NMDC Limited (526371) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '21 Earnings Conference Call for NMDC hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Chandak from DAM Capital. Thank you, and over to you, sir.

Thank you very much, Ayesha. Good evening, ladies and gentlemen, and thank you very much for joining in for the fourth quarter FY '21 Earnings Call for NMDC Limited. We have with us the Chairman cum Managing Director, Shri Sumit Deb; and the Director of Finance, Shri Amitava Mukherjee. Sir, thank you very much for giving us the privilege to host the call. And congratulations on fantastic set of numbers. So without much ado, I would hand over the floor to Sumit, sir, for his opening remarks, and then we will open up for the Q&A. Over to you, sir.

Thank you, Vishal. And I'm glad to be here for the con call. NMDC, Q4 performance has been -- I mean it's a great performance in terms of, if you see the numbers, production figures were 12 million tonnes and look at the numbers in terms of profitability -- profits and EBITDA margins all happen at an all-time high. So we have done exceptionally well in the Q4, with a little bit of favorable market situation conditions. However, our -- this is an all-time high record Q4. We also ended the year also with a turnover of INR 15,720 crores, that is inclusive of the other incomes. So the performance has been very good. Also our production figures also have gone up by 8%. Sales went up by 6%. So all put together, it has been a good year for NMDC. Thank you.

Sir, shall we open the floor for question and answer?

Yes, please. Please, go ahead.

[Operator Instructions] The first question is from the line of Abhishek Mody from Emkay Global.

My question pertaining to the royalty and the other levies. It's a known fact that because of change of the MMDR Act, there was a huge jump. But can the management give sort of clarification on it? Because they have spoken that it was post the 28th March 2021 when I -- if I'm right, the managements have finalized or approved by the President. But from how many periods for the back -- in the sort back-dated because Donimalai mines are open in Feb. So previous 2 years or 1 year, how many years and same way for the other 2 mines also, except if I'm right, at the Kumaraswamy mines the -- any sort of breakup or clarification as to huge royalty jump?

So this additional royalty is affective from the date of the amendment coming into place. In case of Donimalai, we started in March -- we started our production in March. So on 0.5 million tonne, we had to pay this additional amount of 22.5% premium. And for the other -- for our mines which got renewed in the Chhattisgarh sector, we are already paying from the date of amendment.

So yes, sir, in the sense that from you're paying back-dated period?

No, no, there's no back-dated. It is always a prospective effect.

So prospective effect means -- because is that if I take into account for this royalty was paid for how many days for the Q4 quarter? And my second question -- attached question to it will -- so in the Q1 of FY '22, how much you have to pay royalty for the 3 months, if I'm right, if you have paid for Q4 for half a month or 1 month, correct?

So for Q4, like I said, we have paid -- we produced in Donimalai 0.5 million tonne, so we paid for that.

There's INR 48 crores in Karnataka and INR 101 crores in Chhattisgarh for 3 days.

Okay. For 3 days. So -- okay. So if my assumption is correct in terms of that for the Q1 FY '22, the royalty amount will be almost 3x something which we have already booked for Q4 quarter? Because you have paid this for 3 days or whatever, 15 days, 10 days.

Anyways, the numbers are not -- I mean we have to pay for -- I mean since this active come in, so you need to pay for that. So we are paying for that.

The next question is from the line of Rahul Jain from Systematix.

Sir, I have -- so on steel plant, can you give us some update on when are you going to start? And what sort of numbers are we building in for this year? And also related to that, what kind of CapEx are we looking for this FY '22?

So the total CapEx for this year is around INR 3,700 crores, and for the steel plant would be around INR 1,500 crores is the CapEx for this FY '22. And we are looking at commissioning the plant in somewhere around Q3.

So I mean you are like fairly confident this time around, but then obviously there have been COVID, there has been lot of delays. And what are the...

The plant is more or less ready. I mean the entire plant is ready. So hopefully, we are now...

What steps have we taken for the divestment? Any progress on that?

The divestment process is basically by the Government of India. They take a call. I mean they -- Deepam does work for them. I mean that is up to Deepam. So NMDC at the moment, we do not have any -- I mean we do not have any role to play in that. So that will be taken care of by Deepam.

Right, sir. And sir, with respect to the amount pending with the monitoring committee, how much is first of all, the quantum now? And what is the status of the court case in the Supreme Court.

So the amount is around INR 2,300-odd crores which is there. And the Supreme Court has actually told us that they would only be taking a physical hearing. They would hear this matter in a physical hearing. So we'll be just waiting for the Supreme Court to start the process. And then, I mean, we'll take it up.

The next question is from the line of Amit Dixit from Edelweiss.

Congratulations for a good set of numbers. I have 2 questions. The first one is with respect to, again, Donimalai. So there were certain demands by Karnataka that apart from the enhanced level of royalty, they were expecting something else that you have to pay some lump sum amount and all. So is there any pending amount that needs to be paid? Or have we booked any pending -- any amount except the higher royalty for Donimalai.

No, there's nothing pending or we have to book any further amount. Whatever is there 22.5% from the date of the Act coming into place, we are paying.

So there has been no incremental cash outflow from the company, I mean, on Donimalai except for that, of course, the enhanced royalty?

Yes.

Okay. The second question is, sir, a little bit intrigued by the pellet plant. This is still making losses despite a significantly high level of pellet prices. So is it possible to throw some light on the capacity utilization of that plant? And why we are making losses over there?

So this pellet plant is basically consists of 2 parts. One is the pellet plant in itself and the other is the beneficiation plant which we had. Now this beneficiation plant had -- there were some technical issues in this plant with regard to the pressure filter. So that part we have taken care of now, and it is -- we are testing the new pressure filters which have been installed by a company called Teju. And -- so now that's 1 module is ready. The next module also is getting -- we're placing an order for getting that also -- revamping that also. And that we -- already the plant has started production and you, hopefully, we believe that the plant will -- gradually will wrap it up to its rated capacity.

So what was the utilization in Q4, sir?

Q4 would be 30%, probably.

30%. Okay. I have couple of more questions...

On a monthly basis probably. I mean because we just have finished the revamping at the end of -- in somewhere in March. And we just started a trial production. So it would not be much to that extent.

Okay. Understood, sir. So...

So it was under the justification. So 4,000 tonnes of that 6% annual -- on an annual basis, it was around 7%.

So 4,000 tonnes you produced from that plant and sold in the month of March?

Most of it came in the month of March.

Okay. And it's of 4,000 tonnes, that's the number you're giving?

See, Q4, the utilization of CMD said correctly is 36%, but the annual capacity utilization was only around 7% to 8%.

The next question is from the line of Abhishek Poddar from HDFC Mutual Fund.

Sir, regarding the royalty, just some clarity. So the way things stands, all the mines except for Kumaraswamy the effective royalty is 22.5%. And even in Kumaraswamy from '20, '22 or '23 when it renews, it will go to 22.5%. Is that the correct understanding?

So this is not exactly royalties. Royalty is 15%. This is the premium which you have to pay. So 150% of the royalty that's 22.5%. So right now, we are paying in all the mines except for Kumaraswamy which comes up for renewal next year.

Okay. And to total, what you're paying is 22.5% all combined?

Yes, yes.

Royalty and premium included. Hello?

Yes, please.

Yes. And sir, regarding the DMF, so how is that going to be calculated now, the District Mineral Foundation contribution? Will that be on 15% or...

No. That's the normal. There is no change in DMF, NMET.

Okay. Sir, just if you could clarify total statutory levies as a percentage of sales, how much that would be?

That's around -- anywhere, royalty DMF, NMET comes to around 19.89% and then this additional 22.5%.

The next question is from the line of Vineet Maloo from Birla Sun Life.

So sir, again, just to try it on the royalty side, only so total, including premium, et cetera, comes to about 41-odd percent, right, on your -- these 3 mines expect Kumaraswamy? That's the understanding, sir, correct?

Yes.

Okay. And this -- and there's absolute clarity that DMF and NMET is not table on this additional premium?

No.

Okay. Okay. And sir, my second question is regarding the steel plant. So while I understand divestment process is being run by Deepam, I wanted to know where -- what is the progress on demerger because it was announced some time back that Board has given approval. But where exactly are we there in the process of demerger?

So the demerger process has already commenced, and it should be at around -- in the Q3, probably we'll be able to conclude the process.

So along with the commissioning -- you mean along with the commissioning of the...

Yes, yes. Yes.

Okay. Okay. So it will require shareholder approval and all, right? So that will need a separate general meeting or something like that, that will also need to happen, right?

Yes, that statutory formalities might need to be taken care. Yes.

Okay. When do we reach that milestone?

Yes, you will -- a final approvals and clearances, that's what you're saying? What is that you are trying to say?

Yes, sir, I'm just understanding in terms of milestone, so we need general meeting approval, we probably need NCLT approval, et cetera, right? So I'm just trying to understand when do we reach those milestones?

Yes. We can answer that.

Sorry?

Hello? Hello? Hello?

Yes.

So you are talking about the milestones?

Yes. Correct. Correct.

So that will be somewhere around at the end of September.

Okay. Okay. And -- okay, post these approvals, you don't expect much time for the merger to be effective, actually?

Hello? Yes, please. Hello? I couldn't get your question, yes.

No, what I'm saying is that post these approvals, you don't expect much time to be taken from that point onwards for the demerger to be finalized?

No. We don't see any issue with that. We don't see any issue with that.

Okay. Okay. Understood. And sir, in terms of balance sheet, so now even you have a bit of a borrowing and also cash balance, I presume this borrowing is for the steel plant CapEx. Is that a correct understanding?

You come again, please? I just didn't get your question.

In terms of the balance sheet, you have a bit of a borrowing, right, as of -- in the balance as of this year-end. So I presume this is for the steel plant CapEx, right? Is that a fair understanding?

Absolutely. That is exactly -- we have already picked up INR 500 crores in terms of NCD. So that is for the steel plant, yes.

The working capital arrangement also INR 1,400-odd crores is against [Foreign Language] -- INR 1,448 crore is against working capital and INR 534 crores is against the steel plant on the -- through the NCD. That is appearing in the balance sheet.

So that INR 1,440 crores is for the working capital for current iron ore business?

Yes, for all business, yes. Iron ore, diamonds...

No. I think you're asking -- he's asking about the debt, whatever debt we've picked up? That's what the loan, whatever you have picked up?

In the balance sheet the loans would show a total of INR 2,000 crores, approximately. By INR 30 crores, INR 30 crores, INR 34 crores is for NCD route which is exclusively for the steel plant and INR 1,448 crores is the working capital arrangement that we have with banks.

Okay. So sir, just trying to understand, I mean, given the cash that we have in hand, I mean, why do we need to draw down on working capital facilities?

So if I have a fixed deposit with banks at 7% -- naturally, either I'll have to break those fixed deposits and move 7% or take 4% of working capital arrangement from banks. So it is better to cope with...

Okay. So you had existing FDs which were yielding as much?

Yes. We have old FDs normally over more the 1 year or 1 year plus tenure -- up to 1 year tenure. So we always take that call, if we have mutual funds, we generally tend to liquidate that and use it for working capital. And if you don't have mutual funds, if we have long-term FDs, then we tend to draw from -- especially if I have to issue BDs and other things.

Okay. Okay. Understood, yes. And sir, 1 last question from my side. On the export side, we were getting preferential duties, right now which don't seem to have been renewed. What is your expectation regarding that? Is that the thing of past now? Or do you expect them to be restored again?

No. For the current financial year, whatever duties -- whatever concessions were being given by the Government of India that doesn't exist. So currently, there is no concession. So you need to -- if NMDC needs to export, it has to do it by paying the duty of 30%, about INR 58,000.

Okay. And how much commitment do we have on export side as we have firm contracts?

So what was happening was that we were exporting under this -- under government-to-government agreement -- based on a long-term agreement. So that has not been renewed now. So we don't have any -- at this point of time, we don't have any commitments for export.

The next question is from the line of Kamlesh Jain from Prabhudas Lilladher.

Sir, 1 question on the part of steel plant. How much CapEx is pending on that front, sir?

So currently, we have already spent INR 18,560-odd crores and the total CapEx to be spent is INR 21,300 crores.

Okay. So roughly around another INR 3,000 crore is pending, which needs to be...

Yes.

Okay. And sir, when we talk about the commissioning and all that. So as of now, if I understand it correctly, we have yet not started the commissioning of coke oven batteries and other ancillary units. So how confident are we on the front of commissioning these entire or integrated commissioning? Or are we talking about the -- like coke oven batteries or the entire integrated commissioning? Because even the last year around 1.5 years back or 1 year back, we had -- like say started the coke oven battery then in the mid we stopped them, and we were telling that it is about to get commissioned in a 6-month time. But still we are 2 years away from that.

No, very true, very true. But then when we talk of commissioning, we talk of integrated commissioning. It starts with the coke ovens and then hitting out of coke ovens and then it ends with the rollout of the coil. So it's an integrated commissioning. In a steel plant of this nature, we can't do part commissioning and just start the coke ovens or the blast furnace in isolation. So there has to be an integrated commissioning. So when you talk of commissioning the plant, we are talking of the entire commissioning. We are pretty sure now the plant is more or less ready. So hopefully, we should be able to start.

So we are still not called for the tender of coking coal and all that. And it takes around 6 months' time, but so far, we have not done anything on that part. So I'm really surprised that how confident are we on the commissioning of this steel plant? As there we have no experience on that side and even the consultants are not coming to India, and we are talking about the Q3 commissioning. So really further down that particular side.

So it's like is that as far as raw material goes to coking coal -- or coking coal we already have procured earlier, and we have also placed orders for around 75,000 tonnes of coking coal for the coming this -- for coming requirement. So for a raw material part, we have all -- limestone, dolomite, all that is tied up. I mean that's not a major issue at the moment. So we are pretty confident of starting the commissioning process.

And sir, lastly, on the CapEx side, sir. In this year, we have spent like the lowest amount in last 6-odd years. And like say if we see any other peers be it Coal India or SAIL, they have done the CapEx, like say, yes, in last 2, 3 years. Despite that fact, we have a good projects in hand, like say, this screening plant at Kirandul and Slurry pipeline, which are very good on the part of the payback period. So even then that we have done such a low amount of CapEx of around INR 1,600 crore only.

So last year -- on the CapEx front, we spent INR 2,000 crores in the previous financial year. Now the main CapEx which is there is for a steel plant. Steel plant is the main CapEx in this year. And now -- and the steel plant is almost complete. I mean whatever balance payments are there, we are all linked to commissioning payments, so -- commissioning activity. So we are at the fag end -- so there's not much spend there to be done. The other thing is with regard to CapEx at our mines -- we have -- a Slurry pipeline -- we're laying a Slurry pipeline, we're doing a pellet plant, and we are also doing the screening plant at Kirandul. So all these projects have been awarded -- most of them are an awarded. So we are some balance part dry docking package in the screening plant. So there are some packages to be -- yet to be awarded. We have started the process, and I think we'll be able to spend money on that -- on those projects.

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

Sir, what are the volume targets for next 2 years? And if you can give a mine-wise breakup of Karnataka and Chhattisgarh?

So the next year, our target is to do almost around 44 million tonnes. Karnataka should do 14 and -- around 12 -- around 13 million tonnes is what we expect from Karnataka, the balance, so we will do it from our Bailadila sector that is around 25 million tonnes.

And a year after that, and you have all approvals in place or you have to go for additional mining approval to reach this 44?

No, we don't need any additional approvals of doing 44. So up to 44, there is no issue. So no additional approvals are required.

And after that, what's the target? And how much is the mining approval in place for all the 4 mines? I believe Donimalai and Kumaraswamy are capped at 7, 7 each. So if you can give Chhattisgarh and Kirandul and Bacheli the maximum mining plan, which is approved now?

So that's around 37.5 in the Bailadila sector. In Donimalai, we have -- it is capped at 14. And we are getting another additional 3 million tonnes we are -- that will be there in Donimalai additional 3 million tonne -- in Kumaraswamy. So that will go to 17 in some time to go. So the balance, we'll have to do -- if we have to ramp up in production. So to -- we are planning to go up to 100. So then we'll have to -- we are in the process of seeking permissions for enhancing our ECs -- our EC capacities from the current 51.8 to around 83.

So from 51.8 to 83 is a long-term plan?

Yes, that's a long-term plan.

Okay. And sir, I missed out on this, when is the next renewal for Kumaraswamy on which this additional premium of 22.5% is not applicable?

That's next year, '23 -- sorry, '22, '22.

'22, which month, if you remember? Mid 2022, something? So probably in FY '23, all mines will come under this additional premium of 22.5%?

Yes, yes. All the mines will come.

Okay. Okay. And regarding the question on this exports since the government has not extended. So what would be the company policy? Will you export and pay this export duty or you will sell additional volumes in domestic market because these were very high-grade volumes which were being exported to Japan and Korea, probably the domestic market is more for 62, 63 especially whereas company use to export 64, 65 also. So what would be the company's strategy for this volumes -- additional volumes which are now available either via in domestic market or you have to pay export duty and still export?

So there is sufficient demand in the domestic market to absorb this additional -- in any case, we are doing 2 million tonnes, 2.5 million tonnes in the export -- we are putting that was the quantity. So now that is available to be sold in the domestic market, and there exists sufficient demand in the domestic market. So that should not be a major issue. And in any case, currently, if we have to export, we have to pay the duty and then export.

Sure, sir. Sir, historically, you have gone via long-term contract route to export iron ore volumes. Obviously, one of the reasons being cannibalizing agency, shipment and this waiver of export duty, but now you are in line with the other Orissa miners who regularly export. So will the company use spot opportunities when the demand is low in market or when the domestic iron ore prices is not at parity to export prices since it is -- since it's an -- NMDC position is now in line with the other Orissa miners who regularly do export. So what would be the company's strategy going forward?

So if you look at exports, whatever we are doing was high-grade ore, which was being exported. So now that is not there. So -- or we pay duty and then export. If we look at exports from Orissa, most of it is done in the grades of 57 and below. So the low-grade ore gets exported because of the duties -- I mean the 0-duty -- there's no duty on that below 57. So as far as NMDC goes, we don't have any major quantities of low grade ore available. So we'll look at that opportunity as and when it is available.

Sure, sir. And my last question on the steel plant, which has a separate iron ore mine for itself. What's the development progress on that? And is that mine also getting started along with the steel plant? Or -- if you can give some dates on that mining capacity approval on that and how much amount has been spent for a development of that mines?

So there is no separate mine attached to the steel plant.

So when the steel plant starts, you will be using existing NMDC volumes to that plant?

Yes, exactly. Exactly, exactly. So the existing ore from our mines only is getting utilized for this steel plant.

The next question is from the line of Rohith Potti from Marshmallow Capital.

Congratulations on delivering such excellent set of numbers. So my question, sir, primarily around the MMDR amendment that came in recently. So one of the major amendments, it seems to be the fact that rather than designating the mining lease has the legal entity, the mine itself has been designated as a legal entity. And my understanding is that the -- any approvable ECFC, et cetera, which is obtained for the mine will be valid for the entire economic life of the mine. So is my understanding here correct?

Yes. Yes. Yes. As far as you also understand this whole thing, it is what you're speaking of. Yes.

So this means pretty much that any ECFC clearance -- I mean -- so in that, there is also this additional provisions which favor the PSU miners in the sense that any mine that is with PSU will automatically get extended beyond -- after the mining lease period is over. So this pretty much means that once we get an ECFC clearance, as you were saying, let's say, for 83 million tonnes, that will remain in place for the entire life -- economic life of the mine. And even if the mining lease expires, there is no issue in terms of getting the whole clearance again. Am I right?

Yes. That is what we also understand. And -- because now normally, most of the PSUs mines -- I mean, we expect them to get renewed. What we are looking at is now there's 51 -- we are asking for an enhancement of -- based on our reserves, we are asking for an enhancement of our EC capacities.

Understood. So once the EC is obtained, it will be valid for the entire life of the mine, let's say, if it is 50 years, 100 years, whatever, right?

Currently, the -- current leases in Bailadila sector are valid upto 2035. So hopefully, we should get an extension after that.

No, no. So my confusion was the mining lease is valid up to 2035, but the economic life of the mine will be, let's say, till 2070 or something. So my understanding is that since -- so since the mine is the legal entity, the ECFC whatever we take is valid till the economic life of the mine and not the mining lease. Is that understanding correct?

Yes, currently, that is what is our understanding also. Currently, that is what is our understanding also.

Understood. That was helpful. And with the MMDF provisions also allowing transfer of mines more easily, are we looking -- and given that we do not have any major -- no presence in Orissa, which is the largest iron ore producer in the country, are we looking -- I mean, given our cash balance and cash flow, will we look at acquisitions and the such strategies going forward?

Yes, we have been talking to the Government of Orissa and other -- similarly to other state governments also where there are mining assets available, iron ore, specifically. We are talking to them in terms of allocation of mines to NMDC.

Understood. So do you expect something to happen in the next couple of years? Or you're still waiting for guidelines from the Ministry to come on this?

No. We are talking to the state governments basically and also to the Ministry also. Yes.

Perfect. And my last question is on -- so again, on the MMDR Act, there are -- I mean so we have a lot of mines which are stuck due to legacy issues and litigation issues. So it's curious to know -- and again, the Act seems to indicate that those will be resolved quickly to ensure production comes on stream quickly. In the past, for example, we have expressed interest in the BPMEL mines, which are -- my understanding is of very, very high quality and results are also quite good. So do you see anything happening on those? Do you see the litigation going away and getting access to those mines as well going forward?

Yes. I couldn't get your question with what was this mine you're talking of?

So, again, my understanding, as per the provisions of the MMDR Act, is that the legacy issue mines or the mines that are litigated, those will be resolved quickly and mining production will begin soon. So in the past, for example, we have expressed interest in 1 of the litigated mines, which is BPMEL mines, which my understanding is that the BPMEL mines are of very high quality and the results are also quite high. So do you see litigated mines like BPMEL to come on stream for us? Do you intend to participate and buy them, et cetera?

No, I'm not aware of this BPMEL thing, whatever mines. So in any case, we don't -- NMDC currently, we do not have any mines which are under litigation. So that question at this point of time is not relevant. We don't have any mines which are under litigation. In fact, other way around, if there is any mines which are there, like I told you, we have been talking to the state governments and we have been -- which have been auctioned, but not started, we are talking to state governments. So we will ask them for allocation of those mines to us so that there is an enhancement of iron ore production -- I mean currently, there appears to be some sort of shortage. So we would -- we are requesting if any mines, which are there, which have been auctioned, but mine is -- I mean the owners have not started production so that could be allocated to us. So in that context, we are talking to the state governments.

[Operator Instructions] The next question is from the line of Nishtha Mukherjee from Steelmint.

Sir, could you highlight on the near-term outlook on Indian domestic iron ore prices?

Pardon, come again, please?

Sir, a brief outlook, if you could give on the Indian iron ore prices as considering the current site availability of merchant ore in the market?

So if we look at the current -- in case of Orissa, which is the main producing state at this point of time. So the production in Orissa has also gone up. But I believe the demand is -- there's a substantial uptick in the demand also because most of the steel plants have ramped up capacities to 80%, 90%. So the demand still exists. There's a very strong demand in Orissa. Also, we are seeing demand from other locations of other steel plants also. So we do believe that the prices would be bouyant at this point of time. However, looking at the current monsoon season, we see a downturn in prices of steel, so that would probably again affect our pricing. However, in the long term, we do believe that prices are strong and will remain stable.

[Operator Instructions] The next question is from the line of Ashish Kejriwal from Centrum Broking.

Sir, my question is for this timeline for demerger. You said that it's in the September end. But if you can say, give us a proper timeline, these things have to be done after that this will happen and so that we can also look at the different time lines? Because last year, in September 2020, we said 6 to 9 months, so we are already away 9 months and still we are seeing around 3 to 6 months more than that. So what are the things which one should look at, like, for example, when you will come out with the shareholders' approval? And once you receive shareholders' approval, how much time you will need for further finally demerging and things? So if you can give a proper time line, I think that will be helpful rather than saying that it will be in the second quarter.

D.S. if you are there, you can answer -- take that question. Hello? Hello?

Yes, sir.

The next question is from the line of Vineet Maloo from Birla Sun Life.

Hello? Hello? Are you able to hear me?

Yes. We can hear you. Maybe you want to answer the previous question, then I'll ask my question, sir.

Yes. Yes. You are talking about timelines after the demerger? That was the first one...

Your previous participant was asking about that. Yes. Yes.

Yes. Yes. I think our Director of Finance is there. He will answer the question on the timelines.

I had a problem with the mic so coming again. What was the question, Vishal?

Sorry, sir. I mean that was a previous participant question. Let me...

He was asking, hello?

Sir, Ashish, is on the line. Ashish, would you repeat the question, please?

Yes. Sir, my question was that if you can give us a proper timeline for the demerger, that like, for example, when we can call for shareholders approval, once you receive that, how much time it will take, tentative time? So those time lines will be helpful rather than saying that it can happen in second or third quarter.

Yes. I'll tell you what's a demerge process. First, you need a set of accounts and then you get some opinion about fairness and accounting treatment and other things, and then we put it up to Board for approval of the Draft Demerger Scheme. So this, since now the accounts have been accepted, so this will be able to do by 31st of July. So we expect the Board to sort of give its approval to the Draft Demerger Scheme by 31st of July. Once that happens, then we take it to SEBI and Commission of India and come back and then modify if they have something to say and then submit it to the MCA. By all accounts, this is the process after the Board approval could take anything between 100 to 160 days, depending on how much time SEBI takes, how much time MCA, other people take. So from -- if I start from 1st of August, so it could be anything between 100 days from August to 160 days from August.

Okay. So the first point is board approval? Fine, sir.

Yes. And so the set of accounts have been like adopted yesterday. So if we -- if I take 14 as the appointed date, then we can ask the Board to get approval -- approach the Board for its approval of the Draft Demerger Scheme on 31st of July -- latest by 31st of July.

That's helpful, sir. Sir, just 1 clarification on the royalty part, you said that royalty in fourth quarter for Donimalai was stable from the time they started. And for Chhattisgarh, is it only for 3 days? Because Chhattisgarh cost around INR 100 crores and 3 days, we must be producing not more than 0.4 million tonnes. So that roughly comes to be around...

Donimalai there is no royalty, no premium, on Kumaraswamy production. And as per CMD said, the Donimalai production was only 0.5 million tonnes. [Foreign Language] So that's on -- and in Chhattisgarh 3 days, it was about -- around more than that.

So that's what I'm saying, sir, INR 100 crore you paid for Chhattisgarh and INR 100 crore for 3 days production seems to be much, much higher because 3 days we can produce max 0.4 million tonnes and for 0.4 million tonnes, we are paying INR 1,000 crores, which means -- INR 100 crore which means around INR 2,600 per tonne as additional premium. So maths was not matching, so that's why...

So that produces the premium product DRPL.

Sir, that's a very small part of the overall income. Okay, I'll take offline.

Yes, you can take it off-line.

[Operator Instructions] The next question is from the line of Vineet Maloo from Birla Sun Life.

Sir, my question is about your expansion plan. You said that you are filing for expansion of limits -- EC limited, et cetera, of about 83 million tonnes. Now for this expansion, sir, are you also discussing with potential customers for long-term offtake contract, et cetera? Because current situation seems to be exceptional and there's a good amount of exports happening out of the country. But as soon as international prices normalize, those exports window closes, right? And there is adequate iron ore available, plus there are some mines which will be ramped up also, which have got allotted after the auctions. So how do we secure customers for that volume? And -- or are you going to rely on spot sales only?

No. Technically, NMDC, most of that -- for most of our quantities, we have tied up with long-term customers only. So whether it is in the Bailadila sector -- in Karnataka, obviously, everything is under the monitoring committee auction process. So in case of Bailadila, it's all based on long-term contracts or long-term agreements, which we have with customers -- linkages, basically.

But sir, those contracts seem to have quite a bit of flexibility about offtake quantities, right? Because we see that whenever Orissa prices are lower, et cetera, your customers actually start sourcing from there instead of buying from you.

So correct -- no, obviously, it does happen that -- but then that happens mostly in the Chhattisgarh sector where we have smaller customers with these smaller customers, which tend to move here and there. But otherwise, if you have -- if we look at the integrated players, whether it is ArcelorMittal, whether it is JSW, whether it's RINL, and most of the other players are very consistent player. So there is no issue with them. And we are in constant communication with them in terms of enhancing, looking at our additional capacities, which will be there for sale. We have also not closed our options for export for those additional volumes also.

Okay. Okay. And sir, would you also be looking at value-addition projects like pellet, et cetera, along with that?

So what we have done is that we are putting up a pellet plant -- 2 million tonnes pellet plant at Nagarnar and there is a Slurry pipeline, which we have -- that's a phase 1 of the Slurry pipeline up to Nagarnar from Bacheli and then pellet plant at Nagarnar and subsequently in the second phase, we are coming up with another pipeline up to Visakhapatnam and the pellet plant there of around 6 million tonnes capacity.

Okay. And this is pure palletization, no beneficiation, right? This is just the ore pelletization plant?

No, no. We are putting up a beneficiation plant at both at Kirandul and Bacheli to beneficiate the ore, specifically.

Okay. Okay. But sir, we've had very limited success in beneficiation efforts earlier. So that's why I was just wondering.

So we have a -- we are putting up a screening plant, which has a dry circuit package or beneficiation. So all that is being done. We have already -- most of it is now tendered out, and some of it is -- we are in the process of tendering. So we -- this beneficiation plant -- beneficiation process is already decided, and we will go ahead with that.

Okay. And sir, what is the total project outlay you expect on this pellet and beneficiation plant?

For the Phase 1?

Sir, all put together.

Should be around -- anything around INR 7,000 crores to INR 8,000 crores.

Okay. And that would take about what, 4 years?

Yes. The phase 2 of the project, we have not yet started. The Phase 1 of the project is only done. The Phase 2 of the project will be on a...

So Phase 1 is INR 7,000 crores, sir?

No. Phase 1 is INR 3,000 crores.

INR 3,000 crores. Okay.

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

Just a couple of questions on your investment. NMDC is a shareholder in Neelachal Ispat. Just on that any -- you mentioned your debt number, INR 80 crores in Neelachal. Any idea what would be the total debt at Neelachal and how profitable the plant was running into losses last year. What is the kind of profitability for the plant when you look at some of the peers in the industry is that are still a loss-making entity this year also?

We are talking of Neelachal Ispat? NIN?

Yes. Yes. Yes.

So currently, the plant is closed down, and it is under disinvestment. So that plant is -- will be disinvested by the government.

The next question is from the line of Pinakin Parekh from JPMorgan.

I have 2 quick questions, waiting for a long time. My first question is, sir, the 22.5% higher royalty that is now applicable to your mines, your pricing is as ex mine. So are your customers paying the higher royalty to you? Or you have to bear the higher royalty?

So currently, it is not a pass-through item. So -- but we are taking care of that additional amount in our pricing.

So basically -- so to your extent, your pricing reflects for the April, May very sharp price hikes that we had seen by NMDC was also to an extent to account for effectively the 15% royalty going to 22.5% royalty?

Yes. Yes.

Okay. Sir, my second question is on the steel plant. Given that plants take a long time to get commissioned, there is start-up expenses. And you said that the accounts need to be prepared before the demerger. So is it fair to say that the demerger process would get completed only after the plant is commissioned or will it be before the plant is commissioned?

So both the processes rather simultaneously. So there is no connectivity between them. Our attempt is to ensure that both of our processes are complete at the earliest.

And after the demerger takes place from this -- of the steel plant, NMDC would be supplying the iron ore from its mines at market prices to the steel plant? Or would there be some discounted pricing? Because the whole point is that the steel plant CapEx was done with the assumption that it will stay under NMDC and it will have access to lower-cost iron ore. But after the demerger, if it has to pay market price for iron ore, then just trying to understand how will the steel plant be viable?

So this -- for -- as in all other customers who offtake iron ore from us, we have a long-term agreement, and that is also going to be the same with Nagarnar Steel Plant. As far as pricing goes, it will be on an arm's length -- it will be an arm's length pricing.

[Operator Instructions] The next question is from the line of Mohan Bhansali from Bonanza Capital.

Sir, seeing the current auctions in Orissa, do you see any further scope or pricing increment? And the second thing is then in Nagarnar, can you please give us what amount of hiring will be required permanent as well as contractual? And what is the status of hiring for the steel plant?

So if we look at Orissa, like I mentioned earlier, currently, the prices have more or less peaked in terms of steel prices. And with regard to -- currently, the monsoons are all have traditionally being flattened on steel prices, especially the long product pricing. So prices are more or less flat now. And we believe that in Orissa also the prices have flattened. So similar with regard to NMDC also. Currently, the prices which we are operating on is more or less we believe that there's not much headroom at the moment currently for any sort of increase. But going forward, post the monsoons, once the activities pick up, with the COVID protocols relaxing, then we believe that things will improve definitely.

The next question is from the line of Ayush Agarwal from Mittal Analytics.

I just have 1 quick question with 22.5% royalty that we are paying it gets reflected in our expense line item, the other statutory levies that you're talking about, is that sales net of that or what do we count that, sir?

You're talking about the statutory levies?

Yes. The 19.89% you talked about.

No. So they are taking care of in our expenses.

Where is it written off?

D.S. you can add to that? D.S.

Sorry?

You were saying something?

Yes. Where is it written in the P&L?

One second. Just a moment. So you wanted to know where it is reflected in our balance sheet, you're talking about extra this one?

Yes. So the statutory levies of 19.89%, there is...

So they are being reflected along with our expenses, I mean, expenditure this one.

Under the royalty line item?

No. It will be reflecting under the royalty items, yes?

So right now, if you see that we are in around INR 1,550 crores of royalty, which is around 22.5% on our sales currently. So how does this add up? 22.5% is additional right, apart from this 19.89%?

Yes. Yes. The 22.5% is additional.

The next question is from the line of Nauhil Baaz from Ashika Stockbroking.

Yes. My questions have been answered.

The next question is from the line of Rahul Jain from Systematix.

Yes. Sir, once again, on the royalty part, for example, if you see in the last quarter, the royalty number seems to be absurdly high. So is it like a normalization of your previous production or something like that? And also, would you get a tax deduction for the premium that you will pay? Or it will be -- it will not be allowed as a deduction?

No, I do not think there is any tax benefit there or any relaxation there. But then -- hello? As far as the -- hello? as far as the royalty goes, are -- you're saying that whether it is -- your question was? Whether the royalty is -- hello?

Yes. Yes. Yes. No. On the premium part, would it be allowed for tax reduction? Or would it be like you would not be allowed. So that will be -- your tax rate will go higher to that extent?

No, no. I mean in terms of the pricing, you're talking in terms of the price?

No, no. In terms of when you deduct from your costs, so when you calculate your PBT, so will you be allowed a reduction for a tax calculation?

No, I don't think so. No, no. It's a normal expenditure right, it will be allowed as a tax deduction.

It will be allowed. Yes.

It is deduction.

The next question is from the line of Vikash Singh from PhillipCapital.

Hello? Am I audible?

Yes.

Sir, I just want to understand, we are targeting almost 6, 7 million tonnes additional from Chhattisgarh. So in terms of logistic or evacuation purpose, what has been changed which would allow us to evacuate that much of higher material? And can we -- the debt which is currently sitting on our books post demerger, that would completely be transferred to the steel mill books, right?

Yes, the debt would be transferred to the steel plant. That is right.

And for the logistics part?

As far as logistic goes, there is a doubling of the KK line, which is already taking place. Most of it is complete, 60%, 70% is complete. Partly, we are doing, partly based on deposit worth basis with the railway and the balance stage from Nagarnar to Joldal from Jagdalpur to Visakhapatnam that is being done by railways itself. So most of the work has done. Some patches are left which will get completed, which will take some more time. Otherwise, we are able to utilize whatever is available right now. So as I said, 60%, 70% is complete. So that availability is there. So there should not be any difficulty in moving those 18, 19 rigs, which we envisage to evacuate the material.

So sir, basically, see, right now, we are entering into a monsoon phase. So even if we take another 6, 7 months because this doubling of line has been taking place from years now. So would that -- would we have enough time left during this year to actually evacuate kind of a 1 million tonne extra every month in the last 6 months or so, even if we complete everything in next 6, 7, maybe 3, 4 months. Just so wondering whether we would have -- because our first quarter kind of the run rate has been kind of 1 million tonne a month kind of run rate right -- sorry, 3 million tonne a month kind of a run rate.

Yes. Around 1 million tonnes a year. Yes. Yes. So what happens is that if you look at our targets of 44 or around that number. So most of it is 7 million tonnes is additional from Donimalai. The balance is coming from the additional 7 million tonnes, which we are getting is from Donimalai. The balance will come from Bailadila. So the balance part of it is not very -- the additional which will come from Bailadila, is we'll be able to take care of it. That is not a very big issue, evacuation.

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

Sir, sorry, 1 question on the steel plant. Since you're going through the demerger route, earlier expectation was -- there was a possibility of disinvestment or bringing in a partner in that. But if that is getting delayed or not happening, we will lose the tax benefit because your iron ore company -- parent company is very profitable, paying full tax. And if you demerge the steel company, which initial years will be making losses, so what's the thought process of Board on that because that would add against the wishes of the minority shareholder that you keep paying full taxes in the parent company, whereas you cannot recoup the losses in the subsidiary?

So what we have done is that we have demerged these companies that the steel plant is a separate company, it will be a separate entity in itself, a mirror unit of NMDC, plus the debt, whatever we are taking on. Obviously, for obvious reasons, the steel plant, it doesn't make any money initially. There's going to be some losses there. So that is -- will be there. I mean we have not yet decided or -- but it is going to be a separate entity at the moment. D.S. would you like to add anything on this, if you're there, Mr. Mukherjee?

Sorry. Sorry, my mic was off. Sorry, sorry, my mic was off.

So the question is, you can repeat the question for him to...

No. So my question to the Board is that, when there is no visibility, whether that steel plant would be divested or you're bringing in a partner and you're going ahead with the demerger and creating a separate entity, there would be losses for 2, 3 years and probably something would happen after that. Where is your parent NMDC, which is a profitable company, you're paying full tax and there will be tax outgrow, whereas you will not be able to offset steel losses ever. So how does it benefit the minority shareholder? And how could that -- if there is no visibility, how this can be justified to the shareholder?

I've understood your question, now listen to me. First of all, you are seeing it only from principal tax benefit. And it will also reduce the profit in the first place. So the tax benefit is much lesser than what it would have reduced the profits in the first place. So if I was making a loss of INR 1,000 crores in the steel plant, so my bottom line will go down by INR 1,000 crores and my tax benefit will only be around INR 30 crores -- sorry, INR 300 crores. So the net loss still would be to the shareholders of INR 700 crores.

So but it is a 100% subsidiary, it will be anyway consolidate. We look at consolidated profit, sir.

Sure. It's not a subsidiary. Right now, it is a part of NMDC itself.

No, sir, that's what I'm saying, when you even create a 100% subsidiary, creating a separate entity, it would remain a NMDC subsidiary the consolidated accounts would anyway reduce your consolidated profits but could lead to a full tax outgo of the iron ore profit, sir?

Yes.

So how does it benefit the shareholder community, sir?

See, this company -- the steel company is never a subsidiary of NMDC as of now. It is a part of the main mining company itself. It is not a subsidiary. And it will straight away be demerged [Foreign Language]

Will you be listing it separately giving separate shares of the steel company and listing it separately?

That is what demerge means. It will be a company with a mirror shareholding. And the umbilical cord between NMDC and the new company will be cut. It will be as independent the company of NMDC as SAIL is or as RINL as Vizag is.

The next question is from the line of Mangal Naivedya from Kotak Securities.

Just 2 clarifications on the Steel division. One is since you expect 3Q commissioning? What is your commercial adjusting volume guidance for FY '22 and '23? And second, in one of the previous questions, you said that there is no mine allocated to the steel plant. But from memory -- if I recollect the deposit 13, which was under JV with CMDC and NMDC and that went into trouble because of some MP allotment to Adani. So is there any update on that mine? And is that -- or that mine has now not been any progress, and we expect only supply from a NMDC to the steel plant?

So currently, we have 2 mines under NCL, which is an NMDC-CMDC Limited, which is deposit 13 and deposit 4. So deposit 4 is quite an advanced stage of being allocated to NMDC. So once that order comes then -- from the state government, then we see called clearances, the forest clearance and the environment clearance. As far as deposit 13 goes, yes, still the matter is yet to be decided. So it still remains under question because the state government has canceled the Gram Sabha or the clearance, which was given earlier. So that is still under discussion with the state government. So -- but in any case, there is no steel -- there's no mines which are attached to the -- with -- to Nagarnar steel plant. And whatever we supply -- iron ore will be supplied, it will be an arm's length distance similar to what other -- we are doing with all other customers. And with regard to the selling of sales of Nagarnar steel plant products, you mentioned that also?

Yes. So the volume guidance in the second half of this year and next year, adjusted volumes that we seem to sell?

So what happens basically once you start the steel plant, most of the product will be -- we would not be certain of the quality or the grade of the material. So there will be -- most of it would be nonstandard products, which will be produced. So we currently don't have -- we would not like to comment on the sort of volumes which will be available. And -- so once the commissioning process is over, so that would take around 6 -- the total ramp-up and commissioning. So then we will be able to come out with some sort of figures. But most of the product, which will be there now available, which will be all nonstandard products.

That was the last question. I would now like to hand the conference over to Mr. Vishal Chandak.

Yes. Thank you very much. Thank you, everyone, for participating. And my apologies if you've not been able to ask your question, the queue was pretty long. Thank you very much, sir. And for any other questions, please feel free to write to NMDC. Sir, any -- over to you for your closing remarks.

Thank you so much, Vishal. We have had a very good Q4. And hopefully, going forward, in FY '22 also, we intend -- the most important thing is to start the -- commission the steel plant. That is one of our main areas of concern. There has been substantial delays, and we would like to ramp this demerger process and commissioning of the steel plant. The other thing is we would like to ramp up production to the 44 million tonnes at least in and around that figure is what we want to do -- we want to -- we intend to do. Prices are looking good, so we want to take advantage of the whole situation. And there's good demand in the country, domestic demand. Exports, obviously, we're not looking at too much at exports at this point of time, looking at trying to satisfy the domestic demand. So these are some things which we -- and also the most important thing is to also ensure that our -- the Slurry pipeline and the CapEx spending on the Slurry pipeline and the screening plant at Kirandul we're also coming up with a screening plant at Donimalai also FC2. So we tend to enhance our capacity, we intend to revamp our existing loading plants and other old equipment. In fact, we are running it. We are getting in our HEM equipment plan is to -- is also we want to get in more equipments and heavy duty equipments that we are able to take care of the production. As regards logistics also, we want to improve our evacuation plans and doubling of the -- we would intend to see -- ensure that the doubling of the KK line takes place at the earliest, we're talking to railways. So all this put together, we have -- the plan for future is -- looks bright for NMDC. And thank you for having us here at the con call.

Thank you. On behalf of DAM Capital, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.

Thank you so much.