Kirloskar Ferrous Industries Limited (500245) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q3 FY '24 Earnings Conference Call of Kirloskar Ferrous Industries Limited, hosted by Antique Stockbroking. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Pallav Agarwal from Antique Stockbroking. Thank you, and over to you.

Yes. Thank you, Muskan. A warm welcome, everyone to the third quarter results call of Kirloskar Ferrous Industries. We have the senior management team from Kirloskar Ferrous represented by Mr. R.V. Gumaste, the Managing Director; and R. Srivatsan, the ED Finance and the CFO. So I would now like to hand over the call to Mr. Srivatsan for his opening remarks. Over to you, sir.

Thank you, Pallav. Good evening, everyone. Thanks for the interest shown in Kirloskar Ferrous Industries Limited. The results are with you for some time and the quantitative results and everything has been uploaded. The quarter remained a bit flattish with INR 968 crores of the sales turnover compared to INR 880 crores of the Q2. The sales realization of pig iron at INR 42,000, a drop of around INR 2,000 per tonne of Q2 and the castings realization remained at INR 1,24,000 as against INR 1,26,000. EBITDA stand-alone at INR 127 crores, percentage to sales of 13% and PBT of INR 70 crores, percentage to sales of 7%. PAT of INR 52 crores percentage to sales of 5.3%. The CapEx program is going as per the plan. Pulverized coal injection is getting completed in this quarter. The long-term loans are at a control at around INR 800 crores for the quarter. With this, I think I will hand over to Mr. Gumaste for any other remarks to make.

Thank you, Srivatsan. I think as Mr. Srivatsan has already informed, I think more flattish in this quarter. We have grown in volume in pig iron compared to last quarter, but we have gone down much mainly compared to third quarter last year to this year on pig iron. Castings, a couple of quarters, we are affected because of the drop in the demand for castings, mainly coming from the tractor industry. And we are running all the 3 blast furnaces, normal and the total liquid metal production can be -- for a quarter can go now to 1,65,000 metric tonnes or 56,000 metric tonnes per quarter. So that is the liquid metal and there will be some drop 3% less -- 3.5% less for arriving at the pig iron production. And we also consume pig iron in all -- in both the foundries, both at Koppal and Solapur and also we sell pig iron to ISMT for the consumption in steel making. And in general, if I have to comment, iron and steel industry is under pressure with respect to margins. The coal prices have remained stable and high. Iron ore prices have gone up substantially in the last one -- almost like INR 2,000 per tonne of iron ore and has impact of 1.6x. So INR 3,200 is the impact on the pig iron. Whereas the pig iron prices have consistently come down. So almost like in 1 year, they have come down by INR 6,000, and that is margin pressure we had during the last quarter and it continues during this quarter as well. So -- also, I think overall because of the global demand for iron and steel is under pressure as well as I think the supply chain from Ukraine and Russia, in my view, have got restored whereas the demand has not restored. So because of that, currently, I think the supply is over supply in the market entirely in the iron and steel industry. Thank you very much for joining this call, and I'd be happy to take more specific questions from all of you. Thank you very much.

[Operator Instructions] The first question is from the line of Pankaj Parab from Molecules Ventures.

Am I audible?

Yes, you are. You are audible.

Sir, my first question is regarding the industry scenario, in particular, for the tractor industry and MHCV segment, as compared to Q3, how the Q4 is going for us, sir?

Thank you very much. I think actually in the Q4 for the tractor sector is the preparation for the season. Typically, April, May are the season for the tractor. If I look at the kind of demand which used to go up, I don't see that kind of demand going up. But if you ask me the schedule for the casting in January and then in February and March, they are better than December. And -- but I'm not sure whether we will really see the sales will pick up for the tractors and thereby the tractor castings will it come this year and how much will come, but the schedules are slightly better compared to December.

There is a slight improvement as compared to Q3?

Yes, compared to October, November, December, they are better.

And sir, how about the other auto segments apart from the tractors like MHCV and all?

In case of KFIL, I would say all products. Other sectors have supported quite well. I would say that auto as well as off-highway, earth-moving equipment, stationary engine, all we have done and that's why we still have a ray of hope that we can reach overall the kind of casting volumes what we did last year. It's not growth, at least try and avoid the degrowth. So it's all because of the other sectors doing well.

Okay. Okay. And my next question is regarding the pig iron segment. Sir largely, we are complete in terms of our mostly backward integration projects for the pig iron segment. So what is stopping us to achieve 18% to 20% our target EBITDA margin? Is it weak demand or weak realization or there's anything else that we are missing on this?

I just mentioned we have done what is required to be done in case of pig iron manufacturing process to become cost competitive to achieve the level of productivity which support better cost structure. If at all anything left out, I would say that full and proper utilization of power plants connected to the coke oven, maybe there's still some delta x improvement possibility. Plus, we are not using PCI, which is also important in pig iron and steel making, and we are getting ready in this month of February itself we will start with the pulverized coal injection. And both the power plants connected to the coke oven are running well. Having said this, basically, the problem of margin is coming -- if you look at iron ore prices over the last 1 year, they have gone up by INR 2,000, which had an impact of INR 3,200, whereas coal prices have not dropped to the extent pig iron has dropped. Pig iron has dropped by almost INR 6,000 over the last 1 year prices. And these 2 combined effect with generally when the commodity prices go down like pig iron or even steel, then the coal prices should have fallen, but we don't see that. And that has impacted at least if not more by about $40, which also happens to be INR 3,500 kind of impact on the pig iron. So some of those set of conditions have to change for the improvement in the pig iron margins.

So basically, the pig iron prices should improve going ahead, that's what -- I mean, I can..

I couldn't get your question?

So pig prices should sustain at this level, so there should be some increase in pig iron prices going ahead?

A little bit improvement in the pig iron prices, definitely or, for example, the drop in the coal prices, which can serve. For example, this year, typically, the costal based pig iron plant used to export pig iron. And this year, they have exported less by more than 1 million tonnes. And it's a big number for a small industry and that definitely got dumped in the same market and definitely we're fishing in the same market and it impacts. And during this, if you see last 9 months, there has been further problems in the European market and Turkey imported less steel scrap and India imported more steel scrap and hence the lower prices and not supported by the steel industry consumption. So the overall impact also coming from the steel scrap as well as the steel industry. So many of the steel plants have also some amount of surplus pig iron to sell instead of buying some pig iron. So that's the scenario change.

Quarter 4 onwards, we can save at least 60 tonnes of coking coal by implementing PCI, is my understanding right?

Yes, yes. The PCI will help us in bringing down the cost. Because first piece starting the PCI in this month, the same year-end. And I think by June, July, we will also be ready with oxygen enrichment. I think together, we get the full benefit, till that time we get only the PCI benefit, which is less than the full benefit. Yes.

Lastly, my question is on ISMT. Sir, what is the volume ramp up coming in tube segment as well as in the steel segment. Our target was to reach 1 lakh in steel segment, particularly, how is that going on, sir?

We have progressed and we will have growth on tubes both in terms of volume as well as in terms of value. Whereas in steel sales, as I mentioned, steel has gone down, I don't think we will have a major growth in steel, whereas tube we have growth.

Sir, the last data keeping question. Sir, what is the volume of sales of pig iron to ISMT?

That has also come down. I don't have the exact figure. We'll work out and let you know. Srivatsan if you can quickly workout, we can give that figure later part of the conference.

Okay, sir.

The next question is from the line of Sunil Kothari from Unique PMS.

My question is looking at another next 2 to 3 years, looking at our government policy and macros. And India becoming a little bit slowly, but manufacturing hub for CVs, bigger engines or sowing equipment and all this. How do you see and where you see the opportunity and what preparation we are making -- what preparation we are making, what we are doing to capture those opportunity if there is enough opportunity?

No. First of all, I believe I have also seen myself, any curve is not a straight line curve. We will have ups and downs. And the conditions both conducive to our margins and volumes as well as unconducive to our margins and volumes emerge, and we get affected. I still believe that our plans and programs will remain intact. There will be increased overall demand for castings as well as sustained demand for the pig iron though right now, it is not that attractive. But I think it will be that. And we are working hard to also develop -- customers have requirement for casting and other castings. If you look at our customer base itself, other than the top of 4, 5 customers, remaining customers' volumes are so low, like 1%, less than 2%. We have a huge opportunity to develop more castings. We couldn't do when our capacities were limited. So with the release of capacity with Oliver Punjab capacity coming, we will be in a position to offer and develop more castings for our existing customers. And that should once again help us in terms of growing on the castings. And pig iron, as all of you know, over the next 2, 2.5 years, we would like to at least convert one blast furnace into steel to be used in Baramati for rolling into the tubes. So we are working for capacity enhancement in Baramati and rolling capacity enhancement in Jejuri. So that the 3.5 lakh tonnes of steel, which would be made bloom form in Koppal will get absorbed into ISMT tube making, and gradually, we continue to increase the sales of steel in the coming period. It's very important to note here that we can sell much more steel but at certain price points. With the adverse condition of electricity consumption and the price in ISMT, our aggressive approach to sell more steel is limited because of the cost considerations. There's no point in selling below the -- with negative contribution. I think over the period our cost structure will change there, and we would be in a position to sell more pig iron.

All right, sir. Sir, some more comment on the opportunity which is opening up from large-size casting from India, because we are also planning to set up at Solapur this facility. I think Caterpillar is very keen to come to India for manufacturing base. So some comments on those lines will be very helpful.

No, the casting demand I agree. It is in almost all segments. Large casting segment is one which has been growing very rapidly. Because of the wind, they're doing well also, the windmill castings. And also the off highway, the foundries, which happen to be less mechanized and they are difficult to be made in Europe and America, and they are looking for the sources from India. And also, even the smaller castings, the SG iron castings, there is increased demand both from Americas as well as the Europe. I would say that there are all kinds of castings and all kinds of foundries. We can't create or we can't make all types of casting. So as you mentioned, we have decided that we will set up a large foundry, 2-part foundry at Solapur. And right now, it's going a bit slow to manage the investment, but we are committed to bring that foundry capacity, and that will give us repeated volume on the large casting space. We still got the windmill casting.

So do you see any opportunities -- sir, do you see any change in your opportunity judgment that is the reason for dealing this large casting project or you feel there is enough opportunity?

I did mention we are not giving up the large casting project. We are going slow just to ensure manage the cash flow and borrowing the loans. Nothing else. It will pick up as we improve the conditions.

And sir, as always, you really -- I mean, remarkably, we have turned around ISMT. So what else and what next projects and cost cutting are remaining and what we are doing, if you can a little bit qualitatively say about ISMT's steel and tube capability, cost cutting and all these things?

See, all the challenges and problems in ISMT, I think are the opportunities for us, very high power and fuel cost, we are still very high and that's the opportunity. We are go green. We are going to go green energy. Not only the solar power plants, we are shortly commissioning 17-megawatt power plant in Maharashtra, which will give power to ISMT. We have finalized them going ahead with the second 17-megawatt power plant in line with our plan to go 210 megawatts of solar power plant, and it will be done in Phase I, II, III. And we also plan that at least 10 to 15 megawatts of wind. Now wind will generate double of what they used to generate earlier. So that will be -- to balance you can say we will have about 75% of ISMT power consumption will be solar. And 13% of ISMT consumption would be wind. Together, you can say about 85%. This is a big push from our side to cut down the cost to improve the contribution as well as go green. And I'm sure that it will help us in producing green steel for. And similarly, we are working -- we have a lot of work to do there is how I can convert the fossil fuel for heating into electrical and then to green power. That's another area where we have both we go green and also we cut down the cost. In the meantime, we are working for debottlenecking all those projects. Those small projects like additional building and tube handling facility to tube shifting facility. Those are small to medium-sized projects for debottlenecking, they are not yet commissioned, and they are in the process of commissioning. And we will continue this exercise in all the 3 locations, steel plant, the tube plant, Baramati and Nagar. In addition to that, we are also working how to start the project to roll more steel. So we typically sell the rolled steel and not the blooms, blooms are used for making the tubes. So those are the opportunities still a long way to go, and we are working and you will see the effects and benefits of that coming from the increased production and sales of steel and tube. And also the cost of manufacturing going down substantially, and you will also see we will be becoming greener and greener for steel and tube both.

Correct, sir. My last question is to Mr. -- our CFO, Mr. Srivatsan. Srivatsan sir, this is regarding ISMT, now we have -- during the March this shareholders meeting to approve the merger. And as per old plan, the 100 shares of ISMT will get 17 shares of Kirloskar Ferrous. So with this meeting, is there any scope to change this -- the merger-related any ratio or that is already done and it cannot be?

No, it cannot be changed, sir. With that, we've got all regulatory approvals. So with the same ratio, it will continue.

And sir, just a small question for ISMT only. We have stand-alone numbers and consolidated numbers. Consolidated profit in tube segment is substantially higher compared to any previous quarter. Any specific reason, sir?

Can you just repeat that question, sir?

Sir, our stand-alone profit in tube segment at ISMT segmental profit and in consolidated numbers, there is a big jump, almost INR 14 crores, INR 15 crores higher. So any specific reason for that consolidated numbers, profit being higher in ISMT?

You're telling consolidated, it is lower, correct?

It is higher. Consolidated.

I'll just check and revert, sir.

Yes, no, no problem, sir.

[Operator Instructions] And the next question is from the line of Suman Kumar from Antique Stockbroking Limited.

Thank you for the opportunity. I hope I'm audible.

Sir can you speak little...

I think you are feeble.

Am I audible?

Yes, good.

Sir, I just had 1 question that regarding in this quarter, all major steelmakers have said that they felt the pressure of high coking coal. And I believe Kirloskar Ferrous also would agree on this. So considering the fact that in fourth quarter, we have the pulverized coal injection coming in. So can you just throw some -- a little bit of light on what was the actual coking coal cost in 3Q? And considering the advantage of PCI coming in 4Q, where would the coking coal cost be for the next quarter?

See, this coking coal prices, what we consume or what we use is the blended, we make use of 4 types of coal. And -- if I just mentioned that over the last 1 year, this blended coal price has gone up anywhere between $30 to $40 per tonne of coke -- per tonne of coal. And this is also a substantial impact dollar at INR 83. So actually, looking at the iron and steel market condition, this should have at least gone back to the earlier level dropped by $30, $40, $50, but it has not happened for reasons unknown. And this impact will still be there. We will continue to make coke and we'll continue to consume coke. But we will consume less coke, so we get the benefit on PCI. But we also expect that once we start using PCI with oxygen enrichment, we will produce more hot metal. So the coke what we make will get consumed and will continue to get consumed, but we will be consuming the PCI to an extent of we expect overall about 100 kg per tonne of hot metal in blast furnace 1 and 2 at Koppal will replace almost 90 or 100 kg of coke. To that extent, we save the cost because PCI coal is the half of the price of coke. And there will be some cost involved, but we still save 40% of this 100 kg of coal.

Okay, sir. Let me just squeeze in just one more question that considering the fact that most of the cost improvement projects, be it installation of bell-less top and furnaces or, let's say, PCI or oxygen enrichment considering that almost all of them are -- it can be said that they are on the verge of completion. So what would be the tentative CapEx number for next financial year?

The CapEx numbers are... [Technical Difficulty]

Ladies and gentlemen, management line has been disconnected. Please stay connected.

Hello?

Yes. Management line has been connected.

The CapEx -- I take straight from there. The CapEx depends on definitely our ability to innovatively develop new ideas for higher productivity, higher -- lower cost, cost reduction projects. I think we are more -- as you said, on the pig iron side, foundry side, a lot of projects have been already done. And if at all, anything they are related to all your foundry operationalization and PCI completion. Whereas if you look at -- I just mentioned that we are looking at big opportunities in the area of green power and green steel. And naturally, we will have a big push with the cost coming down, it's very attractive. We will have 210 megawatts of solar and also expect at least 15 megawatts of wind. And I think for this purpose, we need almost about overall total CapEx of about INR 1,000 crores. Out of that INR 275 is coming to almost completion. And as we complete this, I think the foundry, whatever we have invested, we will have to do the balancing investment, especially in the foundry 2 in Solapur and Oliver, but it will take some more time to do. And our next major project would be steel plant. And we will have the environmental clearance shortly, and we'll be starting that investment.

And if I just may just ask one more question to squeeze in. This is regarding the castings customer base. We're seeing that from FY '19 onwards, the number of customers has increased, like in FY '19, as I can say, it was 21. And -- but if we see then from -- right from FY '22 onwards, we are stagnate -- we're kind of stagnated at 26. So are we seeing the kind of flattening out of the total customer base? And what is the plausible thing there? Can it increase because it hasn't increased over like the last 2 years?

No, I think it is very important because we don't share that number next -- I don't know, it's not a great idea to share publicly that number because I just mentioned that most, we have 26 customers, OEMs. Out of that leaving 6, 20 customers we supply very little. Though customers have large requirement. So it is the time for us, our marketing team and our casting development teams to work with these customers and increase the numbers or increase the share of business with them. I think that is the need of hour because we have almost covered most of the large OEMs, which are relevant for us. We may -- we can add maybe 2, 3 more. I don't say no. But maybe 3, 4 more. But I think it's important to increase the share of business with them. I think there is opportunity, and we are working on that.

The next question is from the line of Pankaj Parab from Molecule Ventures.

Sir, my next question is regarding the volume side. So you just mentioned on casting side, we will be -- there will be no growth on the casting side. But on the pig iron, we have full capacity available of 1.65 lakh metric tonnes. So what will be our margin for Q4 and for the whole year and next year guidance as well?

I think this year, we are likely to reach of 5,30,000-something liquid metal, not the pig iron and we'll have to calculate the pig iron. And our own consumptions are about 25,000 to 30,000 tonnes. So we will have hopefully 1,65,000, somewhere around that for quarter 4. So we have already shown quarter 3 at 3,88,722 tonnes. So you can add to that 1,65,000. So we will be between 5,00,000 to 5,50,000 tonne of liquid metal. And the next year, we plan to run all the 3 furnaces, market support -- market should support us on the margins basically. And full running, we will have hot metal production even beyond 6,00,000 tonne and close to 1,80,000 in Hiriyur and close to 5,00,000 in Hospet posted. So between 6,50,000 to 7,00,000 tonnes. So there is a big volume push coming as we don't have any stoppages. And we will -- in the casting field, I expect that market should support and at least next year, we should be, once again, be able to start the journey of ramping up of the volumes in casting business.

Sir, for the pig iron segment, there will be no stoppages and all our 3 furnaces will be running for the entire year?

Yes. Big volume growth coming there.

Okay. And sir, on the tube segment, do we have any orders coming in from the oil companies or any customer in pipeline for oil companies?

No, I think we have been participating in tenders. We are winning tenders. Both on the volume and the margin front in tubes is well supported by the oil and gas sector, and we are not only doing regular, but we have also started doing the premium couplings, which is at much higher price than margins. And we are progressing well. I think the area we have to progress is how do we make more tubes with the same mills with debottlenecking. I think that is the area which will be a new challenge for us, and which we'll have to crack and be successful in ramping up the tube volume for the next coming 2, 3 years. I think that would be a real challenge as well as the opportunity for us.

And sir, 1 last data-specific question from my side. Sir, what is the average cost of coking coal for Q2 versus Q3?

No, I don't have -- I have not looked exactly because quite often people compare last year versus this year, my focus was on that and I mentioned. But see the prices Q2 to Q3, I don't have. But $30 to $40 is the increase over the last 1 year, December to December, January to January like that.

The next question is from the line of Digant Haria from GreenEdge Wealth.

Sir, 2 questions. One was on the casting side that -- let's say if the tractor industry, let's say, remains slow next year also, like do you see that from other sectors can make up for the slowdown that is there in the tractor segment because the volumes and the realization per tonne both have stagnated in our casting division?

I believe 2 things. One is that we'll have to whichever segment where there is good demand, we will have to push and sell more casting, develop more parts for our customers. The interest for Kirloskar casting continues, and we'll have to capitalize on that. And industry support is the requirement, and we have seen a few quarters back that all of our capacities were absolutely short and demand was, say, like 50% more than what we could make. And from there, I think it has come to the other way around. It's a more balanced now whatever we are able to -- I think it's rather gone negative. I expect one is the industry pickup should come back. And the other one is we will continue to develop the castings for the customers where we were able to do only 1% or 2% as a share of business. I think most of the customers want to see at least 5% share of business of their with Kirloskar. So that is a great opportunity, and we have to do hard work to sell more.

Right, sir. Sir, second question is on the ISMT bit. Let's see, last 6, 7 quarters now, we have reached a revenue run rate of INR 650 crores to INR 700 crores a quarter. Is it because we've reached that 14,000 tonnes per month, we are full on capacity and before the debottlenecking happens, we cannot increase the sales here. Is that the case?

I think the first aspect is also quite important. I cannot push through more steel sales without pricing power. See premium pricing position sales in a bad market has limitation. In good markets, it can still work, but not in the bad. So our steel sales have come down and we are very clear, we typically refrain from selling with negative contribution for building for tomorrow. So I expect that even if we pass on some cost advantage to customers, we can correct as we progress on the green steel. And it will definitely give us some power to push sales, and it is required. I think other one is we have to definitely do whatever we could do without doing much, we have got the benefits of ISMT. But further -- going further, whatever work we have done in the last 1.5 years, 2 years, that should complete some of the debottlenecking projects. We were short on nondestructive testing, ultrasonic et cetera. We were short on heat treatment capacities. We were short on space in the shop floors to handle the tubes, which was bottlenecking the rolling mill. We have done some of them, and some are getting commissioned. Maybe it will take 1 or 2 quarters. After that, you can see the productivities and outputs going up, which should support us for the growth of both steel as well as tube volumes.

Hello. Am I audible?

Yes, yes. I thought I couldn't hear anything. Now I can hear you. I hope I answered the question.

Yes, sir. Last question is that are we going to commission the solar -- the first phase of the solar plant in ISMT this quarter? And would that be a cost savings start from this quarter itself?

Yes, I think we will be commissioning in the month of March, and the benefit may start from -- typically, it takes 1 month to get the benefit. We don't get 1 month benefit, though we'll be...

The next question is from the line of [ Shreyansh from SD Securities ].

So my question was on ISMT actually. So initially, when we did the acquisition, we mentioned that the power cost, we can increase margins up to 15%, 16% by saving on the power cost. But even without that, we are already there. So once we have these projects in place, should we expect another 5%, 6% increase in the margins there? Like just trying to understand how much benefit we would see in margins due to the green energy projects that you're putting for electricity?

I think in steel sales, we will have to give some benefit to the customer to increase the volumes. In tube, we will get a benefit from March. But most of the power goes into steel. So all the customers are saying that they are paying this premium steel pricing INR 2, INR 3. And if we want more volume, they would not like to give that premium. So we may have to pass on something to get into higher volumes of steel sales.

Got it. Got it. Okay. Yes, that was my question. So we...

Overall, we'll still be benefited. Even if we pass on something, we get the volume benefit and we still retain some margin improvement coming out of the green power.

Got it. Okay. And my second question was regarding the iron ore mine, if there's any update on that?

I think we are quite hopeful. I can't say anything beyond being hopeful that we will still commission before the close of this financial year. Many more approvals have come, but something is still left, but it will happen.

Okay. So that would potentially bring up our margins because that's one of -- if iron ore prices just stay here, that...

That should give us with one mine INR 50 crores...

Sorry, INR 150 crores you said?

No, no, 50, not 150.

50. Okay. Got it.

The next question is from the line of Sahil Sanghvi from Monarch Networth Capital.

I just had one question. And yes, that's regarding actually Oliver Engineering. If you can just give us some understanding, sir, in FY '25, what can we expect from this asset? I mean we are looking at this asset as an expansion of our sales and also some customer base. So I mean, what can we expect from these assets going ahead?

See, first of all, there are potentially 12 to 14 customers in the North for the block head and housing this kind of casting. And there are hardly any suppliers. And -- but what we are trying to see is how do I get Oliver volume as delta x increase in my volume is what we are working. And we will try to get it as additional benefit and not replace the capacity here to there. Second thing is out of 12 to 14 at least to get on board 5 to 6 customers in the next year. And maybe if you ask me if its aspirational in nature and not be planned immediately, try to get 10,000 to 15,000 tonnes of volumes and starting the plant in the month of June.

The next question is from the line of Tushar Sarda from Athena Investment.

Am I audible?

Yes, audible, Tushar.

Okay. Sir, I just wanted an update on merger with ISMT, unfortunately, I couldn't find much detail online. So what is the status, sir?

I think we are gearing up with all the shareholders meeting. Dates have been announced... [Technical Difficulty]

Ladies and gentlemen, please -- the management has been disconnected, please stay connected, I'm connecting them. Management line has been connected. Sir, please go ahead.

Tushar, am I audible.

Yes, yes, sir. Yes, sir.

Yes, Tushar, I think we are in the process, I think, to the best of my knowledge, I think April, May we should be a merged entity.

The next question is from the line of Chetan Phalke from Alpha [ Info ].

Yes. Sir, my question is with respect to alloy steel plant. Let's assume we get an easy clearance soon. So from whenever we start the CapEx, so from 0 date to commissioning of the plant, and from commissioning to the ramp-up. I mean, can you just give some sense on the time line? How much time do you think?

2 years plus 1 year.

Okay. Okay. So -- and sir, whenever the ramp-up happens and let's say, we achieve the full capacity utilization, what will be the impact on our external sales of pig iron? Because I think today, we are selling more than 4 lakh tonnes as an external sale. So will it drop below 2 lakh tonnes, 1.5 lakh tonnes, what kind of trajectory we are looking at when we hit the peak?

No, there are some strategies. The Hiriyur plant also can be upgraded to produce say 2.5 lakh tonne. So all this is possible, but it all depends on the overall pig iron market scenario. Sometimes you feel that it's continued requirement, we must serve the foundry, give them the foundry grade pig iron, but they are also cost focused. They don't mind taking steel grade, adding ferrous silicon, ferrous silicon is cheaper. So many things are there. We are closely watching, but I think 4 to 5 lakh tonne, we will continue to sell pig iron and we will -- in the short or medium term, we won't be exiting that business unless we come up with spun pipe or some other value-adding but -- or Phase 2 of the steel plant. We are there with 4 to 5 lakh tonne of pig iron till that time.

Okay. Okay. Got it, sir. And my second question, sir, with respect to the solar plant that we are putting in. So for -- whenever the full plant is commissioned, what kind of O&M or operations and maintenance expense we are looking at for the plant, just to understand on a full year basis?

Very small. There is no major -- because see, the cleaning of the panels, we are putting the robots. And I would say typically, it has a security staff and 2 electricians per shift. So nothing other than that. No major maintenance at all. That's what I've seen operating the plant over the last 4 years. But it still has some cost, few lakhs per month. The more the area, more the security camera. Now that is also becoming cameras and all that. But it still has some estate management cost, sometimes some grass removal, some manage. But very small in terms of paisa, I think it's like INR 0.05 per unit.

The next question is from the line of [ Anchal ], an individual investor.

Sir, one of the question is due to the PCI injection. Can you like quantify what will be the benefit in the cost with the PCI coming in and the oxygen enrichment that you're expecting from June, July onwards?

No, what I mentioned is to start without oxygen enrichment, we may be in the 50 to 60 kg per tonne of hot metal and benefit is 40% of that on coke sales. And once we get into oxygen enrichment, then we can go up to 100 to 120 kg and then the benefit will double. So we expect this a very potential cost saving area, and we can in today's conditions, because PCI is relatively cheaper compared to the prime coking call, and it's very conducive for PCI. And benefit is very, very attractive. CapEx are fairly low. So we expect that it should, to some extent, help us in managing the margins, yes.

Okay. And sir another question is with respect to pig iron. So sir as we see the NSR of pig iron, is the increase in NSR of pig iron is lower than the casting -- the increase in NSR of casting. And volume-wise, if you look at the results, we are looking more on the pig iron sales. So how do we make out -- like what is the margin increase if we look at -- when we look at the pig iron and casting margin?

Currently, the pig iron is tremendously under pressure, and we have reached the kind of breakeven level, that is very, very under pressure. Casting only the impact is volume drop, whereas we have a mechanism of passing on the price variance. So with that, we maintain the margin in casting. So if we, of course, produce more, sell more, we get more but the margin remains same, we may get some benefit with the higher volumes. That's all. Whereas the pig iron business is open market. So the prices -- what is the price for pig iron today in the market. What is my cost, nobody is concerned. So the pig iron margins are under pressure because of that.

Okay. Just if you can also share some insight on the margins between the pig iron and casting as a product?

See, we consider this as integrated and typically, we don't -- internally, we have it, but typically, we don't publish that. But all of you know how to calculate and you can arrive at it. Because today, the margins are under pressure. We have come to a stage of like the gross margin of INR 3,000 -- INR 2,000, INR 3,000, which is like our fixed cost.

Okay. Okay.

I think that answers. I don't have the exact numbers to tell you and it is changing every month. Thank you.

As that was the last question, I would now like to hand the conference over to management for closing comments.

Perfect timing. I think we have 1 minute before 5. I think thank you very much. I think for your interest and support. I think it gives me also a lot of confidence and lots of support in terms of all of your continued interest in KFIL, and we look once again, look forward. I look forward that maybe after a couple of quarters things should improve, and we will have interesting numbers to present as well as the growth coming back once again. And currently, I would only like to add that we are continuing with most of the -- or almost all the projects which are essential for driving the cost down as well as driving the productivity and production increase. And that -- with that comment and note, I would like to close by thanking all of you for joining. Thank you very much.

Thank you. On behalf of Antique Stockbroking, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you very much.

Thank you.

Thank you.