Sir, my second question pertains to our cost savings exercises, like slurry pipeline, coal mines coming, versus the product wise deterioration. Would those cost savings, as per your internal estimates are good enough to cover for the product-mix deterioration, or would we see for the next one and a half year, our overall product mix would continue to deteriorate from current point of view?
See, I think using the word deterioration would not be correct over here. That is a strong word. You understand Quarter 3 was a tough quarter for the entire industry. And if you look at the overall realization, HRC was the most affected out of all the products. So, overall, as we move up and realizations have also started increasing, NSRs have also increased. So, there is no deterioration in the product mix. Rather, our portfolio, as we have maintained over a period of time, is getting more balanced towards 50% flats and 50% longs. I think that is a great diversification and provides a lot of strength to the Company in times to go forward.
On debt level - your debts in Q3 are at multi-year high, even higher than FY22 levels. Leverage is at 1.72x with newer capacity coming up in Q4 with startup costs. What is your exit run rate of leverage or net debt expected in current FY?
So, I think, firstly, we should appreciate this is a very good leverage level overall. Even looking at the industry, it is a very healthy leverage level. If you look at our debt-to-equity ratios also, they also remain very healthy. Yes, we are at a point where we are coming out of a very tough market cycle, which is for the industry. And at the same time, we actually are at the culmination of our project phase in these two quarters, Quarter 3 and Quarter 4. Now, these factors combined have pushed it up to 1.72x net debt to EBITDA, which you are looking at. But overall, as I said, as we stabilize, ramp up over the next 2-3 quarters, you will see it coming back in line to what we have always guided, 1.5x times through the cycle. And we remain committed to that.
On your mix - by when do you think, in terms of quarters or year, you will be able to get into a more value-added mix portfolio on the expanded capacity? When can you get the Rs. 1,000 back in that sense?
See, I want to actually come away from these words of deterioration and weak, when I do say that we shifted a higher productivity order book, our value-added profile still remains at 66% and that is very high. What we are comparing that to is 71% in Q2. So, that is where we are coming from. That is a very high value-added percentage in our product portfolio. So, as we speak, the markets have already rebounded and I did mention, I think in the opening statement itself that today we are working at about Rs. 3,000-Rs. 3,500 higher than where we were towards the end of the last quarter. As we move ahead, you will see our value-added profile start inching back towards 70%.
On the expansion plans - our next BOF is on track for fourth quarter. When is the associated metallic capacity coming and what is the plan to use this BOF in FY27, given the lack of metallics?
So, we are talking about the current capex cycle. You are right. BOF will be commissioned in this quarter. Anything going forward, we will be guiding in the next quarter on how we are panning out on that. At the moment, we are very focused on commissioning all the current projects and realizing revenue, EBITDA and cash flow from this. We will be able to use about 60%-66% of this capacity in FY27 as well. I think we have spoken in one of the earlier calls that we are targeting FY27 end for that and we are sticking to that.
On margins - 3 quarters of deterioration of almost 16,000 to 7,000. Has this ramp up and startup cost been going as per plan? Was Rs. 350 crores of startup cost anticipated?
So, there are two things. I don't like going on what peers are doing. Everybody is good in their area. But there are two points over here. We have been fairly open and transparent about how we are going about our business. And we have maintained that over a period of time and we intend to continue doing that. Coming to the second part of your question. Yes, a large part of it when you are ramping up a facility, especially a blast furnace, it is not immediate that you get down to your capacity utilization numbers or your coke rate. It takes a little bit of time. And that was anticipated. Nevertheless, I don't think we are in a position to say that we didn't receive any surprises. Yes, there were surprises along the way. But I think I must say kudos to our team, which has been able to counter those surprises and ensure that as we sit today, we are at a very high capacity utilization number with industry standard coke rate and operational parameters.
Largely from FY27 - how do you see FY27 panning out in terms of production and volume?
I think, I will pick on one thing you said at the beginning of your question. We are at an inflection point. Yes, I did say that. And please understand we are maintaining a guideline, a guidance given in a year where we are commissioning capacities, ramping them up and sustaining our guidance. So, I think I must, even on this platform, congratulate our team for being able to do that, at least be on track for that towards the end of the year. In terms of FY27, I think we will be coming out very soon. We are in the process of finalizing our business plans for the year. And as soon as we do that, I think at the end of the next quarter, we will be coming back to you and giving you guidance for that.
Compared to when you initially announced this first phase of expansion - how much has the CAPEX cost increased because of various surprises and challenges?
I think there have been no material project cost overruns. I think over the years, there have been a lot of projects that have been added into the scope rather than any major cost overruns. I think if you go back in time, 2-3 quarters back, we did talk a lot about it and I think it should be available. Otherwise, you can connect offline with Vishal if you need further help.
By next quarter we will be finishing BOF3 also. When will we be in a position to announce next phase of CAPEX? Our long-term plan is to take Angul towards 25 million tonnes.
So, we are very focused on increasing our utilization on these assets, increasing our EBITDA margins and increasing our cash flow, reducing our debt to our previous guidances given for the cycle. And at the moment, that is our focus. And we remain committed to that. As and when we make any expansion plans in times to come, we will definitely make sure that we keep you updated.
On coking coal prices - spot prices going up to $250 levels. Do you think it is more of a seasonal uptake? If they sustain, it would push up cost in Q1 FY27 and offset most of the increase in steel prices.
See, these are transient in nature and seasonal impacts that you see here and there, not any mid-term or long-term impacts that you are talking about, those one-off sharp corrections or uptakes. Apart from that, I think on a lot of things, we also have a long-term arrangement as well and we benefit from those as well.
So Q3 EBITDA was Rs. 7,000 per ton, but we can begin with Rs. 8,500 per ton EBITDA because this is largely over. Is that assumption right?
So, Ashish, Vishal here. We actually refrain from giving guidances on EBITDA on a sequential basis. But I understand where you are coming from. If you look at, as sir mentioned, about Rs. 350 crores is the one-off, which will obviously not recur. And steel prices have moved up and so has also the cost. By and large, our understanding is that Q4 should be a much stronger quarter both in terms of volumes as well as in terms of profitability.
Going forward, our earning would grow primarily because of volumes and with lower margins. Many flat capacities are coming up - Tata Steel, AMNS. Do you think going forward the play would be on higher absolute EBITDA rather than much richer margins compared to historical levels?
First part of your question, we actually don't move away from a rail or MLSM or structure capability. So, it is not that we have gone away from those. They remain the core part of our portfolio. And as we speak, we actually keep working on ways to increase those facilities output as well. Apart from that, the second part of your question is, yes, will these other products increase in our portfolio and our product mix? Yes, they will. But along with that, I think Vishal did mention that we have also added heat treatment furnaces. So, those will add capability to our flat portfolio for higher realizations, higher value add. So, I don't see anything in the mid to long term future that is of any concern at the moment.
Maruti listed increase in steel prices - chance of a rollback. Do you think auto HRC prices will come off a little bit from the negotiated levels?
No, I won't be able to comment on that.
Sir, my first question is towards the realization impact, which you are talking about only Rs. 3,000. But if we just calculate on the average side, the drop is much higher, almost Rs. 5,500-Rs. 6,000. So, how much is because of the product deterioration and what else we are missing in here?
So, as I mentioned in my opening statement, we did ramp up our capacities with low margin products, and it was mainly skewed towards HRC. And as we are actually ramping up, when we were on a lower output on a hot strip mill, we were actually producing low productivity, thinner grades, and with very high value add, and the margins were higher at that time. As we are ramping up, actually, thickness levels are increasing, our productivity is increasing. So, the realization per ton over there is lower, although we are producing much more. Also, roughly about Rs. 3,000 is on account of NSR. The by-product sales were lower. We have actually increased the captive consumption of most of our by-products as our steel production is increasing, and the balance is coming from that. As our capacities ramp up, we do expect that all our by-products will be consumed completely internally.
So, effectively, on an average, our blended realization would increase lower than what the market is because of the byproduct credit would not be available. Is that assumption correct?
Yes, but our cost will also come down. And overall, if you see, as our capacities ramp up, our EBITDA is actually accretive in that nature. We will actually keep on adding to EBITDA.
So, just to answer my question, would that the cost savings be able to cover for this change in product mix? Also peer groups with higher weightage on flats had less decline in realizations - we are unsure about how our product mix has changed.
Yes, definitely. You will see that in the time to come as our results come out. I will explain to you again, two things. Our portfolio has a larger portion of longs, especially TMT, and that was actually hit more in terms of the realization drop from the previous quarters. Secondly, as I explained, when we were on a lower production on our HRC, we were actually making more value-add products because we had limited steel. Now, as we are moving towards higher output on HRC, we are actually producing lesser of those grades. We are actually producing more of the thicker sections to get the higher productivity and thereby more EBITDA. So, that is why you see the difference between our peers and us, if that explains it.
One of your peers' share of exports has actually increased given front-loading to geographies with CBAM restrictions. However, your share of exports has gone down to 6%. Also, if you are making thicker HRC and lower value-added product, wouldn't it make more sense to shift back towards higher value-added product?
So, I will answer the first part of the question. You mentioned about exports. As you look at the markets in the last quarter, the exports realization were actually lower than the domestic market, even further down. And we actually managed to penetrate the Indian market with our expanded production and make space for ourselves in a market which was not expanding itself. That actually shows great strength in the Jindal Steel brand and our capability to penetrate these markets in tough times as well. What I was talking about was the ramp-up phase. I do agree with you. And your point is a very valid one. As we ramp up towards full capacities, first target will be capacity utilization. And once we reach very high numbers of utilization is when we start screwing the portfolio back again towards value-added profiles more and more.
Was capturing higher domestic market share at the cost of compromise in your margin? Purely on the domestic front, HRC was down about Rs. 2,500-2,800, your longs were down about Rs. 700-800.
No, actually, compared to exports, our margins in domestic were higher. We select competitive prices in the market. We didn't take any large discounting to get into the market, to get market share if that is your question.
Your flat to long is right now 50-50. Whereas it was supposed to be flats much better off at 60%-65% going forward. Is that timeline still intact?
Yes. So, good afternoon. I am Sushil Pradhan. I am Head of Flat Products in Jindal Steel. See, in Q3, our flat to long ratio was almost equal, 50-50. And that is because we saw a major decline in flat product rather than long product. So, we maintained our product ratio, shifted more towards long in the quarter. But going forward, we expect a gradual shift towards flat and as demand from flat product and prices for flat product is rising and demand from automotive appliances and all these segments is gradually moving up. So, accordingly, this mix is expected to go up in flat. I think in Q4, we see a shift towards 55-45, more towards flat, flat 55%, long 45%.
On the power capacity expansion - now that you will be excess in power capacity, would you be looking to ramp up those capacities and sell more merchant power or it will be purely used for steel operations?
At the moment, as I mentioned, our first unit is under stabilization and the second unit has just been commissioned and we are going to be stabilizing it over the next 2-3 months. Whilst that happens, our capacities will continue to ramp up. We have another 3 million tons coming up and associated downstream coming up. So, in the near-term future, we will be actually, as we ramp up all sides of the capacity and the whole facility, we will be consuming a large portion of it internally at the moment.
You said that this quarter you consumed your by-products internally, which was an additional hit to realization - what were those by-products? Is it pellets?
You have got it. It is pretty much that. But please also understand that you are seeing at the ASP level the hit, but at EBITDA level the hits are not anything material or not significant.
With respect to slurry pipeline, what are the reasons for the delay? We still see only 94% complete. And what sort of contribution will this have in FY27 in terms of actual slurry transfer and cost saving?
So, see, one thing we have to understand, slurry pipeline is never an easy project and it has a lot of regulatory and other hurdles that you have to go over and basically ground level hurdles as well. We have maintained the guidance for the end of this financial year for the slurry pipeline and we are on track for that. As far as the savings, etc., I think we are very fairly comfortable to say that we will be able to go towards Rs. 750-Rs. 850 a ton on that.
On sales volume guidance - we just 2 months left for the year. Where are we with respect to our 8.5-9 million tons guidance for sales volume this year?
We are actually on track to get the guidance that we have already given you.
I just wanted to understand the input cost escalation that we might see in fourth quarter for Jindal Steel?
I don't think we are expecting any input cost escalation in the fourth quarter. There is only one thing which I think I have given in the opening statement is on the coking coal prices. But if you see the market has more than commensurate increase, so I think there is no material input cost escalation that we are going to see apart from that.
Steel prices are up by Rs. 3,000-Rs. 3,500 versus quarter end. Given trajectory for realization has been worse than how steel prices fared in Q3, is it fair to say if steel prices remain where they are, you would see a much better trend in realization versus this Rs. 3,000-Rs. 3,500?
Yes, you are right. And they will be in line with the industry. And I think if you are referring to that incremental thing, which you have been referring to, that won't be there. We have realized more than that and will be in line with industry trends as we move forward.
Now that you are ramping up flat capacity, and EU prices supposed to move up on back of CBAM, is it fair to say you would be actively looking at the European market over next 2-3 years?
As you have seen in the past, we are predominantly producing material for the domestic industry with a very strategic focus in the external market. And you are right, our major market has been European market for plates. Now with HSM coming in, also the prime focus will be on European market, but that will be around 5%-10% range only.
I have missed a few numbers from your initial opening remarks. Rs. 350 crores you said for one-time blast furnace startup cost. And there was Rs. 189 crores, that was regarding?
PAT is Rs. 189 crores for the quarter.
For the flat products now we have all the new setup, do we have approvals from OEMs like autos and consumer durables for next few years, will we start improving our product mix?
Yes. We already commenced supplies to auto and engineering industry and we have necessary approval from this industry. But then since our flat product capacity is more plates and HR, so it will be more into commercial vehicle segment, earth moving segment and yellow good segment, more of it will go into that. And we have all the necessary approvals from all these segments. And we already started supplying to the segments.
How much would part of our coking coal be coming from Mozambique and South Africa mines? Also any benefits from captive power or Utkal mine opening up in Q4?
About 15%-20%. See, the mines have just been opened up and we are already coming to the near, middle of the quarter. To realize any meaningful gains in this quarter, I would refrain from. But yes, in time to come, we will definitely see benefits.
Many congratulations for ramping up faster than expected. On Rs. 350 crores of startup cost - what could be that, whether higher coke consumption as well as the coke ratio? Will this number be there in Q4 or have we stabilized by December?
The largest portion of that number is on account of coke, because it is bought out coke at a higher cost. It is a little bit inferior quality to what we produce in-house. And obviously, when you start a furnace, it is too much technical detail and you can, I think, connect offline with Vishal. But it is a standard process of starting up a furnace and stabilizing it. I do acknowledge your remark for commending our team for the faster ramp up than expected. Yes, I do acknowledge that. Thank you for commending the team. And to answer the last part of the question, yes, we have stabilized and we are at normal industry standard productivity, KPIs and especially profit.
On realization improvement Rs. 3,000-Rs. 3,500 higher - are we taking into consideration improved product mix? Q3 was much lower than industry standard - Q4 should be higher than industry?
The numbers that I mentioned for the increased realization are as a scenario right now. I think we are only at the beginning of the quarter. I did mention in one of my earlier answers that you will see us at industry levels in this quarter. And as we keep ramping up and improving our capabilities, we will see us beating those numbers again as in the past.
First again on the one-off cost - suggestion when we give adjusted EBITDA in presentation, can we include the numbers? Secondly, in terms of our downstream, what all capacities are left to commission over the next 2 years?
Siddharth, this is Vishal here. Coming to the second question, over the next 2 years, the downstream capacities are largely commissioned except for CCL2 and CGL2. Thereafter, we have pellet plant 2 and DRI2 as the key capacities. If there are any more lines that we plan, we will come back to you. Out of the two Q&T furnaces, we have already commissioned one of them.
On cost - you indicated startup cost and coking coal costs were higher. Going forward, we basically expect a reversal of the startup cost. And then we expect higher coking coal prices simplistically?
Yes. But please also understand that our coke output is increasing because we have commissioned the batteries. And as I did mention that our coke is better quality than what we end up buying from the market. So, we get some offset gains from that side. And obviously, high utilizations will also give us some gains in our cost portfolio. So, those gains will also be there.
When you indicated spot realizations are about Rs. 3,000-Rs. 3,500 higher than the December quarter - you are talking about what you are billing at this point in time on a blended basis?
Yes. This is the difference in the realization between where the last part of Q3 was and where we are today.
For the full year, the CAPEX you had given - you are still holding on to that? No change in CAPEX targets for 2026, 2027, 2028? And how did the inventory move sequentially?
No, nothing. No change. Marginally increased during the quarter. But as we speak, it has been unbound as well. There is nothing material in there.
When we give guidance of sales volumes, should we presume it is excluding any metallics purchase, be it for this fiscal or next fiscal? Also, would it be possible to provide a timeline for the next SMS? Can you indicate coking coal on a consumption cost basis - increase from Q3 to Q4?
Yes, there is no metallics purchase. We have given a guidance already that it is one of the best quarters and we are well on track for that. About $18-$20 per ton.
How do we plan on the evacuation specifically, given Angul in east? Also how critical is the Paradip port? Given the scope of our capacity is very large, how do we plan to sell and evacuate?
I think whatever we are producing, we have been able to evacuate. We have the infrastructure and the capability for that. No problem. See, I think if you are coming from this expansion phase that we are talking about, and you were talking about Angul, Paradip port does not impact anything for Angul capacity expansion, ramp-up, etc. Paradip port is a very strategic thing and it is a longer term play. And it is a benefit that we will be able to derive for our import and export in times to come. But if you are coming back to the specific Angul ramp-up, there is no effect of Paradip and nor did we envisage anything like that.
How should we look at Jindal Panther expansion? Is it linked with the listed Jindal Steel entity? And on slag transfer from listed entity to that entity - color on transfer pricing? Also Thyssen bid with Jindal International - listed entity is completely ring-fenced?
So, this is Sunil Agrawal from Jindal Steel. So, basically, Jindal Panther has nothing linked with the Jindal Steel. It is a separate company, and we are independent of Jindal Panther. Slag, we will be giving at the transfer pricing as per the standard norms, if we supply to them on long term basis. Yes, you are right.
Out of our total capacity of 15 million tons, what is the proportion that will go to the auto industry?
It will be around 3%. Yes, because we are literally flat hot rolled. So, we don't have CRCA or related products which mostly go into auto. So, it will be somewhere around 3%.