Steel Authority of India Limited (SAIL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '27 Earnings Conference Call of Steel Authority of India hosted by Nuvama Wealth Management. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashish Kejriwal from Nuvama Wealth Management. Thank you, and over to you, sir.

Thank you, [ Eric. ] Good morning, everyone. Sorry for the delay to start the conference call. But at the outset, we -- on behalf of Nuvama Institutional Equities, we welcome Dr. Ashok Panda, Chairman and Managing Director, along with additional Director of Finance charge of Steel Authority of India. I would request Dr. Ashok Panda to give his opening remarks, and then we can open the floor for Q&A. Over to you, sir.

Thank you very much, Mr. Ashish Kejriwal. Good morning, everyone. I welcome all our investors and analysts who are joining this results con call for the financial year of SAIL for the period quarter 1 '26-'27. Though I'm sure most of you might have already seen the results on the website of the company and through stock exchanges, I would briefly run through the same for the benefit of the house. When we look at the economic scenario globally, the period was impacted adversely by the geopolitical situation in the Middle East. Not only did it impact the supplies of fuel across the globe, it also affected the supply chain for inputs like limestone, et cetera. And even it also affected to some extent, like the gas supplies, propane, et cetera, for the steel industry. On the other hand, the rising fuel cost led to inflationary pressures against raising the various expenditure heads. However, notwithstanding the projections for India also remain range bound between 6.4% to 7.2% by various agencies over the next 2 years. So far as Indian steel scenario is concerned, the landscape for the steel industry is highly influenced by economic trades, trade policies and technological advancements. Indian steel industry, however, continues to enjoy robust demand for steel with consumption during quarter 1 '26-'27, which has grown by more than 8% over CPLY. The production, however, showed a muted slightly lower growth of around 3% during this year -- during this quarter '26-'27. Due to higher growth in imports as compared to exports, there was increase in imports as well as increase in exports and the net import for quarter 1 '26-'27 was to the tune of around 0.4 million to 0.5 million tonnes as against maybe 0.3 million tonnes last year quarter 1. Now let us have a look at -- briefly look at the company performance for quarter 1, '26-'27 performance of Steel Authority India Limited. Before highlighting the performance of the company during quarter 1 '26-'27, I would like to inform the house that owing to the circumstances that prevailed and the threat that loomed at large, SAIL decided actually to advance some of its major capital repairs during quarter 1, so that it will be free after that and will start producing better in the next quarters. Mostly, we had major capital repairs in IISCO Steel plant, Durgapur Steel plant and also [indiscernible] Bokaro Steel plant, which were done in quarter 1 by design. So that is the story about this quarter 1 compared to last quarter 1. While this impacted the production volumes as per design, but then ultimately, it helped us in some of the things and which led to a good profitability going forward. Coming to the performance of the company during quarter 1, '26-'27, the highlights are as follows. Crude steel production stood at 4.8 million tonnes in quarter 1 '26-'27 as against 4.9 million tonnes CPLY. This reduction is because of the capital repairs which have been advanced in this quarter 1 by design. Sales volume was 4.2 million tonnes, which fell by around 7% to 8% as compared to the previous year. And there was increase in inventory by around 0.2 million tonnes in the finished goods. The company, however, remains very much committed towards increasing its sales volume, including inventory liquidation in the balance period of this year as we've done last year as well and also will be -- our endeavor will be to reduce the working capital borrowings. And when we look at the borrowing position as on 30th June 2026 at the end of this quarter, we are almost at the same level as that of the beginning of this year in spite of the fact that the inventory has increased by 0.2 million tonnes. On the back of better realizations, sales turnover increased by well over 1% as compared to previous year quarter 1. Despite significant increase in prices of major inputs like coking coal and fuel, limestone, the company was able to improve its profitability through measures towards operational efficiencies, better financial management and treasury management during this period of quarter 1. EBITDA at INR 4,356 crores showed for quarter 1, '26-'27 has a growth of more than 50% as compared to CPLY figure of INR 2,925 crores. EBITDA margin at 16.7% is one of the best since '21-'22, when the steel market at that time was at its peak and coal price was at its bottom in '21-'22. EBITDA per tonne also crossed a benchmark figure of INR 10,000 per tonne and stood at INR 10,464 per tonne in quarter 1 '26-'27. While talking about PBT and PAT, PBT and PAT stood at INR 2,159 crores and INR 1,636 crores in quarter 1, respectively, as compared to INR 890 crores and INR 685 crores, respectively, for CPLY period with a growth of around 150%. As mentioned earlier, the cash outflows were managed smartly through better treasury management efforts. which helped to keep the borrowings under check. And this is -- this stood at INR 21,729 crores as on 30th June, which is almost at the same level of the level of -- as on 1st March 2026 was INR 21,663 crores. The debt equity ratio was further reduced to 0.36 on actual basis at the end of quarter 1, '26-'27. Going forward, while Q2 has traditionally been a toughest quarter for the steel industry because of the rain, incidence of rain, et cetera. And -- but efforts are being made not to increase our inventory during quarter 2. And after that, our efforts will be to reduce inventory in quarter 3 and quarter 4 so that on a yearly basis, there will be inventory reduction. We will continuously strive for increasing our efficiency levels and cost reduction efforts. One another good thing which has happened during this quarter, '26-'27 is that our focus on mines has been foremost. Now we are trying to increase production for our captive mines and as well as consume and the rest quantity to sell in the market wherever it is possible. And during this quarter 1, we could have sales of around INR 400 crores more as compared to last year quarter 1 and which has resulted in a profit of around INR 150 crores as compared to last year quarter 1. So these are the highlights. With these words, I hand it back to Mr. Ashish for opening the Q&A session.

[Operator Instructions] The first question comes from the line of Alok Deora with Motilal Oswal Financial Services.

Sir, just had a couple of questions. First is, if you could indicate what was the NSR in 1Q as against 4Q? And based on the July and how the prices are moving, what do you expect for the second quarter?

Yes. Quarter 1 average NSR was INR 57,100 as compared to quarter 4 of INR 52,000 that means an increase of around INR 5,000 per tonne between these 2. So far as Q2 is concerned, as I already told, because there is monsoon season right now. So -- but traditionally, there is always a reduction in the NSR. So far as Q2 expectation is concerned or maybe when you talk about July, so the prices of the flat products, there is not much of a reduction in that. But there are fluctuations in the long product prices. There were reductions. But recently, there is a positive momentum, which is visible because of which there is a possibility of increase in long products price. So as we can see, you can say that between June and July, in the long product price, if there was a reduction of around INR 3,000, around INR 3,000 per tonne. So maybe it will improve by INR 500 to INR 1,000 right now in the long products. In the flat products between June and July, there could be a reduction of around INR 1,000 per tonne, something like that.

Got it. And how about the coal cost, sir? What was the coal cost on a consumption basis in 1Q? And what's the guidance for the second quarter?

The imported coal price in quarter 1, '26-'27 was on a higher side, INR 21,300 as compared to INR 18,100 in quarter 4, means around INR 3,100 increase. The index of imported coal, which was at a peak of around 235 a couple of days before, now it has come down to a level of 220 today. So that is -- that means there is some softening effect in the coal index -- imported coal index, others and flat and others index. We hope that because in the rainy season, there are monsoon situation, et cetera, demand may come down. And because of that, maybe the prices will soften in quarter 2.

Okay. So any guidance on coal cost you can provide on -- yes?

We are expecting that in Q2 going forward, maybe from August onwards, there could be a reduction of around INR 1,000 to INR 2,000 progressively in the coal cost -- in the imported coal cost on [indiscernible].

Got it. Just last question, sir. So based on the performance, are we maintaining the full year volume guidance?

Yes, we are maintaining the full year volume, and we'll be having a growth over last year by the year-end.

The next question comes from the line of Amit Murarka with Axis Capital.

So just first question would be on cost inflation in West Asia, if you could spell out the amount.

Your voice is breaking.

Amit, you're not clearly audible. I would request you to use your phone in handset mode in case if it's not on the handset mode. We'll move to the next participant that is Ritesh Shah with Investec India.

Sir, first, just a clarification in the prior answer, you indicated we expect coking coal prices to go down by INR 1,000, INR 2,000 into Q2?

I mean on a monthly basis, actually, I'm not talking about the average. But when we look at month of August, maybe there will be reduction of around INR 1,000, maybe in September for the INR 1,000. This is my expectation.

Okay. That helps. Sir, second is, can you indicate the volumes, excluding RINL or any other sales that we have done for, say, NMDC Steel for the quarter?

So when you look about that particular figure, so NMDC, still, as you know, actually, we are not doing the marketing this year. So it is still almost kind of nil NSL. But whereas CPLY quarter 1 had 3.73 lakhs of sales. This time, it is 0. In RINL, we sold around 93,000 tonnes, which was not there last year in quarter 1. So on the whole, if you combine NSL and RINL, then last year's CPLY, CPLY means last year quarter 1 had a quantity of around 2.76 lakhs tonnes in that as compared to this year.

Perfect. Sir, just 2 quick questions. Sir, how do you see the pricing gap between primary and secondary longs? You did indicate that we are hopeful for long product prices increasing by INR 500,000. Sir, how should we look at the divergence between primary and secondary? That's one. And sir, second question is, how are we reading into the antidumping duty investigation, which has just got initiated? And is there any probability of safeguards basically to be reinstated again?

Yes. Let me answer one by one, actually. First question is about the gap between primary and secondary in the TMT, in the long products. So now the gap has narrowed down. The gap is around INR 5,000 right now, which is a healthy gap. So that's the reason why probably there is an uptick in the NSR in the prices of the primary TMT products. This is my guesswork. And number two, you asked about safeguard duty and antidumping duty. In safeguard front, actually, yes, there is a step. safeguard is still in place, which is 11.5% as of now because it was there for 3 years, and now we are in the second year right now. So that still continued. It is giving a relief to the -- much needed relief to the steel domestic market. So far as antidumping thing is concerned, that is going on. And based on the investigation, maybe some measures will come as a relief to the domestic steel sector.

The next question comes from the line of Parthiv with Anand Rathi Group.

Sir, my first question is pertaining to the subgrade ore fines. I believe you said that in the first quarter, you did some extra INR 400 crores from sale of ore. So the question is actually divided in 2 parts. Number one is on the subgrade ore of iron ore, what you have, the inventory. The second is, if you see the recent auction data of Steel Authority, the volume has actually been going down, especially in the June month from a couple of mines. So do you expect this third-party sales of ore to continue? Just wanted to get your thought process on that.

Let me try to answer one by one. The last question, I didn't get it. But the first question and second question, let me take. The first question is about SGF, sub-grade fines. We are having a volume of around 32 million tonnes inventory in the balance sheet. And we have put up in the auction around 3 million tonnes. The rates are yet to come, and we are hopeful that this time, we'll be able to click that particular thing. So that will become a beginning of selling -- of our efforts towards selling 32 million tonnes going forward. Number two, about sales from the mines. The sales from the mines is primarily from the Orissa group of mines from where we've been selling iron ore fines, fresh iron ore fines, tailings from there. So the quantities have become more than twice as compared to last year. That's the reason why turnover from there has increased by around INR 400 crores and profit from there has increased by INR 150 crores. Our efforts are to increase our production further and sell more and more in the market. We are also planning to sell from Chhattisgarh Group of mines. 2 auctions have fructified recently just a few days back, which is in quarter 2. And that will testify our possibility of increasing further sales from Chhattisgarh mines. And we're also trying to sell from Jharkhand mines, efforts are on in that.

Okay. Okay, sir. Sir, just one quick clarification. The 3 million tonne is the '27 target, right?

Pardon.

For the subgrade. The subgrade over 3 million tonne auction target is for the entire year of '27 or it's for '28?

No, this is the first case actually, once it happens and starts moving, then we'll also see. That is the target for '26-'27.

Okay. Okay. And sir, I believe just wanted to quickly get your understanding on the railway price revision, whatever you can share, what is your expectation? How are we supposed to see that going forward for the current year?

Yes. All that I can say, as you know, that it is based on the provisional prices, rail price. You're talking about rail price, isn't it?

Yes, sir.

So for the year '26-'27 because the imported coal prices are on the higher side and our provisional price is pretty low at INR 74,000. So we are expecting a better price compared to that. And so that is going to improve our profitability whenever it is declared.

So are you expecting anytime soon?

For '26-'27, it will come in '27-'28 and '25-'26 prices come in '26-'27. So we will see how it comes out at that point.

But do you have any preliminary understanding for last year's pricing, sir?

I mean '25-'26 prices will be more than that of '24-'25 prices. It all depends how it gets. And this may get...

If I may just quickly squeeze in the last question from my side. I think recently, Government of India imposed a definitive ADD on met coke for, I think, about 5 years. Would it be impacting you in any sense? Because I think...

It is not going to impact still because we have our own capacity, which is equivalent to our recharge or maybe...

The next question comes from the line of Pinakin Parekh with HSBC Bank.

Yes, 3 quick questions. Firstly, can you give us your updated CapEx guidance for this year and the next couple of years given whatever the plans are?

Yes. So far as CapEx is concerned, this year, we're planning a target of INR 15,000 crores, and this is going to increase in the next 2, 3 years because our expanses are on. That means next year, it could be in excess of INR 20,000 crores. And after that maybe INR 25,000 crores, INR 26,000 crores like that. So it will go on increasing for the next 4, 5 years. This year, it is INR 15,000 crores, and we are likely to complete that.

Got it, sir. My second question is, sir, you said that NSRs are -- basically July was better than June. But if I take the average NSR for the June quarter, the first quarter versus what has happened in long product prices, 2Q NSR should be broadly be down by INR 2,000 to INR 3,000 a tonne or flat? Or how should we look at it?

When I -- when we talk about the NSR actually, I said that quarter 1 of this year, NSR is higher than quarter 4 but in quarter 2, that is starting in July, the NSR will be less than that of quarter 1, primarily because of the monsoon and demand and all that. That means in -- what I said is that in July, August and September, so reduction in flat prices may not be that much, but reduction in TMT means LP long products will be more actually. So in June and July, while there was a reduction of around INR 2,000 in NSR of long products, recently, there is an upward momentum for the long products NSR. It might further increase by INR 1,000. So kind of -- if you talk about quarter 2, quarter 2 NSR as compared to quarter 1 could be down by around INR 1,000 to INR 2,000, maybe. This is just a guesswork.

Got it, sir. And sir, my last question is, can you give us an updated guidance for your employee cost for this year and whether you will start providing for the wage provision in the January, March 2027 quarter?

Salary basis this year in quarter 1 is INR 2,937 crores as compared to last year's figure of INR 2,944 crores, almost at the same level. While in this quarter 1, it includes the VR -- differential VR amount, VRS Voluntary Retirement because our VRS scheme is on. So many people have taken VRS. That factor is also there in the employee remuneration. The number of employees are coming down and VRS is on. So we're expecting that the employee cost should come down, number one. Coming to your point of wage revision possibility, so they are in quarter 4, we'll look at the probability and possibility of making some provision towards wage revision. Those aspects we will evaluate and examine in quarter 4 because that time, it will be due. So -- but your group will look into that.

The next question comes from the line of Pallav Agarwal with Antique Stockbroking.

Just a couple of questions. First one, can you just update us on what is the current product mix breakup between flats, longs and semis?

Yes. Just 1 second. It's almost kind of 50%-50%. And one thing is that the semis have come down. The semis have come down from, say, 14% last quarter 1 to 11% this quarter 1 and between long and flat, the long is -- flat is 52.7%, long is 34.8% and semis are at 12.5% in quarter 1.

Sure, sir. Because in the slide, in your sales performance slide, the proportion of semis is showing as 6%. So are we getting some semis converted outside and then into finished products?

Yes, of course. Semis are getting converted to finished goods. That's the reason why I told you that the finished steel has gone up from 86% to 89% this year. So we are trying to convert most of the semis into finished and pushing that in the market.

Okay, sir. So I think the slide mentioned 6%. So maybe that's after conversion, the final sales is about 6%.

Correct. You're right.

Okay. Sir, also in terms of the coking coal, what is the breakup? I mean most of it is imported, but how much are we getting -- are we getting anything from our captive mines? And what is the proportion from coal India?

Yes, captive mines actually is from Sitanalla and Tasra. So that is a part of the indigenous coal that is not part of the imported coal. So imported coal are at around 85%, indigenous coal is 15%. So out of that 15%, we get somewhere around 5% from our own mines and which is likely to go up from December onwards because production from Tasra mines, which is under development right now is going to take place in the month of -- expectedly in the month of December. So fourth quarter will be a better quarter expectedly for us in which we'll be getting more indigenous coal from our captive mines. And this will also give an advantage in terms of pricing.

So could you just give us some idea of what is the cost benefit of indigenous versus imported coal?

See, in quarter 1, the indigenous average price is INR 13,100 as against imported price of INR 21,200. That indigenous is INR 13,100, but when we'll be getting from our own mines, it may be somewhere around INR 5,000 to INR 6,000, around INR 6,000. So that component is going to increase from December onwards.

Sure, sir. Also, sir, just lastly, if you could just give us a sense of in our coke carbons, what is the sort of blending -- you've given the PCI, the coke rate and the PCI injection. So broadly, how much of what is the proportion of pure hard coking coal that goes into our coke mix?

Just one second. The percentage of hard coking coal -- the percentage of soft coking coal is around 25% to 27%. So the rest is hard. And within that also in totality, if you look at, our imported component is around 85%, indigenous component is around 15%. That is under hold. But when we want to breakup between soft and hard, soft is around -- what percentage? 23%. 23% is soft and 61.7% is around hard coking coal. That means actually indigenous coking coal is 15%, then imported hard is 62% and imported soft is 23%. That is how it becomes 100%.

The next question comes from the line of Sumangal Nevatia with Kotak Mahindra Bank.

Sir, I just want to clarify a few things. One is the fourth quarter NSR you said is INR 57,100, right? Can you share the breakup of flat and long?

Yes. Fourth quarter is NSR is...

Sorry, 1Q -- sorry, sorry, sorry. I meant 1Q.

Yes, INR 57,100 is the average out of which almost same. Long is INR 57,100, flat is INR 57,200. So it is average INR 57,150 to be precise.

Got it. Got it. And sir, what is the July NSR for long and flat?

Yes, July NSR average is INR 55,600. The flat is INR 56,900 and long is INR 54,200.

Understood. Got it. Sir, for the captive mines, when we shared that sales was INR 400 crores, profit was INR 150 crores. Can you share what was the volume here? And for the full year, what is our expectation?

So volumes are 1.1 million tonnes. And last year, quarter 1 was 0.31 million tonnes. And when it is 1.1 million tonnes this quarter, last year, we sold around 3-odd million tonnes, although we are targeting a very high target of 8 million tonnes, let's see how far we can go.