Sarda Energy & Minerals Limited (504614) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Sarda Energy & Minerals Limited Q3 and 9 Months FY '24 Earnings Conference Call. We have with us today, Mr. Manish Sarda, Deputy Managing Director, Sarda Metals and Alloys Limited; Mr. P.K. Jain, Director and CFO; Mr. Nilay Joshi, Head, Corporate Finance. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Sarda. Thank you, and over to you, sir.

Thank you so much, and good morning to everyone. A very warm welcome to each one of you attending this call. I would like to state that some of the statements made in this call may be forward-looking, and a disclaimer to this effect has been included in the investor presentation. I hope you all had a chance to go through the results presentation uploaded on our website as well as websites of stock exchanges. During the quarter under review, globally, the economies continued to face macro headwinds on account of weakness in Chinese economy, high interest rates, war between Israel and Hamas, high fuel costs and attacks on ships in the Red Sea. In India, domestic steel demand continued to grow and was up around 10% year-on-year. Steel spot prices moderated in line with global cues without corresponding correction in input prices. As such, profit margins shrank slightly. Central banks continued to adopt tighter monetary policies to rein in inflation. During the quarter, we have achieved highest ever production of iron ore pellets, wire rod and captive power. The ferro alloys plant also operated at record levels. For the 9-month period, we achieved record production of coal, thermal power, ferro alloys and all steel products except sponge iron. Hydropower generation during the quarter was low due to lower rainfall in catchment area and pipeline damage from landslide in Uttarakhand project. Power generation in Uttarakhand project has resumed now. In quarter 3 FY '24, we expected -- we exported 33,429 metric tonnes of ferro alloys valued at about INR 242 crores against 25,454 metric tonnes in quarter 2 FY '24 valued at INR 189 crores, and 20,554 metric tonnes in quarter 3 FY '23 valued at around INR 176 crores. We have received permission for increasing the production of iron ore pellets from 8 lakh tonnes to 9 lakh tonnes, which will enable us to produce extra quantity without any fresh capital investment. Mines and Minerals. The Gare Palma coal mine block produced 3.86 lakh tonnes of coal. We have applied for increase in the coal mining capacity of Gare Palma IV/7 coal mine from 1.44 million tonne to 1.68 million tonne, and expect to receive permission during the current year. In view of increased in-house coal requirement post proposed acquisition of SKS Power, we are seeking approvals to increase the coal mining capacity of Gare Palma IV/7 coal mine to 5.2 million metric tonnes in phases. The capacity of the coal washery is also proposed to be increased suitably to meet our requirements. We are also taking steps for setting up railway siding and loading infrastructure in the coal mine for movement of coal through rail, for cost effective movement of coal and mine refilling material. The Indonesian joint venture coal mine produced 250,000 metric tonne coal during the last quarter. In the last quarter, when mines reopened, we had produced 84,000 metric tonnes of coal from the mine. The Indonesian JV has received permission to produce 1.6 million tonne from the coal mine. We expect to produce 1 million metric tonne of coal from the mine in FY '25. Our proposal for first-stage forest clearance for Shahpur West coal mine in Madhya Pradesh has been approved. Mine opening work will be started only after getting Stage 2 forest clearance and mining lease. We expect to commence commercial production before the stipulated period of 51 months from allotment. Post commissioning of this mine, 100% of our high-grade coal requirement will also be met for -- from captive mine insulating us against price fluctuations and a high cost of imported coal. We have entered into an agreement with SECL for mining of high-grade coal from Kalyani Coal Mine on a revenue sharing basis. We have to restart mining within 18 months after obtaining all required approvals, et cetera. This was the first mine under revenue sharing model. A joint venture with our share of 67% has been declared as successful bidder for reopening and operation of Bartunga Hill high-grade coal mine of SECL in the state of Chhattisgarh, with a revenue of 18% to be shared with SECL. The contract shall be executed through a special purpose vehicle. This will further strengthen the company's presence in commercial coal mining. Surjagarh iron ore mines. We are awaiting letter of intent from the government of Maharashtra for composite license for the mine. Soon after receipt of LOI, prospecting work will be started. Solar power project. The company is installing solar power project of 50 megawatt in the state of Chhattisgarh to meet captive power requirement to replace grid power being purchased presently. The project is estimated to cost INR 200 crores. Orders have been placed, and the plant will be operational before the end of next financial year. In addition to the cost saving, it will also help in reduction of carbon footprint. Hydropower project under construction. Construction work at 25-megawatt Rehar hydro project is progressing ahead of schedule, and the plant is expected to be operational well before scheduled completion of March 2025. The acquisition of SKS Power, the matter of approval of our resolution plan for acquisition of SKS Power is under hearing before NCLAT. SKS is having an operating thermal power plant of 600-megawatt capacity near our coal mine in Raigarh. And this acquisition will bring operational synergies with our coal mine. Presently, NTPC is running the plant under O&M contract. Financial performance. The company has achieved quarterly consolidated revenue of INR 925 crores between quarter 3 FY '24 against INR 1,001 crore reported in last quarter and INR 908 crore in corresponding quarter of previous year. The company has reported operating EBITDA of INR 194 crore during the quarter against INR 240 crores in the previous quarter and INR 197 crore in quarter 3 FY '23. The company's profit after tax consolidated stood at INR 114 crores as against INR 149 crores in previous quarter and INR 130 crores in quarter 3 FY '23. All steel products, except iron ore, pellet, ferro alloys saw price pressure. Fall in the selling prices has resulted in fall in revenue and profitability in spite of improved volumes. Debt. The company is net debt free. At consolidated level, gross long-term debt stood at INR 1,100 crores. Loans repayable within the next 1 year is INR 185 crores. Ongoing CapEx, including for coal mines and hydro projects have been financed from internal accruals. The company has strong liquidity position to meet projected outflow for acquisition and ongoing CapEx. The company is not exposed materially to currency fluctuation. Foreign currency exposure is majorly covered by natural hedge. The quarter gone by has seen strong domestic demand, but slowing global demand and increased exports from China had an impact on pricing of steel. China's property market remains sluggish, affecting steel consumption. During the quarter, India recorded 0.5% growth quarter-on-quarter and 15% growth year-on-year in crude steel production. During calendar year '23, India recorded 12% growth in crude steel production against flat production in China and rest of the world. During the quarter, India recorded growth in steel production despite jump in imports from 2.26 million tonnes to 2.59 million tonnes. The apparent consumption has gone up from 31.38 million tonnes to 35.15 million metric tonnes year-on-year, registering growth of 12%. Iron ore and pellet prices remain firm due to increased export from India. Energy and logistic prices softened during the quarter. Due to reduced domestic consumption and increased exports from China, the finished good prices also softened resulting into compression of margins. Ferro alloys prices also corrected during the quarter. The Indian economy remains stable against the pressure of high inflation, high interest rate environment. Interest rates across the globe are expected to start falling in view of declining inflation across the global -- across the globe. That should boost CapEx heavy projects and real estate sector, creating demand for steel. India's steel production and consumption has recorded healthy growth and is expected to continue its high growth momentum. The apparent steel consumption has recorded healthy growth of 14% in 2023. Growth in steel sector is driven by government spending on infrastructure and recovery in private investment, which has been the focus of this year's budget. Money flow from election-related spending should also stimulate demand. Input cost of steelmaking, including iron ore, coke, coal and energy, may remain range-bound with upward bias. China demand remains subdued, but may pick up with additional stimulus measures. With recent increase in steel prices in other parts of the world and BIS restrictions, imports of steel in India is expected to go down. Some margin expansion is seen in ferro alloys with recent price increase of about USD 35. Though in spite of marginal increase about $0.15 in price of manganese ore and increase in prices of coking coal by about USD 25. Price of coal has also been stable. Price of power in open market is hardening and is expected to remain at elevated levels in view of seasonal demand, providing good power sale opportunity. That's all about the performance and outlook. Now we leave the floor open for questions from the participants. Thank you.

[Operator Instructions] The first question is from the line of Rakesh Roy from Omkara Capital.

Sir, my first question is on volume. So this quarter, the volume increased like [indiscernible] also increased. But sir, pressure realization, is there any reason behind this, sir?

Pardon. Your voice is not very clear. Can you repeat your question?

Sir, my question -- first question is, this quarter, volume is good, sir, compared to last year, if I check, sir. But realization, if we check, sir, your volume is increased by 3% in steel compared to realization is down by 12%. So any reason behind this, sir?

Yes. As we stated in our opening remarks, the prices of the finished goods have gone down as compared to the -- quarter-on-quarter also, it has gone down. And year-on-year, also prices have remained sluggish. That is the reason for the fall in the revenue.

Okay. So any chances to increase the prices in Q4 because raw material prices start going upside, sir?

Yes. In opening remarks, we also stated that -- recently, ferro alloys prices have seen some upward movement and the pellet you have also seen upward movement. The remaining steel products, I think, remains on the same level. Manishji, you can give more highlights on this.

See, if you've gone through the opening remarks, it was clearly mentioned that because of the global prices being subdued, the profitability and revenues will be lower compared to the last quarter and last year. What is happening is that there's lot of activities which are happening, which are not very conducive to business, like the Hamas, the Red Sea environment, the continuous fighting between Ukraine and Russia, which is still on and off. And these spurts are not letting things go in the right direction in terms of infrastructure growth in these areas. So here in India, we're seeing a very strong domestic demand. We have seen the growth also for steel and the consumption apparently has also gone up. What is happening is that there are a lot of places where infrastructure development is going to start taking place in a big way. We have currently seen the Atal Setu being opened. There are a lot of other bridges which are being made. The coastal roadway in Bombay is still carrying on. Part of it is getting open, the part of the coastal roadway is still yet to get started now. So infrastructure is going to grow up. Steel is going to go up. Raw material production have gone up slightly, but I think it's only a lag which happens always in the commodity market. The lag -- whenever the finished prices go up, the raw material prices also start moving along and vice versa. So hopefully, we'll see the prices come back and rebound in a good way this year.

My next question is regarding -- if you see in December, coke prices increase nearby $10 to $12 -- $20, sir. So this will impact in our margin in Q4 or Q1?

Which prices you said?

Coke, sir.

Coke. So we basically do not use coke too much in our entire facility for production of goods. And we just use coke in ferro alloys. To quite a bit, we are insulated as we have started using a lot of Indian coke as well. So we are trying to have an economic blend of Indian coke as well as imported coke and good quality South African coal. So we're trying to insulate ourselves from the coke price fluctuations. And to a great extent, we are quite a bit insulated from that angle.

Understood. So sir, next question regarding, sir, you get the permission for the pellet from 8 to 9 lakhs. So for FY '25, we take 9 lakhs full ?

We will try -- we have taken the permission and we'll try to produce 900,000 completely.

No, no, sir. Okay, 900,000. Okay.

[Operator Instructions] The next question is from the line of Aditya Rathi from Aequitas Investment.

Sir, any timeline on our mind regarding the Gare Palma coal mine enhancement to 5.2 metric tonnes?

Please understand that the timeline is difficult to say. But we are trying our level best to get it. It happens in phases. As the matter goes up to Delhi, the Environmental Board, and we are trying our level best to pursue it as fast as possible. But the overall process takes a bit of time. It's very difficult to put a timeline exactly on when we will get the clearances. But in normal course, the operation -- I mean, the way things are working at Delhi-level should come stage-wise.

It should come by what, sir?

It should come in stages. We have to apply in stages. You can't straightaway apply for 5.4. But that is -- the whole aim is to get it to 5.4 million metric tonnes because we will need that extra coal for our acquisition of SKS Power. So we are trying our level best. And hopefully, we should be able to do this in the next 1.5 years or so.

Okay. Okay. And sir, amount of cost savings that we are expecting after the solar power plant of that 50 megawatt that we have recently ordered -- awarded?

Mr. Jain, can you just answer his question?

Yes. Our present landed cost of power is INR 7 plus from the grid and whatever power, we will replace -- and whatever we will replace, it should cost somewhere below INR 4, INR 4.5. It will not cost beyond that. So that will be the saving whatever generation is there.

Okay. Perfect. And sir, any -- since we are close to the end of financial year '24, any volume guidance for next financial year across the segments?

Given in this -- the production of pellet will definitely go from 8 lakhs tonnes on the higher side. And rest of the capacities, we are operating at optimal level. There will be slight improvement. There won't be any material change in the output capacity, slight improvement will always be there in the steel segment also. And coal, presently, we have capacity of 14.4 lakh tonnes, that will go to 16.8 lakh tonnes.

16.8 lakh tonnes, right, sir?

Yes. And the hydropower, we will also start a second hydropower project in Chhattisgarh will also start. So we will have some generation from that project also.

[Operator Instructions] Next question is from the line of Vikash Singh from PhillipCapital.

Congratulations on becoming net debt free. Sir, just wanted to understand our capital allocation. Since new hydropower would also be coming a little bit better in pellets and coal mining would also start contributing next year. I see our cash inflows would be much higher than the current CapEx plans which you have chalked out. So just wanted to understand next 2 to 3 years, what kind of CapEx we are planning to take it up, in which region and how does -- how do we allocate our -- what would be our capital allocation policy?

If you see, one is the SKS project, which is already in public domain. So whenever we receive approval from NCLT, that will be the one major investment. And in addition to that, we have taken up 3 coal mines. One is Shahpur Coal Mine, which I think after we receive the second stage forest clearance we will start working on that. And maybe in 1 to 1.5 year that should come into operation. Third, we have taken 2 coal mines on revenue share basis. There also -- but the investment will be spread over a period of 2 to 3 years because it takes time to get required approvals and then carry out the investment. So all these projects, the CapEx will not be within 1 year. The annual CapEx will be somewhere in the range of INR 700 crores to INR 800 crores, except the SKS Power project. For the next 2 years, at least, we will have CapEx of about INR 700 crores to INR 800 crores put together in all the ongoing projects. In addition to that, this hydropower project which you talked about, that will get commissioned in the next financial year, somewhere in between. So that is getting over. There won't be material CapEx beyond this particular hydropower project. In addition to that, we have taken 1 mineral wool project in our subsidiary at a cost about INR 70 crore. So our CapEx plan for the next 2 years is in the range of INR 700 crores to INR 800 crores per annum based on the CapEx, which is already planned and approved.

Understood, sir. Sir, just one question on SKS. Assuming that we would eventually receive permission, if -- so is there any additional CapEx which we need to incur apart from the bid which we have submitted over and above to basically rectify or do some other modification in the plant?

Nothing major.

That is a running plant. Presently also it is operating at the normal levels. So there won't be any material. There might be some minor here and there, but there is no material CapEx on that.

But there -- but I basically heard somewhere that, that don't have the -- further potential to increase capacity. So was coming from that perspective?

No. That plant has got a capacity to increase to 1,200 megawatts. First, we will stabilize the operation, then we may go for the second phase of the project. That is a separate independent project, which will be decided in subsequent times. We will decide based upon the market study of the techno-economic viability of the expansion. But yes, they have got the infrastructure, they have got the approval, so that is there. But as of now, there is no plan specifically to increase the capacity immediately from 600 to 1,200. We don't have any planning immediately.

Understood. Sir, just one last question. Last quarter, what percentage of our own coal requirement has been met through captive sources? And how do we see it in the FY '25, '26?

FY '25, '26, we should be able to meet 100% of our coal requirement from captive sources after commissioning of the Shahpur Coal Mine. Presently, might be 70% approximately. I will let you know off-line. But approximately, we must be able to meet our 70%, 75% of our capital requirement from our captive sources.

Understood. That is for the steel and power. For the ferro alloy, the coke would continue to come from outside?

No, for sponge iron -- no, even for ferro alloys, once we have our Shahpur Coal Mine operation started, coal requirement even for other plants, including for ferro alloys, we should be able to meet from captive sources. Presently, we are using imported coal partly for the sponge iron and partly for the ferro alloys.

[Operator Instructions] Next question is from the line of Vikash from Acorntree Group.

Yes. I want to understand, after this 50-megawatt solar power projects, whether our company is eligible for the green steel for the export purpose?

No. Basically, we will reduce our carbon footprints, for sure, but green steel is a different subject altogether. There are a lot of components to green steel. So I would not say that it will be directly called as green steel, but definitely our overall carbon footprint will be reducing. And that is -- the whole approach of ours is also going forward to reduce as much as carbon footprint as we can.

So after this one, how much carbon footprint is reduced in our case?

That we have to get it verified through the proper agencies, which we have not yet started because we've just placed the orders for the solar power. And once things get in line, we will get that also because for carbon tax, we will be requiring the carbon footprint reduction data also.

Okay. And another thing is there regarding of this SKS projects, any timeline is there from your side -- expected, not in the firm timeline, is the expected timeline?

No. So it's a court-driven process. Right now, the matter is in court. So it is difficult. I mean, we are -- while we are trying to expedite and do the best from our end and the process takes its own time. So difficult to put a number on it. We're hopeful this should happen fast.

In the next 6 months or 12 months?

Yes.

[Operator Instructions] Next question is from the line of [ Tej Patel from Niveshaay Investment Advisory ].

Sir, so I know you already talked about the ferro alloys prices in your commentary. You said that they got corrected in Q3 and now has seen a little bit of an upward tick. So would you mind putting a number to it? And how do you see these prices spanning out in, let's say, next 2, 3 quarters?

If you see the prices in the steel products and ferro alloys in the last -- compared with the previous quarter, it was down by -- in the range of INR 2,000 a tonne. If you compare year-on-year, the ferro alloys prices corrected on the much higher side maybe about INR 7,000, INR 8,000 a tonne Y-o-Y.

Okay, okay. So this is -- this was for the quarter in Q3, right?

Yes. And that is -- more details are available in our corporate presentation. You can see there.

Yes. And sir, what -- how do you see these prices panning out? Right now, already this one month we are into this quarter, and how do you see it moving, let's say, next 2 quarters?

Ferro alloy prices have already moved up as given in our opening statement. And steel prices are hovering more or less in same lines except in case of pellet where it is slightly on the higher side.

[Operator Instructions] Next question is from the line of [ Jatin Damania from Svan Investment Managers ].

Just wanted to crosscheck, you earlier indicated that we will be spending about INR 700 crores to INR 800 crores of the CapEx every year. Now this includes only for the power or probably it includes all the CapEx that we'll be doing for the expansion for the coal block as well?

No, it includes all projects, including coal, solar power projects, all other projects and increase in the mining capacity of the existing running mine, new mines opening except the SKS, this is what we have stated.

And sir, if you want to include the SKS, what could be the outer -- I mean, the additional CapEx that we will have to incur for that?

SKS is an independent transaction that will be independently financed. Giving a specific figure on that will not be right at the moment. So other than SKS, all other projects, whatever we have planned or both approved which are under installation, this is what we have given you the estimated figure of our CapEx plan.

Right. And sir, if you can help us in terms of the output that we are getting from the Kalyani Coal Mines and the Bartunga Coal Mines because last quarter, we had already entered into a revenue-sharing model with SECL. So if you can throw some light on that, what is the output that we are getting from both these mines?

Kalyani Coal Mine, it will be 6 lakhs tonnes per annum on the peak and in case of -- 1.8 lakh tonnes per annum and Bartunga will be 2.2 million tonnes per annum in the peak capacity.

And what are we doing is right now from that?

Presently, we are not -- these are the new mines which will be started.

Okay. And sir...

Capacity wise only after the mines come into operation. I'm talking about the ones we reached to the full rated capacity.

And sir, in terms of the consent to operate of the expansion that we have got in terms of wire rod and the pellets from -- wire rods from 1.8 to 2.5 and pellets from 8 to 9, when do we expect these numbers to achieve? So I just wanted to understand if you can give us the broader guidelines for FY '25 numbers with the new consent?

In the pellet, we will try -- our endeavor is to achieve the -- in the next financial year, maybe in the range of somewhere about 8.6 lakhs to 9 lakhs, depending upon the different conditions. And wire rod, what we expect it will be -- it will remain somewhere in the range of 2 lakhs to 2.25 lakhs.

Next follow-up question is from the line of Rakesh Roy from Omkara Capital.

Sir, my next question regarding your hydro projects. Currently we have nearby 142-megawatt and 25-megawatt is under progress. So sir, next 2 to 3 years, how much we are looking? Any chance we are looking to add more hydro in the near term, in the next 2 to 3 -- 3 to 4 years and how much, sir?

Maybe one more project will come up in the next 2, 3 years.

Okay. How much megawatt, sir?

25 megawatts is what we have planned of.

Okay. Okay. How much, sir? Pardon me, sir. How much?

25 megawatts.

Okay. In which state, sir?

Chhattisgarh.

Next question is from the line of [ Rajesh from Nakoda Enterprises ].

Sir, SKS Power cuts, now it is 100% sure that Sarda would be getting it?

[Foreign Language]

[Foreign Language]

[Foreign Language].

[Foreign Language] Beyond that very difficult to say anything because sub judice matter there.

LOI, we already have?

Yes.

[Foreign Language] it is basically revenue sharing or profit sharing?

Revenue sharing.

[Foreign Language] certain percentage you will have to give?

Yes, sir.

[Foreign Language] that profit has to be much, much more because revenue [Foreign Language]?

[Foreign Language]

Okay. Last time, if I remember, [Foreign Language]?

[Foreign Language]

[Foreign Language]

[Foreign Language] We have internal accruals to support projected expansions.

Okay, okay. Normally, sir, [Foreign Language] Sarda realization has been excellent as a matter of fact. But this time, the other players have had a better realization than Sarda?

[Foreign Language]

[Foreign Language] normal steel products, sir. I'm not talking about the power [Foreign Language] I would not like to name the other company. But profits have been much higher? Like for example...

Multiple factors [Foreign Language] commenting on profitability of others will be very difficult.

[Foreign Language] Sarda realization has been excellent in the market.

[Foreign Language]

[Foreign Language] solar plant, that is 50 megawatts?

[Foreign Language]

It will take about 1 year in installation?

Yes.

Rajesh, sorry to interrupt you. I request you to come back for a follow-up question. Thank you. Next question. [Operator Instructions] The next question is from the line of [ Saket Kapoor from Kapoor and Company ].

Sir, firstly, if you could provide me with the mix -- sales mix in proportionate to the value-added percentage, how much goes into the value-added part? And also, what percentage of our sales is towards domestic and the export percentage?

Can you repeat your question? Initially, your voice was cracking.

Yes. Firstly, the value-added [Foreign Language] total sales, value-added [Foreign Language]?

[Foreign Language] At every stage, part of the quantity sold in the market and part of the production is going in the value-added products. If you take the example of the pellet. Pellet we are producing about 8 lakh tonnes per annum. Out of that, maybe 35% -- 30%, 35% is going in the captive consumption and remaining is we are selling in the market. Similarly, sponge iron, out of 3 lakh tonne plus production, we are selling -- captively consuming about 2 lakh tonnes of the sponge iron captively and remaining is going in the market. But at every stage, there are different percentages of the production, which is getting consumed captively for downstream production and the remaining is sold in the market. Same is the case with the coal, same is the case with the billet. Billet, about 80%, 85% we are captively consuming and conversion into wire rods. So it's like that. So far as domestic and exports are concerned, ferro alloy is the only product which we are exporting. About 90% of our ferro alloys production from Visakhapatnam plant is getting sold in the export market. Remaining ferro alloys is sold in the domestic market. And all those details have been provided in our opening remarks also.

Sir, when we look at the international coal prices currently, they are on a declining trend. If -- I'm not particular with the grade, but if we look at the coal prices have declined year-on-year also and monthly also because I think of the slackening Chinese demand. So taking the current international prices on an import parity basis, how well do you think that our acquisition of SKS and going ahead the merchant mining, all are these going to be good profitable venture even post this decline, sir?

Should I take this question, or Jain, sir, you will take it.

[Foreign Language]

So basically, the question is that when you're seeing the international coal prices declining, right?

Right, sir.

And do you know the decline, what it is?

Yes, I'm just referring to the website wherein I've seen the decline of around year-on-year prices are down 50%.

Yes. So please understand that the coal prices have gone to record highs of $119-odd for South African RB1 coal. And the normal pricing of South African RB coal should be hovering from RB3 to RB1 between the ranges of $78 to $105. That's typically the range-bound pricing of South African coal. Okay. Now if you have looked at the Indian coal prices overall, historically, we have been comparatively lower because of the quality of coal that we have, we have majorly power grade coal in India. We have the resource base for that. Now the acquisition of SKS makes a very strategic sense for us because it's very close to our coal mines. So the logistics cost of transportation of coal, which is also a big factor in India. If you look at other power plants, they're buying coal from a lot of distance. So it makes perfect sense for us. And for us, when it is our own captive coal mine, we don't have to be bothered about the raw material that is required for the power plant. So I mean, in short and in a nutshell, the acquisition is very strategic. The acquisition definitely will prove very, very good for the company in terms of the numbers, in terms of the profitability. The international coal price has got directly nothing to do with the SKS acquisition. In the true sense of things that international coal pricing has gone down because it was abnormally high, which was not sustainable. Now it has come to a stage where we can say that these prices are the realistic prices of coal of RB3, RB2 and RB1.

Okay. So we are benchmarking the South African coal prices, which you are referring to, sir?

Even if you take the Indonesian coal price. Indonesian coal price is also went 4,200 that also went up to $100. But all these pricing are also dependent upon the freight. Freight plays a major and a basic component of the entire pricing structure is the freight in imported coal in India. And imported coal is good for the coastal plants which are placed around the coast of India. Only very high-grade coal like RB1 and RB2 goes into the central part of India for application usages, for blending usages, for improving the quality and the yield of the products like sponge pellet. They are not the bulk -- they are not in bulk consumption so to impact the entire overall pricing until and unless the prices of coal moves very, very drastically high, like what we saw few months back of 175 FOB basis. So what I'm trying to say is that international coal prices have got no direct connection to SKS Power acquisition. And it does not -- the pricing of international will not decide whether this will be profitable or not because we have our own captive mines, which is very, very close.

Sir, with this SKS acquisition currently, we are sitting -- we will be setting up this any pithead thermal power plant? Or how is this coal being utilized? And whether this will be for merchant sale? Or end utilization of the coal that would be -- that you will mine?

Which mine?

How is the SKS acquisition going to be aligned with our setup? Are we going to set up pithead thermal power plant near the coal mines or...

Manish, can I take this?

Yes, please. Please go ahead, Nilay.

Yes. So no -- so let me just clarify. I think there's some confusion. See SKS is a 2 x 300-megawatt operational power plant, which is being run by NTPC right now. It is around 60 kilometers from our existing operational coal mine, okay? So -- and this is -- SKS is a completely, a call on the India growth story. It has nothing to do with global coal prices, okay? SKS is our power assets. So now if you have got clarity, maybe I think you can ask your question because it has nothing to do with another pithead power plant and all of that. There is no plan of any pithead power plant.

So the powers generated from these power plants, are we looking for merchant sales? Or this will be consumed by our units itself?

Some captive maybe, but largely merchant sales.

Largely merchant sales?

[Foreign Language] PPA or whatever, that we will see. That we will decide in appropriate time. It is under -- the matter in sub judice right now. The strategy for sales, we will decide. As of now, it is partly -- they are selling partly merchant and partly under PPA. What strategy, et cetera, we take, we'll decide once the matter is resolved in the court.

Okay. And what are the current merchant rates under PPA and the market share?

So right now, giving too much -- I mean, there is limited information that can be discussed for SKS actually so.

Okay. Sir, going ahead, matter is -- sir, going ahead, how does that -- yes, you were telling something?

One thing I want to clarify on the coal pricing, you're talking about the imported coal with our coal mines. Whatever premium or revenue share we are giving, that is also linked with the market rate. So if prices are falling, our cost will also go down.

Right. Sir, post this aligning of our SKS in our portfolio, how will the revenue mix look like in terms of the different verticals we have, ferro alloys, steel and then power? What would be the revenue mix?

I think definitely power revenue will go from here. Presently, power revenue is much lesser because we are selling only hydropower thermal is captive consumption. So with the incoming of the merchant power of 600 megawatts of SKS Power, the share of our power sale will be substantially higher in the overall revenue mix.

Okay. Any ballpark number you can give depending upon the current prevailing rates? What should be the likelihood and at full capacity utilization?

I think it will be too early to consider the number of SKS in our revenue because by the time, there will be multiple other revenue streams, maybe from the coal and all those things, other expansion projects, hydropower projects will also come up.

[Operator Instructions] As there are no further questions, I would now like to hand the conference to Mr. Manish Sarda for closing comments.

We thank all the participants. The company continues to diversify its revenue. Revenue from power and mining will increase over a period decoupling it from cyclability of metal industry. Journey from here is exciting. We are adding solar power for captive consumption. It will help in reducing carbon footprint in our manufacturing facility. Approval for resolution plan for SKS Power will be a major milestone in our growth journey. Increase in the coal mining capacity of existing coal mine from 1.44 million tonnes to 5.2 million metric tonnes, and opening up of 3 more mines at Shahpur, Kalyani and Bartunga will also help in accelerated growth. Please feel free to reach out to us or our IR team if you have any further questions. We look forward to connect again in the next con call. Thank you.

Thank you very much. On behalf of Sarda Energy & Minerals Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.