NMDC Limited (526371) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '24 Earnings Conference Call of NMDC hosted by ICICI Securities. [Operator Instructions] Please note that conference is being recorded. I now hand the conference over to Mr. Amit Dixit from ICICI Securities. Thank you, and over to you, Mr. Dixit.

Thanks, Michelle, and good morning, everyone. On behalf of ICICI Securities, I welcome all of you for NMDC's Q1 FY '24 Earnings Call. At the outset, I would like to thank the management for giving us an opportunity to host this call. We will begin this call with brief opening remarks from the management, post which we will open for an interactive Q&A. Thanks and over to you, sir.

Good morning, everybody. So can I speak now?

Yes, sir please proceed.

Good morning, everybody. So thank you for connecting, and this has been the best quarter ever, Q1 ever since inception for NMDC. And not only Q1, it has been the best Q1, Q2, Q3. So if you leave aside the Q4, which is, of course, always the star quarter, if you leave out that quarter, so this has been the best ever quarter except from Q4. Good thing is that April, May and June, they individually have also been the best, both in terms of production and sales since inception. So that's a remarkable achievement that we've been able to log and this absolutely dovetails with our annual plan of anything between 47% to 49% and god willing even up to 50%. So to that extent, as per the annual plan, we are on the right track. The most happening aspect is that at this time, our sales has been up until at least July, about 1 million tonne extra -- 1 million tonne over our production. So that's really happening. That gives us great leverage. And also as the production goes up, our cost of production per tonne comes down. And despite the margin pressures that we have, as you know, that we have taken price adjust for the couple of days. So despite those small hiccups in prices because of the increase in volume and the consequential reduction in prices per tonne -- sorry, cost per tonne, I am confident that we'll be able to maintain our overall EBITDA margin of 40%, 41% on an annual basis. So overall, I think what has been good and what we are looking at is also very encouraging. So I think we can now sort of be have a firm footing where we can make this quantum leap to 100 million tonnes in the next 5 to 6 years for which our plans are right now. Some of them are already being executed and some of them are driving more stage and we hope that we'll be able to do that by 2030. We already have a new NMDC logo for NMDC 2.0. It speaks about our commitment. It speaks about our aspirations. It speaks about our fried past. So going forward, we are very hopeful and very, very optimistic on the future. So thank you. We can have the questions now.

[Operator Instructions] The first question is from the line of Alok Deora from Motilal Oswal.

Congratulations on pretty decent numbers.

Sorry, your voice is cracking. You voice is cracking.

Can you hear now?

It's very disturbed. Something needs to be done about the line.

Mr Deora, please proceed with your question.

Yes, yes. Sir, just wanted to understand this price now, which we give, including royalty, DMF and MET. So if we just want to calculate it as against the previous few years to give excluding that, then what would be the typical differential between that. So just if you could indicate? How much is the difference now in -- for these 3 items?

Normal loading is around 21% because of the royalty and royalty issue. But that's not the only thing we have while going for an integrated pricing internally, we have seen the correlation that is there because between our prices and the IBM prices. It's generally 0.996 in Chhattisgarh and 0.992 in Karnataka. So we've had a relational analysis and we've checked out. So we've had a factor of utilizing that as well. So it will not be a straight -- the last time we declared in July. So it's not a straight sort of 21% loading. So it was an internal mechanism that we sort of -- where we hedge the risk for the first time against the IBM prices that could be fluctuating. So after hedging then we declared our prices. So if you ask a straight correlation, I don't think it will be arrived at, but it will be around 21%, 22%, around that percentage. And going forward, after 3 months and things settle down, I think the -- that would come to around 21.4%. But we cannot have a 1:1 correlation.

Sure, sure. And sir, any update on the NMDC steel plant? Or any update on that?

Yes, yes we have commissioned the blast furnace.

Yes, 2 days, I think 2 days back only.

On 12th, we highlighted it now, hot metal is coming out. And I think in another 2, 3 days, hopefully, the Silica will come down to less than 1%, and then we can take it to the SMS and then roll it. So I'm looking at somewhere around anything between 21st to 23rd -- sorry 20th to 23rd so that this plant will be fully commissioned. Because we have already produced about what 3,000 tonnes per day right now, output. The output will go up and silica will start to come down. We have already started the pick casting machine. So it's taking that. So touchwood, like after the commissioning of the blast furnace. Another 7 days, I think we should be done and dusted.

Yes. Sure. I was asking actually from the time any -- on this investment, any update on that?

That process is being run by DIPAM. So as we know that the UI has been called for, and this is a state-of-the-art plant. So obviously, there is a lot of interest. Exact numbers, I cannot say whether it is 5 or 8 people have put it, but I'm told that a lot of -- we are not privy to the names who have sort of participated. But there has been more than adequate interest in that. So which is really obvious because it's a state-of-the-art plant. And absolutely, one plant. So actually -- there has been more than adequate interest. Now that the commissioning will be done, I understand that the pace will pick up because a lot of things where people are looking at commissioning to happen first. So now that's done, I think the pace will pick up. But it's not being run by us. It's being run by DIPAM that we have to understand.

Got it. Just last question. So just some status update on the CapEx plans, which we have been undertaking. What's the status on that? Is it progressing as per the plan or any changes?

As you know, that we did including Nagarnar last year around INR 3500, INR 3600 crores. This year, excluding Nagarnar, I think also we are targeting at around INR 1600 crores, INR 1700 crores. But I think we should be doing around INR 2,000 crores. Now we have got major projects sanctioned. So going forward, I think the normal would be at around -- if I am to go to 100 million tonnes in the next 5 to 6 years, then the total investment per year has to be more than INR 5,000, INR 6,000 crores. I think somewhere rather in the vicinity of -- when we get all of projects sanctioned somewhere in the vicinity of INR 7,000 crores to INR 8,000 crores going forward in the 3 years from now, once we get all the project sanctioned. Our existing projects for the next 2 years should be, I think, more than INR 2,500 crores for the next 2, 3 years.

We'll take the next question from the line of Mohamad Farooq from Pearl Investments. Mr. Farooq, kindly proceed with your question. As the current participant is not answering, we'll move onto the next question which is from the line of Pallav Agarwal from Antique Stockbroking Limited.

I just -- I just want to know any updates on the coal blocks and so when are we planning to commission? What production targets are there?

As you know, there are 2 that we have. One is Tokisud, the other is Rohne. So Tokisud, we are in the land acquisition phase. Of course, now we are going for both this coal mine was under the Coal Bearing Areas Act ,which is the CBA Act, which is -- we have applied to the Ministry of Coal for the relevant notifications. And that would expedite. Hopefully, as you know, in Tokisud, we've already appointed an MDO. So once the clearances are there, it should take about the year-end -- somewhere around early next financial year or closing series of this financial year, we hope to do some mining in Tokisud. Rohne is, of course, more than a year away. The approvals have been sought for -- Rohne would take us somewhere around FY '25 mid or somewhere around that. But that's the bigger block. So the main thing is now that we need the notification from the -- the CBA Act. Coal Bearing Areas Act, CBA Act.

Sure, sir. Sir, also, sir, any update on the SPV amount at 50% balance that we were to receive. So is it possible to receive that in this FY '24?

That will depend on -- so we have petition with the topmost court. So we are waiting for a decision. We are confident that it will come in our favor. But of course, we cannot set a deadline. I hope that we'll get it this financial year. I hope that we'll. [indiscernible].

And sir, currently on whatever we are selling in Karnataka. Are we paying that 20% or we're paying only 10% right now?

It's only 10% now, we won that case, we won the case. So we're paying 10% now. They refunded us around 1000 crores, 990-odd indiscernible crores. So it's only 10% now.

Okay. Sir, lastly, sir, I think we had this -- we've got this clearance to expand the mining capacity at -- I'm sorry, at Karnataka. So will we see some incremental volume? Yes, sir, so will we see some incremental volume?

Yeah we hope to operational. We've got the EC, environment clearance, we have got it for 10 million tonne. Now will more clearance from the monetary committee is required because Karnataka itself is fully capped. So that cap needs to be re-adjusted at our -- of that 35 million tonnes or 40 million-tonne cap of that area. And that has to be redistributed, only that is there. So hopefully, if we get it soon, our target to operationalize that is around 1st of October, the additional. And if that comes through, I think we should be getting at least 3 out of the 2 extra million tonnes, I meant 2 out of the 3. And that is why the current guidance, as I said in my opening remarks, is around 47% to 49% and hopefully, 50%. It all depends on how soon we can operationalize these things.

We'll take the next question from the line of Sumangal Nevatia from Kotak Securities.

First question is, sir, your comment on CapEx, it's not very clear to me. So this year, you are saying INR 2,000 crores is roughly the ballpark we're looking at. And based on existing projects, which are already approved, per year, INR 2,000 crores is the number to kind of work with for future year also?

Next year I think we should be doing much more than that. I think INR 2,500 crore would be minimum next year, if not more. We are trying to literally drive the CapEx because we believe that going to 300 million tonne, not only the existing project needs to be updated fast, but a lot more needs to be sanctioned. So CapEx is something that we will really have to look at. This year, I think we'll do INR 2000 crores, although our budgeted target is around INR 1,600 crores only, the official number is INR 1600 crores.

And what is the 1Q CapEx, sir?

I beg your pardon?

What -- how much did you spent in 1Q?

Q1, I think we've already spent -- CapEx till date is already we have touched around INR 606 crores for NMDC up to August. Q1 figure, I'll have to actually go back and see how much CapEx have done. But up to August INR 600 crores we've already reached. And I remember, around 40% of the CapEx comes in the Q4 only. So we are in line to do around that number. Q1, of course, I'd love to revert back to you. Just a second. I can -- it was INR 351 crores in Q1, but by now, we have reached INR 606 crores by end of August -- by actual 15th of August.

Understood. Sir, second, on the volume growth, if you see 2018 to '23, we've been quite range bound 36 million, 38 million tonnes. So when you're kind of expecting around 10 million tonne addition this year, I just want to understand what would be the breakup? Are we also -- I mean, how much are we expecting to supply to Nagarnar. And if you could share what is the estimated breakup of this 10 million tonnes from Karnataka and Chhattisgarh?

Karnataka, as I was telling in the previous question, we have got the EC for additional 3 million tonnes. So this year, if you do it in October, if you operationalize in October, maybe part of -- more than 2 million tonnes should additionally come. From the production side, we also have a 2 million tonne capacity upgradation project in Bacheli in Chhattisgarh. So that's going to be another 2 million tonnes there, that's going to be commissioned in September end, definitely October. So we are going to get 1.5 million tonnes from there also. And then we are -- hopefully, by January, we will be starting 365 days working. Right now, we have weekly offs. So we are getting additional equipment and manpower to ensure that we have 365 days working. So that should be giving us quite a volume there. And a couple of mines in Chhattisgarh, which we're doing 2 shifts, 11B and 14C. We are planning the third shift there, but it was -- we are increasing material and men, and we'll do the third shift out there as well. So taking all this, I think, it depends on how early we can operationalize all these ores, so that is why we are keeping our guidance from 47% to 49%, maybe hopefully, 50% this year, next time -- next year, it will be more than 50%.

Okay. Okay. So for this additional 3 million tonnes and 2 million tonne upgradation in Chhattisgarh and 3 million tonne capacity in Karnataka, do we have both the screening plant -- plant equipment in place for additional capacity? And is the evacuation not a constraint?

We have the plants. We have the plants.

And evacuation is also...

In fact, Bacheli, it is the screening plant upgradation that we are talking about. So we have the mining capacity, but we had limited screening capacity. So that's a de-bottlenecking, which should give us 2 million tonne.

Okay. And sir, when you say about increasing 1 shift and working 365 days, was it new this year? Or was it also happening in the Jan-March period in the FY '23.

No, no, it was not happening. In fact, it will not happen immediately also. The RBS, we can target this in January because I need men and material for that. Men and equipment for that of sourcing they're not available officially. So we have ordered the equipment, once they get delivered, by the time we will recruit the people also. But hopefully, we have set ourselves the target of January. If we can do it earlier, we will be gaining, if we do it later, we'll lose. But [indiscernible]. Operating 6 days a week and 1 day off [indiscernible] that.

Okay. And sir, how much are you applying to Nagarnar? What is the estimate for this year and, say, next year?

Nagarnar would consume at the peak around 4.5 to 5 million tonnes.

And this is entirely from our existing mines, right?

Yes. Yes. All from mines.

Okay. Got it. Got it. And just one last question, sir. So the news report that we are having partners which are mining in Australia and also some early exploration work in India. If you can just share what exactly is happening in Australia, what is our interest stake there?

Australia, we have Legacy and we are going to do the gold mining in about a month's time -- a month, 1.5 months, we'll start our own gold mine there. All the approvals are there, except for one, which is expected by this month day. Once we get that, we'll take about a month to tie up before the logistics have started mining around the end of September for sure, that will be our own gold mine. And we can use the proceeds to go into further exposition. Regarding the other things that we have a very big tenement there around 17,400 hectares where we have -- which was jointly owned by NMDC and Hancock. So now we have a third partner, which is the Atlas there. Atlas, as you know, is the biggest mining company in the world. So we've tied up with them for the magnetite exploration, which is at the [indiscernible], almost the final stages of the PFS, preliminary feasibility study. The initial results are very encouraging. So that's -- if that certifies, it can go up to a 15 million tonne magnetite-iron ore mine, in the next 5 to 6 years? And also, that tenement has some potential for lithium and other minerals. So again, the tie-up is with Hancock so that we can explore those material -- minerals also in that.

Okay. Sir, Legacy has been a loss-making entity since years, sir, what sort of profitability are we expecting this is gold mining start. Is there any visibility on our earnings metrics?

Initially, we don't expect it to have bumper profit. The reason is the first mine that we are doing is essentially are not a very big mine. But whatever we earn from there, I think we expect to earn around $15 million to $20 million. What we expect to do there with that is to plow that back to the other 4 to 5 adjoining tenement that we have for gold, which is very promising and see the results there. I think the results are encouraging that we can go in for big-time gold mining. And that would be at scale. This is more sort of experimental in the saying that we have not mined in Australia. We want first-time experience. We are not going have the money part right now. We're looking at enough so that we can plow it back to invest in other gold tenement that we have and also to gain experience. So the next phase would be the one -- that will be the -- one in scale. This is a smaller.

We will take the next question from the line of Ruchika Dhanuka from Phillip Capital.

This is Vikash Singh from Phillip Capital. Sir, I wanted to understand our realization. If I look at our realization, which has gone up on a sequential basis, but we have started getting up price cuts on the June itself. So just wanted to understand the...

I didn't understand your question.

Sir, I would request you to increase your volume a little bit.

Is it better?

Yes.

This is much better.

So just wanted to understand our realizations, which have increased on a sequential basis, but we -- on a monthly basis, they have started to cut down prices from the April onwards. So just wanted to understand how much of lag we are expecting? Or is there any mix change which would have resulted in a better-than-expected realization?

The mix change will be even into better realization, I think we have some -- sometimes far from that right now. We need the infrastructure to do the branding, et cetera. Yes, I believe you're talking about iron ore prices. They have -- I believe you are talking about iron ore prices, right?

Yes, sir.

So yes. So that -- there has been severe pressure on the prices, as you know, since this entire financial where we have hardly -- we have not been able to take any price increase, in fact, we have had to sort of reduce it quite a few times, including the 1 a couple of days back where we had to make a marginal adjustment. But I hope we have bottomed up and the prices would go up. The good thing about saying is that since the volumes have gone up, and this is a fixed cost industry, so your cost per tonne has come down. So that really compensates for the loss of pricing leverage. So to that extent, yes, the margins will be able to [indiscernible]. But hopefully, let's see what happens after the monsoon, see if the demand picks up and the -- as of now, there is no visibility of something great happening on the price front. So I think we just have to survive this pricing pressure as of now, and that's what we are doing.

Sir, actually, I was just referring to our -- so 1Q price increase over 4Q levels, while our average realization was on a continued declining trend since April. So I just wanted to understand the reason for that particular...

Q1 prices just -- it was just marginal. We had taken one -- I think around March, we had taken some price increase at that point of time. So thereafter, it has been completely down south because the Q4 prices were around [indiscernible] And Q1 prices average domestic realization was [indiscernible]. It was only a marginal ease of 4%. We tried to sustain that in April and then thereafter, we could not because of the market dynamics. So even after Q4, it has not been very encouraging to us.

I'll take that point, sir. Sir, my second question pertains to our evacuation plans of railway doubling as well as the study pattern, if you could update us the state of completion they are right now?

Yes. Out of the [indiscernible] kilometers of railway line upgradation, I think more than 100 kilometers has already been done commissioned and trains are running there. The last stretch, which is around 25, 30 kilometer stretch is being under construction. We are told that the phase wise by end of this financial year, they will be able to deliver. But the problem is not of light capacity as of now. The problem is availability of guidance. We -- even before the doubling the capacity was 28 million tonnes, and now the capacity is around 40 million tonnes. So it's not a capacity constraint, it is the non-availability of wagons that is the problem. Because we are producing around 30 million tonnes from Bailadila approximately 8 million tonne, 7 million to 8 million tonne goes through the conveyor of Arcelor Mittal, 2 million tonne goes to road. So we are able to -- our requirement as our rail transportation is only 20 million tonnes. But if the rigs are available, then we can really upscale our dispatches through rate. So it's not a capacity constraint issue in terms of land capacity. It's more of availability of trains and rigs that is the issue. And the railway has been helping us a lot. In Q4, we earned an average of 18, 19 rigs, which we need to do annually rather than the 13, 14 rigs that we get now.

Understood, sir. Sir, in terms of NMDC team, what are our FY '24 and '25 production targets?

This year, we'll have the entire almost entire H2 to us. So for production. So we should be touching about 1 million tonne in the H2. We have a constraint of nonavailability of lime and dolo because the plant has not yet come up really. And despite reusing -- purchase lime and dolo for making steel, we should be able to do about 1 million tonne this year and more than -- plant would be full capacity next year. Because these are modern plants, you really don't need too much of a problem in ramping production once the availability of input.

Understood, sir. Sir, just last question, what is our net cash balance as on 1Q end?

Net cash was 7,000 -- at the end of Q1, I think it was around INR 1700 crores, I just want to refer to that particular figure. I think it would be there in the presentation, just give me -- how much? I mean are we -- what was the Q1 total? Q1, we had net cash balance of INR 11,279 crores.

11,200 crores?

Yes.

We'll take the next question from the line of Kamlesh Bagmar from Lotus Asset Managers.

With regard to this Legacy operations or Legacy mine, like it has been in our belt for last 10, 12 years, and we haven't been even able to like extract iron ore from there. And even for this lithium mining.

What? Iron ore?

Yes. Yes, I'm talking about the Australian operations or Australians subsidy. So like around 10 to 12 years, and we haven't been able to mine even the iron ore there. And apart from that, like for this lithium as well, we would be left with around 29-odd percent stake. After like this arrangement which have been done with Hancock. So like what potential could be there in terms of earnings because we would be hardly back with now around 29-odd percent stake, which we used to had around like 80-odd percent earlier prior to this deal. So if, say, the -- if this entire prospecting and all those activities go on. So how many years would it take like say, 5, 7 years? And after that, what commercial arrangements would be there? Like would it be around all trading operations, how that would proceed if the feasibility studies are in positive format.

Right. Number one, first, you must understand the Legacy is essentially an exploration company. It is a junior mining company. So it's main business was exploration. And naturally, as you know, in mining, all explorations do not lead to success. So the success rate is rather low, especially -- most of its exploration was in terms of [indiscernible] minerals where the success rate is as good as going to a casino and winning a jackpot. So it's not quite different. So to have an expectation of mining from a junior mining company straight away? Or a definitive mining plan? I think that expectation is something wrong because that's not the way the Legacy was working. The good that we are able to -- we were successful in one of the tenements to get gold. And we just got lucky there. And we have a few more tenements which are promising so far as gold is concerned. Now so far as the big tenements of Mt Bevan is concerned, where we have entered into a agreement with Hancock, you must realize that Legacy did not own 100% of that. Legacy used to hold 60% of that and 40% was owned by another company called Hawthorn, which are the original owners of that. So we were only owning 60% of that. Now we are actually getting down to 30% of that. And it's a sweetheart deal in a sense, we have 0 risk. So we are not spending -- the PFS is costing around more than INR 200 million, right, where we are not spending a dime on that. In fact, we got around $10 million to sign that agreement. So we are not spending a dime on that. And if we get -- we get 30%, of course, if the iron ore is available then we get 30% of that. So our subject to, of course, are willing us to invest up to that level. So it's a sweetheart deal, we don't have any downside on all the possible upside. So similarly, since we are doing the lithium exploration in the same tenement, so the terms and condition of the lithium exploration is also very, very similar. And both of these are sweetheart deals. And in the Retail exploration, we have another clause that we have 75% of stake rates. So that's adding sugar to the sweetener. So that's a real sweetheart deal. So nothing could be better so far as the Legacy is concerned from that deal. Yes, even if the iron ore PFS comes out to be successful, operationalizing that mine should take at least 5 years, 4 to 5 years, that's how the Australian mines -- all the approvals, construction. So we are looking at around 5 years for that. And of course, if lithium is found, the PFS itself is going to take around 18 months. And if the PFS good then we will take another 3 years to sort of come to a mining stage. But it all depends upon what the PFS results are.

Great. Great, sir. Thanks for the very excellent answer. So -- and on the gold mine, sir, there also we have a 60% economic interest?

No all mines are 100% owned by us. All those tenements are 100% owned by us. Except this big tenement, which we call Mt Bevan, it was -- we had 60% ownership, and with the other company, Hawthorn had a 40% ownership. And we could not invest in that year because Hawthorn would have got a free ride. So there was no diversion clause in that agreement, which was at the 10 years back. So I could not invest and if I had invested unilaterally, Hawthorn would not have -- they would have got a free ride. So now that the investment is being done by a third party, which is very, very reputed, it has a huge 55 million tonnes, 60 million tonne mines in Australia. So they are a real big brother to be within the Australian mining area. it is a sweetheart deal that we bought.

Sir, 5-odd years away from now, so it would be...

Yes, the initial PFS results, cyclical results are all fine in the iron ore. They're all very, very encouraging, the initial PFS results. But we'll have to wait for the entire thing about water and about magistrates and all those things have been worked out with. So we're keeping our fingers crossed, but we are optimistic. We can't have a definitive sort of a say right now.

And lastly, on the lithium reserves in India, anything you are hearing from the government?

No, we have not been offered -- obviously, we are not going to bid. I don't think that's going to be because we don't have adequate [indiscernible]. We -- if it is offered to us on the reservation, we'll take a look at that point in time.

We'll take the next question from the line of Sukhwinder Singh Bedi from EON Investments.

So congratulations on a production and sales numbers for the quarter. So sir, you've given a long-term forecast of 100 million tonnes over the next 5, 7 years. What are the indicative kind of figures for FY '24, '25, '26? Because we'll have a greater handle on that, I guess, at this point in time?

We have an EC of 54% that is -- this year, we'll say anything between 47% to 49%. And if we can prepone our things that we said, so it could as well reach 50%, but that's something more aspirational than 47% to 49% should be for this year. Next year, of course, definitely we will cross 50%. So because by time, we would have operationalized all 4 of these things, so we will definitely go above 50%. We will try and touch our EC capacity of 54%. So that would be our plan. So we are working on that.

Okay. And the current projects that are current under execution at this point what do we take our capacity to the front pipeline, beneficial plant, screening plant, so on and so forth, okay?

You have to look at the project in two different -- one is the dispatch and marketing and sales-related projects, which has solid pipeline in all things and the one is the production-related projects, which is the screening plants, et cetera, et cetera. So the screening part in Kirandul, for example, is 12 million tonnes. The ones that we have tendered out last week at Karnataka is 7 million tonne upgradable to 10 million tonne. We've just tendered it out last week. Right? And the downhill conveyor that we are tendering in the next week, it would be the downhill conveyor at the [indiscernible] at Kirandul 14C, et cetera, is another 10 million tonne. So these are the ballpark thing. So on the production side, again, we need to get these done. The other mines also need to upgrade, and we need to make this investment in the next 2, 3 years so that we reach at least 60 million tonnes from Bailadila itself, the current is around 30 million tonnes. So we'll try to reach around 50-plus -- and by that time, NMDC, CMDC should also come, that's deposit 4 and deposit 13. Deposit 4 would be operational next year. Deposit 13 might take a little bit longer. So we should have another 7 to 8 million tonne from NMDC, CMDC. So that's the broad outlook. Now you come to the dispatch side, of course, as you know, that we are upgrading the railway life from 28 million tonne capacity to 40 million tonne capacity. And what the railways are doing, in fact, it will be effectively 55 million, 60 million tonne capacity evaluation to rail itself. And I've told that the number of wagons that the railways have ordered were -- but the availability of wagon in the Q4 and going forward in the other financial years should not be a problem. So we have a fair bit of evacuation capacity out there and around 15 million tonnes of spare pipeline we are already building. So that's our evacuation plans on there. We'll have to take a serious look at the Karnataka dispatch also once the upgradation [indiscernible]. So we need to take upon on that.

And we recently saw an EUI inviting expressions of interest for exports, okay? So any update on that? Export. Export of iron ore, okay? So any progress on your export of iron ore plan?

No, not as of now. We have asked for the -- we are exploring this market. As of now, at this current prices, our domestic net -- on a netback method, our domestic realization is more than export realization because of, as you know, the 30% export duty that is there. But yes, going forward -- and there is more than adequate domestic demand for our products. But we must keep that export window open because if tomorrow, there's a slight slack in demand or the prices go down and people start importing then we need to sort of -- just to keep ourself afloat when -- when you are ramping up to 50 and from 50 to 70, 70 to 90 and to 100. So unless we keep that window open, it would be a major challenge. So we have decided that we should be off the block as soon as possible. Have some do some -- keep the window and the market open so that people interact promptly. But that's more of a sort of a long-term plan for which no short-term things need to be done. So that's what we are doing.

Right, sir. And so finally, sir, is the largest cost head is actually the royalty and the additional royalty and the various fees, et cetera. So is this application of the same would help. So earlier, we used to pay an additional royalty of 22.5% out of our basic price. Now there's no basic price per se. Now we have a list price, which includes the royalty of 15% with DMC and the NMDC. So how does it change? So how is now the...

It doesn't change. Don't worry, it doesn't change. You've seen the math. Even if you see the IBM prices, they were declared including all, right? We have just aligned our prices to the IBM prices. So when our basic prices were, let's say, INR 4,000, the IBM price was INR 6,000, including all those -- not INR 6,000, it was around INR 5,000 including all those [indiscernible]. So IBM used to declare INR 5,000 when we had a basic price of INR 4,000. We have now just aligned our prices with the IBM method of calculation, which was being done by all the miners except us. OMC was doing it, all the private are doing it expect we are not doing it. So we just aligning the method. But our liability [indiscernible] will remain on the netback meter. So they'll deduct the royalty, you cannot have 22.5% of royalty again. So it will be taxation on taxation. That can't be done. So that liability towards additional royalty of 22.5% will remain on the netback method. So there also -- so there's not going to be any change in that.

To help us model the potential revenue. So if 100 were our list price now as per our new pricing mechanism, then what will be the royalty component out of that? So if INR 100 is our list price now, what will be the royalty?

INR 100 let us say, 121.4%.

And our realization will be 77.5?

What would you -- you divide 100 by 121.4 and then multiply -- but there is other correlation factor that we have factored in for the July pricing. Just to insulate us from the vagaries of IBM pricing. So it will not be a straight calculation. I guess, out of 100, I think the -- it should come around 78% or 78.9% or something like that.

So what we are saying is that effectively, our sales price is 121.5%, excluding the [indiscernible] permit fee, transit fee and the environmental cess, then our net realization will be 78 there out of 121.4, is that a fair assumption?

121.4, it will be a 100.

No, sir.

Out of 100, it will be around -- if you take another 100, then this will be around that figure. But I [indiscernible] some calculation on that.

No, sir. The additional royalty will have to be still paid. Because 121.4...

Additional royalties are part of my cost. It's not a pass-through item. It is not a pass-through item.

But net of our royalties in our line item, okay? So the net of royalties, we will realize a net 77.5, 78?

Yes, around that part.

We'll take the next question from the line of Mohamad Farooq from Pearl Investments.

Can you hear me?

Yes, sir.

Yes.

And over the past 3 years, I have been consistently participate in the NMDC conference call, where we have been presented with a range of positive news, including achievements like record production, an ambitious target of 50 million tonnes this year or next in 5 years, 100 million tonnes in a substantial investment in CapEx and venturing to gold mine, lithium production, substantial cash results in new logos and solar power generation, so many things. Despite all the positive factors, there appears to be a lot of investor confidence in the management. The market offers is unresponsive to the positive news. For instance, during the export ban, investors lost 50%. But when the export ban was lifted, we saw only a 5% take up. Could you please shed light on how NMDC management is addressing this perceived low investor confidence?

We, of course, put all our achievements and all our aspiration in the public domain where regularly I interact. So I don't think it is a investor confidence or rather, as you say, lack of investor confidence is due to lack of communication from the corporate. I think we are a very transparent company. Our numbers are there and information of our future plans, et cetera, is there. Obviously, because I think that most of the BSE stocks are taken as a dividend yield stock rather than capital appreciation stock. So when I -- my personal perception is that where you have a portfolio of around INR 40 stock you sort of categorize that as some of them which gives you a standard dividend deal, some of them which -- where you expect a capital appreciation and fortunately or unfortunately, we fall under the sort of our dividend yield category of investments. So naturally, people -- I think that -- that's my perception because they are government owned and some amount of our dividend yield is one of the highest in the country and in the world around [indiscernible]. So I think the investors are more sort of in sort of looking at us as more of a steady income rather than the capital appreciation stock. Of course, whatever that I see from the different analysts like a lot of people who are attending today's call, they've all been very kind to sort of always keep us in the buy category rather than the hold or sell category. As a company, even if you see our performance parameters internationally, if you compare us with Vale and Rio Tinto and BHP and FMG and we have the lowest C1 cost. Our risk ratings are much lower than Vale or many of the international or Indian companies, including Vedanta and we have a much more lower risk rating. Our parameters other things like GHG or you take any parameter as a company is...

Your cash reserve is 33% that's our market cap currently, INR 11,000 crores? Yes. Still.

[indiscernible] Dividend around INR 3000 crores of dividend. But yes, now we are ramping up CapEx, another 2 years, we would be substantial investment in CapEx because other that, without investment in CapEx, substantially the quantum German CapEx, we cannot hope to reach 100 million tonnes. So some of them are already [indiscernible], some of them are active.

My next question is, in the previous conference, I highlighted about the NMDC's top clients, like RINL, JSW, Arcelor Mittal, and KIOCL. Given that any reduction in purchase by 1 of this client could substantial impact NMDC operation. The reason is sent with JSW purchases being 50% below expectation in July, has severely impacted on production and sales of NMDC. It was unexpected for NMDC to witness 50% drop in purchases of JSW within a month. Now the good news is you have export UI. Okay. With the expo -- with the global export market accounting for more than 1 billion tonnes, I'm curious to know if NMDC has a specific target -- monthly target, perhaps a range of 1 million tonnes or whether the company is more reliant on buyer's demand to determine the export target.

So, that's a good question. So let me take the part one of statement first. So yes, you know that 70% of our sales go to 3 million buyers, which is a businesses, right, by every standard. We are aware of that. And accordingly, our plan is to diversify our customer base. So the first step has already been taken. We have an intermediate stockyard at Kumar Maranga. And going forward, we need much many more such intermediate stockyards and from where we can dispatch to where -- from where we can cater to markets like Raigarh, like western Orissa and other places. So we need to -- 40 million tonne of production and sale and 100 million-tonne production sales are two different ball games altogether. They are completely in terms of your marketing philosophy and everything, it's a major paradigm shift. So we are aware that we need to increase our customer base and accordingly we are making out plans to sort of increase our customer base. And one of that is having intermediate stock and blending yard. So -- but the will take 3 to 4 years to come, of course. Yes, the buyers -- when the mega buyers that we have, 3 of them account for 70% of our sales. So naturally, there is dependence of them right now, which we need to get out of. Regarding export, yes, as you know that as of now, the numbers don't make sense because your netback in realization in domestic is greater than the netback in realization in exports because in exports, we ought to pay 30% duty. You have to pay the freight, and you have to pay the royalty on your account. Right. So if you calculate the netback, economically, it doesn't make sense to export today. But as I was saying to the previous caller's question, that we need to keep that window open for the volumes. So even if I were to do around a 10% less realization in export, I should have that window open to give me the volumes that I need to do. So as a result, having a monthly target today would not make business sense. But going forward, when we really ramp up our production, and we are through to the distribution sector, yes, then as the business [indiscernible] lower debt realization doesn't make too much of our businesses. But we need to keep that window open for strategic reasons. And as a result, having 1 million tonnes or 0.5 million tonne export target for a month-to-month basis as of now, wouldn't make great business. Going forward, it does when we post production also to sustain the domestic prices there.

Okay. Could you please update on the latest export UI that was like a month back.

Yes. Export UI is a month back, I really have not seen -- followed it up 2 months because that's more of an explorative nature. So I'll have to get back to you on that one.

Okay. So what is the projected Q2 target for production and sales?

Last year, Q2 -- Q2 the last -- this year the dispatches will be very substantial because we had a lot of stock and we've been able to service our customers very well. So July, we have done more than that. So Q2 last year, I think we did around 7 million tonnes in production I think this year, we have already done by July, I think 2-point something. So I think we should be doing around 8 million tonnes in Q2, while I think last year, instead of 7, I think we should be able to do 8 million tonne. And in terms of dispatch last year, Q2 was around 8.5 million tonnes, I think we should be slightly increasing that to around -- it should be marginally above that as well.

Also the participant has left the queue. Ladies and gentlemen, due to time constraints, that was the last question. I would now like to turn the conference over to Mr. Amit Dixit for closing comments. Over to you, Mr. Dixit.

Yes. I thank Amitava sir for very patiently answering all the question. On behalf of ICICI Securities, I would like to thank all the participants for attending the call. I would like to turn it over to Amitava sir for the final comment. Over to you, sir.

Thank you, Amit. It's has been a nice quarter for us. But going forward, I think we'll have to build upon this momentum and if this momentum goes -- and we are not only looking at the next few quarters, but we are looking at the next few years where a quantum [indiscernible] needs to be taken, and we are preparing ourselves for that, both in terms of investment physically and as well as in terms of corporate culture and all infrastructure. So we hope to see NMDC 2.0 in a completely more efficient as -- at a much, much big -- bigger scale than we are at present. We are capable of doing that. And I think we hold to the nation and the investors and the industry to realize our potential. And I think we'll -- going forward, you'll see a completely different NMDC. We are proud of our past achievements. But then what we intend to do in the next 5 years, what we have done in the last 60. So that's the challenge to squeeze in 60 years of achievement and experience into next 5 years of performance. So that is what we are preparing for. Thank you so much.

Thank you, members of the management. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.

Thank you.