel consumption was 9.29 million tonnes, which is the highest from April 2021. So these are the qualities which we are seeing that the month-on-month to the consumption of steel has gone up in India. So this is the positive side. But at the same time, if I look at and compare with the Q3 of last year, the steel consumption in this quarter has come down by 7%. That means the kind of acceleration, which we were anticipating in the steel number in the second half of the financial year has not happened. The reason, as you know, as far as India is concerned by it an extended monsoon, or too many holidays due to festival season in the month of November. Under threat of Omicron and also slight slowdown in the overall global economic activity, attributable to either tighter labor markets, tighter energy prices, supply chain dislocations, surging cases of Omicron. These are some of the reasons why we are seeing slowdown in the economic activity worldwide, added by the factors which I just related. In these circular senses, if I see JSW steel it is the highest ever quarterly core steel production, 4.41 million tonnes of steel. If I just break up this 4.41 million tonnes 1,80,000 tonne is from Dolvi expansion. So we have produced 4.3 million tonnes from the existing operations by operating our plants at 94% capacity utilization relative to 91% in the previous quarter. Production-wise, we've done quite well other than the Dolvi expansion, which was under the ramp up in the last quarter. The sales also improved comparing to Q2, we have achieved a 6% growth into 4 million tonnes of sales on a stand-alone basis. But here, what is interesting here is the domestic sales once again crossed over 3 million tonnes. We posted 3.1 million tonnes, which is a growth of 31% quarter-on-quarter in the domestic sales. So there are many highlights in regards to the sales. Our value-added steel products as a proportion of total sales went up to 62% from 60% in the previous quarter. Again, after we are seeing improving demand, let's say, quarter-on-quarter, it went up by 2%. The sales in between the solar sector went up by 26%. The sector went up by 67%. The which goes into packaging, it went up by 34%. The domestic sales, there is a very good increase in the overall sales. To that extent, there was a moderation in the exports. Exports was around 800, 6,000 tonnes. The net sales realizations quarter-on-quarter on a blended basis, if I compare the increase of 2%. Again, auto sector, our -- our prices has got settled in the last quarter. So that also got reflected. So overall, there is an increase in the NSR by 2%. But the cost pressure was too high as we have guided last time, the coking coal price is $100 we [ adopted ]. So the blended basis, the costs have gone up by 70%. So that has an impact on the overall EBITDA per tonne on a stand-alone basis, it is INR 6,980 per tonne, which is 23.6%. Compared to Q2, it has fallen by around INR 5,900 per tonne. While a significant portion of this increase is attributable to the coking coal price, but a part of it is also on account of price fixation for average selling price. So generally, as you know, IBM success the average selling price in the state, in state, partially in state of Orissa considering the average of the sale prices that have been declared and that have been transacted in the state of Orissa. But this time, what we have observed is that in the month of July and August, an international iron ore prices were at a level up to $220, $230 per tonne, and they are fallen to as low as $85 per tonne in the month of November. The IBM prices, which are getting declared are not reflecting the fall in prices either internationally are in the domestic market, where MDC reduced the prices that is not getting reflected in the IBM price published public prices. But initially, when prices of September and October was declared by IBM, we noticed that there is correction relative to August. Then after some time, the republished the numbers for September and October, increasing the prices again substantially, almost similar to what was in August. Just to give you a number, 58% to 60% FE iron ore, which was originally declared at INR 2305 for the month of September, they revised to INR 4095. So there is almost INR 2,000 increase in the revised prices relative to what they variably declined. So when we were trying to understand why this revision has happened is that due to exclusion of certain mollified sales made by the company of auctions, e-auctions conducted. So those were excluded for the reason it's best known to again. So we have contested. But the reason that happened subsequently in the month of January 2022. We have immediately closed the provision by closing on books of accounts. This provides a net impact, INR 1,056 crores in the quarter at almost INR 2,640 per tonne. So when our EBITDA per tonne came down by INR 5,920 if IBM prices correctly reflected what was there in the market. The fall in EBITDA would not have been there to the extent of INR 2,640. So we have taken up this matter to the High Court of Orissa same subsidies. One hearing has happened. Another hearing is expected in the next week. So considering these provision and then EBITDA at INR 16,980 per tonne. The EBITDA on a stand-alone basis is INR 6,797 crores. As far as subsidiaries and other banks of the companies are concerned, in the U.S.A., Plate and Pipe mill and also the Ohio operations together, we have dropped an EBITDA of $55 million, which was lower than the Q2. Again, in the state of Texas, there is a tax on inventory. There is a tax on inventories that are there as on 31st December. So generally, sales would be lower, but right now, the activity would be lower in the month of December. That also contributed for lower sales and the lower EBITDA in the U.S. operations. But in the current quarter in Q4 of the financial year, we expect this could improve. In the case of Italy, there is a EUR 7 million loss out of that, approximately EUR 6 million is one-off item. So at time before we took over the area management was contemplating to set up an electric furnace and they did some engineering and some expenditure that the expenditure we had written off. So that is an amount close to around EUR 6 million, including another small item. So this one-off item, if I take it out, the loss in Italy is only EUR 1 million. So we feel in this quarter, we should be able to do reasonably well in Italy. So the overall EBITDA from overseas operations was INR 340 crores in the Q3 and it is INR 485 crores in the previous quarter. The Indian subsidiaries have done reasonably well. It recorded a total INR 769 crores of EBITDA from Indian subsidiaries other than Bhushan Power & Steel. So I want to give you a separate number as far as Bhushan Power speeds concerned. It is INR 1,547 crores EBITDA, which has been recorded by Bhushan Power & Steel. So including 1547, including Indian subsidiaries, other Indian subsidiaries, EBITDA plus overseas, minus consolidation adjustment all together. The subsidiaries have contributed INR 2,344 crores. So with that, the consolidated EBITDA stood at INR 9,132 crores, and it is INR 19,707 per tonne. This is our consolidated EBITDA number. Our profit after tax was INR 4,516 crores. We also consolidated from 1st October 2021 Bhushan powered steel. With that, the total debt got added, net debt got added INR 7,500 crores approximately. With that, the debt was INR 66,304crores as on 31st December on a consolidated basis, including Bhushan Power & Steel. If I take out the debt of INR 7,500 crores of Bhushan Power and Steel. The balance debt on a comparable basis was INR 58,827 crores, which was higher when compared to 30th September by almost close to INR 2,000 crores. Our inventories in the quarter went up by around 3 lakh tonnes and also some data were to be collected. So we have invested approximately around, again, INR 3,000 crores in the working capital. That's why this debt has gone up. Our effort in this quarter is to reduce these inventories and reduce this debt to this exchange and bring it back to the levels which we have seen in 30 September. Debt-to-EBITDA on the pace of [indiscernible] to be 1.73, but actually, it is 1.53. Why I'm saying is 1.53. When we take last [indiscernible] trailing EBITDA, Bhushan Power & Steel 1 quarter EBITDA has come in the 12 months trailing EBITDA that is upward to December. So previous 9 months EBITDA has not got reflected while calculating this 1.73. So if we annualize the EBITDA of the October to December quarter of Bhushan Power & Steel, then this number will be 1.53%. And debt to equity was 1.02. As regards to 9 months performance, our consolidated production, crude steel production was 12.61%. These numbers are without Bhushan Power & Steel. And our sales number was 11.2 million tonnes. If you have seen our guidance, we have given 18.5 million tonnes of crude steel production and 17.4 million tonnes for the sales. So if I just break up this guidance we have given to existing operations and the expansion of [indiscernible]. In the existing operations, we're almost near toguidance, we're at 97.5% to 98% both production and sales. But in the case of expansion, because of the delay, of commissioning of this project, is July, we could commission only in October, October and actual commercial production is from 15th of November. So there we have lost volumes of production and sales from the Dolvi expansion project, nobody stabilized, we will have a good volume for the Q4. Considering the loss of production from the Dolvi expansion projects and 1% or 2% lower production from existing operations and the sales from existing operations, so our overall guidance for the year will be around 94% to 95% of the corporate guidance given for the year initially. Our Dolvi, as I mentioned to you, the expansion is more or less is lower, and it is stabilized, accepting power plant, which will get commissioned in this quarter. So that will reduce again cost of production once commissioning is completed. Out of the total 2 power plants, 1 is getting commissioned in the month of February and the other 1 in the month of March. Then what is left out is the in downstream units, like 1 galvanizing line at Vijaynagar, 1 color coating line at Vijaynagar, 1 car line at [indiscernible] on in place 2 at Tarapur. These are the downstream units, which will also get commissioned before 30th of June 2022. So this is briefly about the results as regards to the overall performance for Q4, there will be a good volume growth, which will happen from the expansion project at Dolvi. Thank you.

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

And congratulations for the numbers despite one-off related to iron ore and all. So I have 2 questions. The first one is essentially on realization. So how do we see blended realization changing from Q3 to Q4. And in particular, our export mix from Q3 to Q4. The second question is on coating coal cost. What was it in Q3? And how is it expected to change in Q4?

So the coking coal prices, Amit, I think, have been very volatile over the last few weeks. So coking coal prices, as you may be aware, have elevated to $430 Australia, which was in the $357 range in the beginning of the month. . So it will be difficult for us to quantify exactly what will be the quarter 4 outlook for coking coal, the where we have given. I think we would need to wait and watch how the situation moves with respect to the coking coal FOB prices. Having said that, we have 2 months usually in the inventory cycle. So that's something which you could take into account while you factor your calculations. As far as NSR and realizations are concerned going forward, quarter-on-quarter, I think I would say that the prices in December have bottomed out. And we have been able to sell the automotive -- settle the automotive prices. The quarterly prices for the January-March quarter also are by and large, done. So therefore, from an exit of December to January, I would say that, by and large, the situation on a monthly price basis will be similar. However, there is an upside on account of automotive and quarterly. Going forward into February, March, the cost push, which is happening across the world, both from coking coal, iron ore, zinc and other raw materials would keep the prices supported. We see over the last 1 week, the movement in the secondary market on the prices, they have moved up. And we see some reflection of that in the international prices as well. So we do expect that there will be some movement on the prices on the positive side between February and March. Difficult to give an estimate as to what the quarter-on-quarter delta will be, but this is the direction where we are seeing ourselves in.

Just a follow-up on this, what was the coking coal cost in Q3? .

It went up by $100 as we had estimated. It was 257 CFR .

The next question is from the line of Sumangal Nevatia from Kotak Securities.

First question, just a clarification. The iron ore one-off of INR 1,000-odd crores. Is that possible to break up between what was it with respect to September and October that will help us to understand what was the one-off with respect to the 3 years quarter?

Up to August, the prices were available and we closed our books in September. After that, when IBM revised at the prices, they have revised only for September and October. So the yield of September was INR 264 crores of [indiscernible] total of INR 1056 crores. . Now October prices were revised, we provided actual based on like based on October, IBM published price. Same trend we expect for November and December, the IBM will continue at the same time. We accordingly made the provision. At the same time, we are contesting starting from September, that this is not the way ASP is to be calibrated. So we obviously finally how the matter will be decided by the court.

Understand. That's helpful, sir. Sir, 1 clarification on the previous question what Amit has asked with respect to the prices. We understand exit December to exit Jan, as you said, is flattish. Is it possible to share what would be exit December prices versus the third quarter average prices?

That will be difficult to give right now. But I think, as I was telling in the last question, December and Jan are similar. International prices have seen an uptick, recent bookings of international exports have been $30 to $40 up. Secondary markets have moved up. So we do see a positive upside possible for February and March.

Understand. One just last question on the subsidiaries. So Italy after turning positive at EBITDA level this quarter, we've again gone into a lot -- And also U.S. we prices are weakening. So is it possible to share what is our expectation going forward on a steady-state basis to international subsidiaries?

No, the plate prices, in fact, have not fallen the way the recoil price has now fallen in the U.S. also. So therefore, we don't expect the plate mill is concerned, there will be a decline in the overall performance, either in terms of volume or in terms of EBITDA. But at the same time, in Ohio, we are seeing a fall in the hedge up in prices, but the demand was weak in the last quarter. In this quarter, we expect the demand to come back. If that comes back over our view as of Ohio is concerned, it should continue to perform the way it is doing, if not improvement. .

Okay. And with respect to Italy? .

Italy, as I was mentioning in one of the calls last time, is basically the rain mill if rail mill operates fee, then we will be in green. If really there is an issue, then we will go into rand. . So the rail mill operation may will be dependent on the tenders by Italian rail mill. If there is any delay in [indiscernible] quarter in awarding those contracts and rail mill operate suboptimally, so that will land in negative EBITDA. So we expect in the Q4 should come back we are expecting rail mill should operate well and it will come back to green.

We have already received one tender order from the Italian rail while that is the first initial order level. So part of that will get executed in this quarter. We are looking forward to another tender by the Italian rail during the quarter. .

Your next question is from the line of Indrajit from CLSA.

Couple of questions. First, can you give us some color on the export market right now? How are we seeing the export thing? And do you expect to go back to those 25%, 30% of sales in export in this year as well first of all?

So on the export market, I think the overall quarter 3 exports to domestic ratio on a consol basis with our BPSL was 21% of exports, 79% domestic. . The export market today post the December holidays and in the inventory liquidation stock down, which has happened. The inquiries are far better post the holiday season. People have come in to the market to buy. Therefore, in the last 2 to 3 weeks. The export bookings have seen good movement upwards. Some of the products have moved better, like hot roll prices and hot-rolled volumes have moved much faster right now than the downstream. However, the downstream, we do expect the movement to start as we go into the month of February. The export ratios, I think, would be in the similar range between 20% to 25% in the quarter 4 as well. We are looking at the international market, but the domestic market is definitely poised to be better. We see the automotive demand in December has improved over October, November. In January, it's improved beyond that. The outlook for quarter from automotive is very good. The general infrastructure pickup and construction activity is also quite positive. We have seen some tender announcements and some execution of the projects, which are now taking place for oil and gas and water pipelines, which will be again positive for servicing during the quarter and beyond into the next quarter as well. Appliances and solar continue to do very well. So we are, by and large, looking at a positive domestic cycle in the quarter 4. So therefore, we will keep export as a balancing number, but the indicative could be between 20% to 25%. On an increased volume is this quarter last year, quarter 4 this year will be higher in terms of overall volume as well.

Sure. Sir, again, coming back on the domestic volumes, do you think that the market has grown as much as the in FY '23, can we see a strong single-digit growth in the Indian market in terms of consumption, as the market has all noted specifically. Do you think those levers are in place? Or do you think the market is still much weaker than what it was pre-COVID?

I think in general, the investments across the physical infrastructure space, which we see especially from the government side is quite positive. The entire CapEx cycle, the way we look at it today is the industrial CapEx and the infrastructure CapEx. About 25% of the CapEx is coming from private CapEx. The balance 75% is coming from the government spending, mostly on infrastructure. The private CapEx is mostly on the industrial side. So the CapEx pipeline looks good. The way we are seeing the oil and gas and water pipeline projects rolling out, the metro projects coming in, the high-speed bullet train execution picking up, the expressway project is picking up, we are quite positive about the infrastructure and construction space the way it is building up. The real estate launches by the real estate companies are fresh. On inventory liquidations are also quite positive. Construction activity is therefore picking up. Automotive estate is picking up. So yes, I would say that if you look at GDP at 8.7%, as indicated and based on elasticity of 0.8 , we see a decent single-digit growth possibility in 2023, '24.

Sir, 1 last [indiscernible]. So for coking coal, if the [indiscernible] prices are [indiscernible], how much do we have any forward contracts in terms of contracted amounts? Or are actual purchase price much lower than the benchmark price? Or generally, at some point in time reflects the best ? How does the pricing of cost for us?

The pricing is basically mostly index-based and it gets rolled up for the month, depending on the shipments for the month. However, you have your inventory cycle for about 60 days in the system between quantities within the country, for plant and whatever is on the sea. So that's, by and large, a thing. The contractual prices separately, we don't have anything which is locked in at a particular price.

So just to clarify, the 257 CFR will turn to, say, 430 FOB at some point in the next few months? It is likely?

257 CFR levels translates to, let's say, roughly 305 level, let's say, FOB level roughly at about $240 to $245 levels. So from there, yes, $430 is only a peak of today. If you were to look at the average for January, that's the way the index will count. So we have to see how the movement of the index is for the remaining 7 days and then take an average index number for Jan.

I think one point I wanted to clarify. $430 doesn't mean $430 is the entire cost of coking coal we buy. So when buy a proportion, it is generally 50% to 55% is prime hard coking contains on selling hard, which is than the prime hard portal. So on a weighted average basis to see what goes into the coal, they have not reported $430 be put and take it out as a country. Relativity will be lower. Number one, we will get some discount to the index prices, number one. Number 2 is the relativity of the mix that goes into the [indiscernible] to the index. That is also important. These are the 2 factors which we have to take for comes. $430, minus $245 is not the cost to us. .

[Operator Instructions] The next question is from the line of Pinakin from JPMorgan.

Sir, my first question is trying to basically put all the moving parts together. So you highlighted that prices are broadly steady, possibly [indiscernible]. Coking coal, there is an inventory, domestic iron ore prices would fall. So if we take the starting point at INR 16,900 and that part at this point of time in Q3. Will the -- does the EBITDA per tonne move higher or lower? Because obviously, spot coking coal is higher, you have 2 months of inventory?

Here, the issue is it's very difficult for us to say EBITDA per tonne will go up or down. [indiscernible] that you actually said, coking coal price which we have seen in the range of $330, $340, it's moved up to $430 within no time. We all may happen to the same extent. We don't know what is going to happen. [indiscernible] as inventory than we have. So from today to the end of the month, whatever coal we will be buying, there is an extra cost that can come in, in this quarter as far as the coking coal is concerned. But on iron ore prices are coming down. So hopefully, it will continue in the following months. And IBM are, of course, we decided in our favor, thereby it gets revised downwards than what they have been declaring. At the same time, if I look at other than iron ore and coking coal, ferroalloys have corrected significantly downwards relative to what it was in the Q2. Q3 part of it has happened, Q4 balance will happen. So we expect, because of the supply chains from China, we again, we're going back to China is that majority of the inputs other inputs, it you take refractory, you take to new [indiscernible]. The input that will come is again dependent on China. So Chinese supply chains are getting streamlined, but production is coming back. Therefore, there is a slightly [indiscernible] other costs are likely to come down relative to what it was in the in the Q3. But the main point with you have to understand as far as JSW Steel is concerned, the Q4, there will be a big volume growth. This is coming from Dolvi expansion. 180,000 tonnes is what has come from Dolvi expansion in the Q3, that will be much more than that because when we gave the guidance of 94% to 95% of our sales target of 17.4 million tonnes of sales, what we achieved 11.5% for the 9 months, then you can see the kind of growth in volume that can come in the Q4. So that will keep the absolute amount of EBITDA in a very healthy level to EBITDA per tonne in fluctuate based on the various moving parts.

Understood, sir. Sir, my second question relates to net debt. So now net debt moved very sharply higher. You highlighting that is because of working capital, which should reverse as the company sells on inventory. But clearly, the net debt has moved from the INR 50,000 crore handle, which was there for a long time to the INR 60,000 crores INR 70,000 crores range. Now assuming that margins don't materially change, the company has the CapEx plan in place. Should we expect net debt to broadly remain in the INR 60,000 to INR 70,000 crores range for the next few quarters? Or do you think it can possibly even step up if there is an increase in CapEx?

As far as the capital expenditure, which we incurred in the 9 months is INR 10,350 crores. So even after incurring that capacity really see the net debt number, excluding Bhushan Power & Steel. Bhushan Power & Steel of INR 7,500 crores. If I look at the EBITDA of that particular company, it can easily suitably out of the cash flow of Bhushan Power & Steel. If I exclude the Bhushan Power & Steel and look at the consolidated out number that is INR 58,800 crores. Now let us look at this number compared with 31st March 2021 number, which is INR 52,600 crores. So actual increase is around INR 6,200 crores. The INR 6,200 crore debt increase, if I look at the 2 numbers, which is after spending INR 10,350 crores increase on the CapEx over and above that, the investment in the working capital in this year is INR 11,097 crores. So I talked about only increasing inventory in this quarter. But if I look at overall inventory as of 31st March 2021, versus 31st December 2021, there is a significant increase in the overall inventory. So we have to bring down inventory, not by 3x, maybe another 2 lakhs per tonne plus the debtor sale to come down. So whatever we have invested in the work capital. Once this come back, we will go back to the level as you have seen as on 31st March 2021. So the number which is more important here, the kind of investments, which has gone in the working capital because of extended working at cycle in terms of decreasing inventory or increase in debtors. .

The next question is from the line of Satyadeep Jain from AMBIT Capital.

Just 1 question. In the one-off related to iron ore. If I understand it correctly, when the IBM prices were calculated initially, the company's e-auction volumes were included in the initial calculation. And subsequently, in the subsequent calculation, those you e-auction volumes were excluded. Is that understanding is correct, is it possible to quantify how much of these e-auction volumes? And was there a substantially basically lowered prices will be [indiscernible]? .

The company has conducted total [indiscernible] volumes. There were 50 bidders, 37 bidders was access for bidders. Out of the 3 are related parties. That is all third party. Total volume, which has been auctioned was 2.65 million tonnes. Out of that, 1.9 million tonnes is unrelated. . Yes. Now this entire auction quantity extrusion is not in line with the provisions of [indiscernible] rules 2017. That is what we are contesting. So there is making a difference of INR 2,000, approximately per tonne in the declared prices, revised price.

The next question is from the line of Ritesh Shah from Investec.

I just wanted to take the prior question forward. Sir, you indicated 2.6 million tonnes, of which 1.9 million tonnes was unrelated? Did I hear it right, sir? .

Right. .

Sir, would it be possible for you to quantify what was the pricing differential between related and unrelated transactions on a volume-weighted basis? .

When you auction you can't distinguish between related and unrelated anybody can participate in that. So the price will be the same in the auction or it could vary very marginally from B2B or B2C. So it can't be significantly different.

Correct. Sir, the reason I ask is basically you indicated 2640. That number is pretty huge. That was the reason I asked that. . Sir, a related question. Ministry of Mines has indicated basically national mineral and metal index and state metal index to what's my limited understanding is, the incremental premiums will still be paid on national metal index. However, there is an element of quantities of grades, which needs to be prefixed when we arrive at a particular index. Sir, where is this process at and given what has happened in the last quarter, how should one understand this particular variable actually flowing incrementally because it's quite pertinent from a P&L standpoint.

So there are a lot of distortions. The way the average selling price is calculated in the current this has been brought to the attention of the government. Government has appointed a committee. This committee has met all the stakeholders how to fix the average selling price, even if it finally goes into National Mineral index. So they have their accumulations and their recommendations are getting submitted. I understand the government. So hopefully, something will come or clarity will come, how it gets fixed in a transparent manner going forward. .

Sure, sir. And my second question is for Jayant, sir. Sir, how are you looking at Chinese net steel export strength going forward? And any color on Chinese infra stimulus? Or how are you operating the local demand supply situation in China? I'm just trying to get a sense on how are we looking at Chinese export numbers and the underlying economic.

Chinese production is to be moderated during the next few months on the winter olympics and winter months they want to control the carbon emission. Certain regions are controlling the production models. That will result in a lower export or more moderate exports from China during this period. The other thing is that the Chinese economy now, I think is looking -- the government is looking at stimulating it, we have seen print to say that the rates have been -- the interest rates have been reduced. There is some more liquidity being pumped in the support to the real estate market is likely to be given. So we have seen some positive vibes from the government to stimulate the economy forward. So I think that's a positive. So therefore, we think that Chinese domestic demand will be reasonably okay. and exports will continue to be moderate at least for the first half of this year.

The next question is from the line of Abhijit Mitra from ICICI Securities.

I have 2 questions. Firstly, regarding the JSW quoted EBITDA movement, the sharp decline, how do you explain it? Is it because you have taken the [indiscernible] price cuts, but yet to sort of take an action or decision on the HR prices? So that's question number one. The second question is how to sort of bridge conceptually EBITDA per tonne that we are seeing on the stand-alone and Bhushan because stand-alone EBITDA is around 17,000 Bhushan 26,000 per tonne. So how to sort of bridge this to. These are the 2 questions I have. .

On JSW quoted the numbers have been a little lower this time because of the cost impact on certain raw materials like zinc. Zinc, aluminum tin and paint. That has led to a moderation in the EBITDA numbers. We are watching that space. There is a raw material pressure. HR prices, to some extent, have moderated and an exit number from December. So the situation for the quarter 4 should be better. .

In the case of Bhushan yes, sorry. .

Yes, just a follow-up on that. I mean the trade between CR and HR. Is there anything to do with that what I was trying to understand because they understand that you sort of supply the steel from JSW and get it converted out there. So -- because realizations are also down significantly, not the cost. So yes, if you can just briefly [indiscernible]

HR and CR, trade you were saying, I didn't understand that part. Question. Can you just repeat the question? HR and CR, did you...

The spread between HR and CR the compression in spreads between HR and CR prices, the compression of the gap between HR and CR does that into predating case that you have quoted. .

Okay. No, the HR and CR, the compression in HR and CR gap has moderated. That is primarily in the CRCA retail space, which you see. But in coated, I think different products are behaving differently. If you look at tin, tin prices are probably one of the best, and we see a strong price support and tin going forward and demand is also quite good. On the coated OEM space, if you look at solar, if you look at appliances, which take specialized galvanized and specialized GL, there also, we are seeing decent demand and therefore, the prices there are also holding up. The high-strength steels and therefore not available from everybody. On the color-coated space, while the prices have moved down. But in certain brands of color like color on plus where we continue to have an edge, we see the price drop has been lower than the other level of color seen from competition. But there is a pressure in quoted on commodity galvanized. Commodity galvanized in coated has, let's say, come down more than -- especially in the retail of the Plate and Pipe mill segment. That area is putting some pressure in the market. But going in the last 1 or 2 weeks, as we were seeing in general commentary, the prices have improved, including the retail space of galvanized.

If we can clarify the second question which you asked as far as BPS sell EBITDA versus [indiscernible] steel I think we will have to look at Bhushan Power & Steel. They have surplus capacity in the blast furnace. So they also sell the guidance. If you look at their EBITDA, it includes the sale of other material other than we finished steel. So that adjustment requires to be made. Number 2 is, if they are producing lead 2 lakh tonnes per month of HR coin , what they sell in the form of HR is only 30,000. That means around 15%. Balance 85% is in the form of value added. Whereas when you calculate JSW steel stand-alone EBITDA per tonne, that is not comparable, actually Bhushan Power & Steel. Because entire value addition is not getting reflected in the stand-alone EBITDA of JSW Steel. Second, the third point is when Bhushan Power & Steel participate in the auctions and they got the iron ore, they got at lower price. That cost is booked [indiscernible] These are 3 differences if you adjust, I think EBITDA per tonne on both the companies are compared.

The next question is from the line of Nitij Mangal from Jefferies.

Firstly, for FY '23, what kind of incremental volumes are you expecting from the Dolvi expansion?

I think we will tell you clearly the exact number in May. But the ramp-up is quite good. So it is stabilized. So the unit is working very well. The numbers, we will give you when we meet in May. .

And secondly, on this iron ore issue. Is there any ambiguity on November, December pricing as well? And if it's possible to share what IBM's rational for that change in the reference price?

I don't want to get into details what is the issue, which is there on the table. But the way the methodology, which is being adopted by IBM or calculating the average selling price in not in accordance with what IBM follows in Karnataka. Both are different. In Karnataka, all the iron ore is auctioned. So the way the average selling price in Karnataka is calculated is not the same [indiscernible]. Therefore, there are discrepancies are brought to the [indiscernible] IBM. So I think the matter will get resolved in the course of time. .

The next question is from the line of Bhavin Chheda from Enam Holdings.

Two questions. One, what was the capital execs and revenue acceptance is bigger in the quarter? And the second one was what was your captive iron ore volume when you can break that into Karnatak volume and Orissa volume? .

The [indiscernible] of captive iron ore in the last quarter was 47% on increased volume. [indiscernible] a pickup right now between Karnatak and Orissa. The capital acceptances, which you asked for raw material was 1486 million because coking coal prices have gone up. The excess interest in the raw material side went up to 1486 million. But at the same time, capital acceptances, we have bought it down with 174 million . So total 1660 million.

And sir, and clarification on this, Bhushan Power pickup per ton, what you explained is substantially higher because obviously, the NSR also looks higher because obviously the NSR the other sales, the number which get captured in the sales divided by actual finished steel volume which means you are indicating this spread is a sustainable number ove JSW. There is no one-off there?

There is no one-off accepting the iron ore pricing [indiscernible].

What iron ore pricing, sir, I didn't get that.

I explained to you about IBM succession of iron ore.

Yes, that's why that is captured in stand-alone. I was looking at Bhushan Power EBITDA per tonne, which comes to roughly INR 26,600 this quarter, even last quarter was INR 26,600. So in fact, has remained steady for last 2 quarters despite cost going up in this quarter. . So I was trying to figure out if there was some one-off in that too?

There is no one-off items.

The next question is from the line of Kamlesh Bagmar from Prabhudas Liladar.

Sir, just on this iron ore cost or that charge, which we have took in this quarter. So if I see the -- right from October, November data based on Orissa minerals data, which is a published one. So every time, like there are, let's say, realizations of which we have published here or reported there are lower by roughly around INR 2,000-odd even for the December month. So -- and if you see another like say around 20, 25-odd miners, which they have MC or mining. The difference is there across the mine. So how we are going to substantiate on that particular item like that our realizations are lower by roughly around INR 2,200 on that account. Because they are also selling the mineral for last, let's say, or around 20, 25 years. So their prices like 25-odd minors against us. So how can we -- how would we be able to establish that particular argument.

We have been operating the mine since June -- July 2020. Now we are in December '21. As to August '21 we have not raised any issues. In September '21 onwards, there is a problem. Because this is auction and the auction [indiscernible] anything. We are bidding on the NSTC platform, the auction platform. Even OC does, [indiscernible]. Karnataka does auction on the NSTC platform. When we do the auction, the next bidder has participated you know the price, you know the quality. So I think we have to prove to anybody. And we know the grade, we know the price, we know the bidder, we know the seller. The mines on which it is going. Definitely quite transparent, but the way they're interpreting the way we understood is different, particularly in the latter months when the prices have fallen. That's why we say that is an issue, which we took up very strongly, not only legally but also to the government.

I appreciate that. Sir, lastly, on this PLI, like say, we are doing massive investment in the downstream. So how much of our quantity in downstream or upcoming capacity because it would be applicable on the expansion? Would be covered under the PLI?

[indiscernible], just now they have announced the guidelines. So we are studying those guidelines, and we are working out based on those guidelines, how much capacity can come in because there are certain time line by which the production has to start the expenditure has to come in. So those things which we are calculating, I think next time when we meet in May, we'll be able to throw light on that. .

And lastly, sir, we have mentioned that we have 2 months of coking coal inventory. So assuming that these current prices continue at $10 to $15 a year and there, so what increase or what change can we expect for the Q4 in terms of coking coal prices?

So the way -- in fact, we -- we wanted to give you a number, in fact. So we or the numbers based on the price prevailing up to 31 December. When we calculate that number, assuming that, that would continue, it would be in the range of around $25 per tonne. After that, the prices went up. So therefore, we have to now recalculate because the January month, whatever buying what is happening, part of the quantity will come in consumption in the month of March. Therefore, that number, we don't know. So minimum $25 after that, we hope to calculate the number and then share. .

Next question is from the line of Vishal Singh from Phillip Capital. Vishal Singh, your line is in talk mode. Kindly go ahead with your question, please.

Sir, just wanted to understand what is our landed cost as of January for more captive 1 versus the bought-out iron ore? If you can tell us the difference in this one is higher at this point of time? .

So that is very difficult to this is the number here. I don't know if there are different grades. As far as our mines are [indiscernible] low grade. We get the low grade [indiscernible] use it. So it's not directly comparable. The for, it is not proper to give you a number.

Understood. And sir, secondly, in terms of Bhushan Power. So just wanted to understand, have has the check whether we have this stress effect addition potential because what you have heard that the capacity could be taken to 3.5 million to 4 million tonnes. So anything you would like to share about by when you would like to start trucking there? What is our thought process in terms of utilizing that capacity going forward?

Last time, I think we already mentioned that there are -- there is a total CapEx of INR 3,500 crores which is committed in Bhushan Power & Steel, which is currently going on. Out of this INR 3,500 crores, INR 1,500 crores for improvement in various areas to reduce the cost, cost savings initiated improving the PCI injection and also coal plant, which is not fully commissioned. So those are the areas where we are spending money to improve the operational efficiency of BPSL that will reduce the cost further. The second amount of CapEx fees relating to INR 3,000 crores to increase the capacity from 2.7 million to 3.5 million. So that gets completed in the next financial year. So we expect at least by September 30, we should be able to complete this project.

The next question is from the line of Prashanth Kota from Dolat Capital.

Sir, I have 2 question. First one is on the coking coal side. Sir, right now, the FOB price for the low wall prime grade is $430. Let's say, we use a brand of prime grade mid-wall and next say, the second tariff. Even then, if you see the FOB basket [indiscernible]. Still, the price will be around $380 FOB and CFR will be $410. And as a country also if you see now, we have been one of the largest importers of coking coal in probably in the world. And this is all JSW probably it's a national issue also, sir. And the price behavior of coking coal, if you see this like [indiscernible] kind of a behavior not now since 12, 13, 14 years we are seeing, there is 15 days of rainfall and for 6 months, prices remain elevated. And there's various times, various instances, it hits very substantial spikes, et cetera. And sir, is there any day we can renegotiate as a country and carve out something as the coking coal price should be a percentage of the steel price, not a flat index, which is quite illiquid and sometimes, we don't know what exactly is going behind there and is quite -- it's not that scientific record maybe. So maybe it should be today rebar price is $725 in India and coking coal is $450 CFR, 65%, there's one commodity. And they need us as much as we need them coking coal there is no other use. So it's a symbiotic relationship, but if somehow there appears to be a lot of [indiscernible]. I don't know what is the solution for this is you have to form a syndicate as a country and do something, what is the solution? Just wanted to know your thoughts.

We appreciate your annuation is that we are also equally anguished in this issue. [indiscernible] the case of while OPEC what entire world is able to do. So they dictate all the supplies to be done, what should be the price. Nothing could be done Same story coal same story in coal, very few players are there. dedicate what could be the price or how we should operate. . The point remains on how India as a country where we have the ambition to become a 300 million tonne steel company still in the country by 2030, where our coking coal requirements will continue to go up from current levels. So how we can become self-sufficient with regards to coking coal. Here, as a company, we have given a proposal to the government, which we are really pursuing very, very vigorously on that. There is enough coking coal that is available within India. So how to develop, taking into account all the stakeholders, one is the state government where the mines are located, another decent government steel industry. The third one is the people who were affected due to mining. These 4 constituents have to have mutual trust and then work together to see that this problem can specially address. So we are on it. Hopefully, something should happen.

Okay, got it. So just next question, sorry for the follow-up on that. Sir, just because of elimination of our company's auction bids, the IBM prices have been revised? Or is there anything else that they're eliminated, only just one because you have 25 sellers. Only one seller prices have not considered hence, it has been revised upwards or how is it, sir?

We also don't know how they calculate it, how revising price has been calculated. The point is that when revision has happened, then we understood that we learned that there is some exclusion happened. So then we took it out that issue with them and then followed by a litigation in the court. So what is that they have taken into account, what is that not taking into account, we don't know. But ours is excluded because they have issued a notice to us to give the details of the quantities sold in the auction and whom we have sold all those details have been provided to them. Thereafter, prices revised. Therefore, we feel that ours is excluded, then we [indiscernible].

Thank you. Ladies and gentlemen, due to time constraint, we take that as the last question. I now hand the conference over to the management for their closing comments. Over to you.

Yes. So thanks, operator, and thanks, everyone, for joining us. Feel fee to reach out to us if you have any follow-up questions. Good evening. .

Thank you. Ladies and gentlemen, on behalf of JSW Steel, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.