Q1 21/22

Jul 23, 2021

Ladies and gentlemen, good day and welcome to the Q1 FY 2022 JSW Steel Earnings Call hosted by Centrum Broking Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Ahish Kejriwal from Centrum Blocking Limited. Thank you, and over to you, sir. Thank you, Mallika. Good evening, everyone. On behalf of Centrum Broking, we welcome you all to our JSW Steel Q1 FY 2022 conference call. We are delighted to host the senior management of Adria. Now I'd hand over the conference to Mr. Ashwin Bajaj, Head investor Abhishek will take it forward. Over to you, Ashwin. Thanks, Ashwin, and thank you very much for hosting the call today. Good evening, ladies and gentlemen. This is Ashwin Bajaj, and it's my pleasure to welcome you to JSW Steel's earnings call for Q1 FY 2022. We have with us today the management team represented by Mr. Seshagiri Rao, Joint MD and Group CFO Doctor. Vinod Noelle, Deputy Managing Director Mr. Jayant Acharya, Director, Commercial and Marketing and Mr. Rajeev Pai, CFO. We will start with opening remarks by Mr. Rao and then open the floor to Q and A. So with that, over to you, Mr. Rao. Good evening to everybody. The Q1 of this financial year Very challenging. The second COVID wave started in the latter part of March 2021. It spread across India. It affected the medium to Defected health and consumer sentiment, which led to localized lockdowns in several places in India. So that had a similar impact on the overall economic activity. Responding to that JSW Steel, even at the cost of Sacrificing part of the production in this quarter, the last quarter, we have supplied over 65,000 tonnes Of liquid medical oxygen to hospitals is almost 1200 tonnes a day we have picked during that period. Whatever we could do during that time, either in terms of supporting the patients Our oxygenated beds which we have created over 1500 and supplying concentrators, supplying masks, sanitizers, Grocery kits, there are series of things which we could do as a part of our These are activities. Over and above that some of the employees were severely impacted. So we have announced a scheme to help the families of employees who lost their lives That an employee who died due to COVID, either in the first or second waves, The families will get 100% of the last drawn basic salary until their notional retirement. When that scheme was introduced by us to help the families of employees because of this unfortunate demise of some of the employees. Even in the month of July, we are still supplying Some oxygen, which is around 2 78 to 300 tonnes a day, even during July, the supplies are happening. On the ESG front, we have taken lot of steps in the company, which we have listed out in our presentation. The major area is plastic waste management, where we are injecting Plastic, which will replace the cork over time that will reduce the carbon emission. Similarly, gas cleaning Plant which we have set up in Dolby, it will reduce the dust emissions. There is a series of steps we have taken As per the plan, we have announced the company's target to achieve in 2030. Now this 2nd COVID wave the economic activity impact, The RBI has estimated recently it could be to the extent of around 2 lakh crores of loss in output in this Current fiscal year. This time the wave is more in the rural areas. Well, the first wave was more of urban and the manufacturing, but this time it is more in the rural and agri area. So that we hope to see how the recovery will happen this time, even though we all hope and wish That the recovery post first COVID wave, the V shaped recovery, we will see again this time. As far as the overall steel demand globally, as you must have observed, There is a huge amount of supply of steel in the 1st 6 months as per WSA release of the production numbers, 1,000,000,000 tons of steel was produced, which was 126,000,000 tonne more than the 6 months of the last year. What is also interesting is that out of 126,000,000 tonne, 67,000,000 tonne from the rest of the world, excluding China. That means the supplies have picked up in line with the surge in demand for steel, mainly caused by Infrastructure spend are energy transition related to CapEx that led to the steel demand. But in spite of such a huge supply of steel by the higher production, Not only from China, even from rest of the world, the steel prices in the USA in the first half year went up by 73% And the Europe, it went up by 72%. Even in China, it went up by 31%. Even quarter on quarter, we were seeing the increase from point to point, the price increases. So that clearly establishes that globally, notwithstanding increase in supply, notwithstanding the Russia Putting 15% tax on exports and China withdrawing 13% VAT incentive on exports and the European Union Extending this TQR, our TRQ, tariff rate quota for another 3 years from 1st July 2021. In spite of all these measures, which have been taken by various countries, increase in production, we are seeing very strong demand that is absorbing The incremental supply in the market that is quite positive for the steel industry outlook. If you look at as far as India is concerned, We have seen a drop in the steel demand by almost 15.7% in the quarter just ended. In these circumstances, if we see as far as JSW Steel is concerned, We have produced 4,100,000 tonnes of steel. So the year on year Has no meaning because the base was so low. All the numbers look very, very good. But I will try to explain quarter on quarter. So the minus 2% lower production in this quarter due to lack of oxygen, So this oxygen we supplied for LMO purposes. So it's a production that suffered. The capacity utilization was 91% in the last quarter as increased 93% in the Q4 of last year. The consolidated sales were 3,475,000,000 tonnes, which is lower by 14%, When Indian steel demand went down by 15.7%, our steel volumes have fallen by 14%. The inventories were at 10.59 lakh tonnes. There was an increase of 4,000,000 28,000 tonne inventory because many of the companies, not only from steel sector, even others have attempted To increase the exports from India, considering a very good demand overseas, the domestic demand bit sluggish in the last quarter, That's where almost all the ports were completely congested. So almost 1 lakh 20,000 tonnes of stocks, which were ready for shipment That the ports could not be done in the last quarter. Otherwise, they're almost sold stocks. If that 1,000,000 20,000 tonne is added, Our sales could have been higher in the last quarter. The exports were 1,200,000 tonnes on a consolidated basis, which is basis, which is 35% of the total sales, there is a growth of 16% quarter on quarter. The way the realizations have moved, The sales realizations on a blended basis have gone up by 19%. As I give the numbers quarter on quarter in U. S. A, it went up by 30%, in the Europe, it went up by 40%, whereas in India, it went up only by 19%. So steel, the domestic prices are at a discount either compared to the international prices or compared to the landed cost of imports. The cost of production in last quarter went up by 10%. These are all the percentages I'm giving quarter on quarter. The 10% increase in the cost of production is majorly on account of iron ore and coking coal. So iron ore prices in India, as you know, 52% has been increased by NMDC from 1st April to 30th June. Similarly, ferroalloys, the power cost, refractories, all these costs had a pressure on the overall cost of production. It went up by 10%. EBITDA for the stand alone basis is INR 26,274 per tonne. Quarter on quarter, there is an improvement of INR 6,500 with a 36.6 percent margin percentage. So standalone turnover went up by 6%. The EBITDA was INR 9,491 crores in absolute number, which is a growth of 18%. The net profit was INR 5,258 crores, a growth of 31%. So the major highlights in this quarter is the turnaround in the overseas operation. The U. S. Plate mill and Ohio together contributed $44,000,000 of EBITDA Last quarter, as against $31,000,000 negative loss in the Q4 of last year, Italy remained in the negative It was €4,800,000 because we were expecting the big order for our rail mill, it got delayed. That's why we could not operate the Rheinmel fully. The EBITDA operating operations side, there was a negative EBITDA of €4,800,000 from Italian operations. So from overseas, what is encouraging is INR 2.82 crores in rupee terms is a positive EBITDA contribution from overseas operations It is INR322 crores of loss in the previous quarter. Previous quarter, I mean, is Flu421. Similarly, Indian subsidiaries have done extremely well. They contributed the overall INR 11.45 crores. Either we look at coated, DIRCL, ACCIL You have done extremely well in the last quarter. After adjusting consolidation adjustments, The subsidiaries both overseas and India together, there is INR 782 crores. Incrementally, they contributed to the EBITDA. Over and above the Indian subsidiaries, the joint ventures and the joint control, they have also done well. Bhushan Power and Steel have produced 6,090,000 tons Production poured like 80,000 tonnes of sales. They reported a profit of INR 745 crores. The JSW Spark Specialty Steel Products, They also did well. They made a positive EBITDA of over INR 170 crores and a net profit of INR 63.32 crores. So these 2 joint ventures, the proportionate profit to the shareholding held by JSW Steel, INR 323 crores has been contributed by the joint ventures. All this translated in the overall Consolidated EBITDA of INR 10,274 crores, which is 35.55%. It is a growth of 22% sequentially. The EBITDA per tonne on a consolidated basis is INR 28 INR 1,706 per ton. The profit after tax is INR 5,900. Debt has marginally gone up in the last quarter. It is INR54,989 crores. There is INR 2374 crores increase in the debt compared to 31st March 2021. In the last quarter, majorly, we have invested in the working capital side. Inventories, as I mentioned to you, finished goods inventories have gone up by 4,000,000 28,000 tonnes. Over and above, we also started stocking of iron ore and the coking coal for our Dolby operations. We also invested in inventories of raw materials. Total together, we have invested in the last quarter INR 6,200 incrementally in the working capital. We have spent CapEx of INR 2,688 So due to this large amount of investment in the working capital, there was a marginal increase in the debt in the last quarter, but overall ratios are quite healthy, debt equity 1.04, debt to EBITDA 1.89. If I look at the overall performance, including The Ohio crude steel production and also the Bushen Power and Steel and JSW Spark Steel Products, We have a total production of 5,070,000 tons and the total sales of 4,330,000 tons. Two more things which I would like to share with you is the investments we are planning to make To get the captive renewable power in the STV, special purpose vehicle being set up by JSW Energy For 9.58 total megawatts of power, this will help the company in 2 ways. 1 is Our strategy of reducing our dependency on the fossil fuel based power, Replacing with the Renewable Power that would help in that direction. Cost of power, Renewable Power cost relative to what we are spending today is lower. The third is any fossil fuel we consume will have an obligation, RPO obligation, renewable purchase obligation of 21% in the state of Karnataka and also in Salem, whereas in the case of Maharashtra, it is around 10.6%. So there is a few obligations here. If we are not able to procure renewable power directly, then we have to buy the certificates in the market. So there is an additional cost involved over and above the cost of power. So by investing in this year to year energy SPVs to procure this power in a long term basis, This is helping the company to procure power at a cheaper rate and also meet RPO obligations. So we'll be investing totally INR 445 crores. These plants will get commissioned in the next 18 months' time. The second investment that has been approved is In JW Paints Limited, generally, it is unrelated business that is how the perception is, It is very, very strategic for JSW Steel. When we had our customer meet a few years back, at that time, one customer has asked us The steel, painted coated steel which we supply, can we give warranty for more than 10 years? Then we were not able to give at that time because the back to back we were not getting the type of warranties from our paint suppliers. But after Started getting paint from JW Paints. Not only we improved the quality of the steel, which we supply after painting, Because we have 1600 shades because we need different types of grades of steel. They set up an R and D center in Vasant, JW Paints. They are working along with our teams to develop new grades and innovative products and also they are giving warranties to enable us to give similar warranties to our customers. The second area where we are seeing it will benefit the JSW Steel strategically is that as you know 2 years back Our coated capacity was 700,000 tonnes. Whereas if I look at today, if we commission all the plants of prepainted at all locations. This capacity will go up to 2.5. If we add Bushen Power and Steel, it will go up further. So there is almost 4 times increase in the overall Overall coated capacity. So if we have to secure our paints today, many of the paint companies in India, They are not expanding their capacity in the industrial paint segment. They are doing more in the decorative paints. So if somebody has to set up the facilities for us To meet our requirements, it is very much essential that we develop that source, thereby reliability of the supply of paints, whatever we need not only to meet this Additional requirement, in case we want to expand, there should be a commitment that they will be able to expand capacities in the industrial Paint Space. Concerning these two factors, availability of paints on a consistent basis, good quality, Developing new products adjacent to us and working along with our teams. Considering these benefits, we felt it is strategically important for us. That's why we committed This INR 750 crores investment over a period of time, the first investment of INR 300 crores will happen in this quarter. This has been valuation methodology that is prevalent in the industry that has been followed by one of the big accounting firms whom we appointed. They arrived at the valuation. Based on that valuation, this investment is happening. It will be 6.88 percent, The first tranche which we are investing of the capital of JSW Paints that we would get out of this Alcor investment. These are the 2 investments coming back to the projects. They're on track. We've already commissioned the CDQ unit at Dhulbi. They are in advanced stage. The workers have come back to the sites. The work is going on in full swing. So we will be able to commission the Dolevy expansion in this quarter. With this, I'll stop here. And if any queries are there, we are here to answer. Thank you. Thank you very much. We will now begin the question and answer Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Vinit Malu from Birlasan Life. Please go ahead. Yes. Thank you for the opportunity. So I just wanted to understand the raw material side. You mentioned there's A bit of a cost increase there because of cooking coal and iron ore. So just wanted to know what would be our iron ore cost In Q1 on average and what would it have been in Q4 the previous quarter? As far as coking coal is concerned, last quarter, the C and F Cost of coking coal, which has gone into production, was around $128 We expect that would go up Over $30,000,000 $35 in this quarter, that is what we anticipate. That also will not fully reflect The current increase over $200 so that will come in the following quarter. As regards to iron ore, We have secured 42% of the total consumption in the last quarter from our captive sources of iron ore. The iron ore prices in India have gone up by 52%, as I mentioned to you, and there is a small correction which was done in the month of July. Now more supplies are coming into the market in Marissa. So we expect the iron ore prices in India may not go up. So the higher cost of iron ore which was there in the last quarter that get fully reflected in this quarter, Further increases we are not anticipating in India, but coking coal as I mentioned to you, this cost pressure will be there. Okay. So sir, what was the increase, let's say, for the iron ore for you, let's say, in Q1 over Q4? Can you share that? The overall blended cost, I'm not asking for Captive or 3rd party, is this a blended cost why I know? Can't do the exact number, but generally, it is in the range of per tonne, INR 5,000 to INR 6,000 per tonne. That is for the iron ore that was increased. That is a weighted average cost for the entire iron ore because it is costly for Holi. It is slightly lower in the year. Okay, understood. And you're saying that this the highest cost has been factored in. There will be no further impact based on at least the prevailing prices on iron ore side. Iron ore side, the higher iron ore cost maybe partially will come in this quarter Because inventories which we have used in the last quarter are low cost inventories. Now the entire high cost will get fully reflected in this quarter. No further increases, I'm saying, Over and above what year. Okay. Beyond Q2, you don't expect anything. Understood. Yes. Thank you very much. I have no further questions. Thank you. Ladies and gentlemen, please limit your questions to 2 per participant. Should you have a follow-up question, would request you to rejoin the queue. The next question is from the line of Pinakin from JPMorgan. Please go ahead. Thank you very much. So can you give us a sense of the steel prices in the market at this point of time? What we had heard was There was a small domestic price correction, but so far, we have not heard of big price correction when Chinese steel prices have started going up. So do you think there is an appetite or the market can absorb price hikes in August or September? Or will prices remain muted because exports Yes. So prices in India is reflective of the weak demand in the quarter 1 Because of accumulation of inventory where the shops were shut, our manufacturing activities came to a standstill. There are there is an inventory buildup in the system. So I think because of that sentimentally, the prices in the Indian market have corrected, both for flats and longs. We are seeing that the situation will stabilize probably post July, where the inventories will come down Substantially, since the export from the major ISPs continue to remains stably upwards. So therefore, we expect that the inventories will stabilize. Having said that, yes, the international prices in China The futures have been going up over the last 1 or 2 weeks, which is positive. Imports versus India, I think we are at a discount level anywhere between 15% to 20%, depending on which country it comes from. So we'll watch the market and see the affordability and then take a decision. Understood. Thank you very much. So my second We further scaled up over the next 2 to 3 years if the requirements for the company go higher or these investments at As far as JW Energy Renewable Sourcing of power is concerned, our intention is to replace the fossil fuel power gradually over a period of time. So those investments will continue to be there in future. But it gives a huge amount of advantage, which I just mentioned to you. If we don't qualify as a captive unit by investing this 26% in the SPV, which is setting up the renewable power, There is a cross subsidy applicable. Cross subsidy varies from state to state. It is some states even as high as INR 1.30 per se to INR 1.50 per se. So in order to avoid that this investment is essential to avoid that cross subsidy, Over and above that, the cost of procuring renewable power is lower. So these are the benefits and meet our view obligation. So these investments will continue to happen in future based on how it progresses as regards to setting up this renewable plants. As for JW Paints is concerned, this is a maximum what we have committed. There is no further investments in JW Paints. Your question is answered. Just to clarify one question on further on the Renewables. What percentage of Current power consumption will be met by this initial renewable investment, sir? So it is approximately 300 megawatts, so we take 2% capacity utilization in these units, which is generally there In the case of either solar or wind power, so if we take it total At 18,000,000 tonne stage, so we need close to 1800 megawatts total requirements. So that way we are meeting maybe 15% to 20% of our requirement. Understood. Thank you very much, sir. Thank The next question is from the line of Amit Dixit from EDWISE. Please go ahead. Yes. Thanks for the opportunity, sir. I have a couple of questions. The first one is on your guidance that you gave for sales volume and production at the beginning of the year. Post Q1 results and post same volume taking a hit due to COVID related disruption, Would you like to change this guidance? No, we are not changing the guidance because There is an incremental volumes that would come in from our expansion project in Dzolpi. So that would be fully available in the second half, Even assuming some shortfall because of the oxygen supply in the quarter 1, we are confident that we'll be able to make it up in the second half. Okay. And the second question is, is it possible to let us know the iron ore external sales volume and revenue? One more thing I wanted to add on the inventory side. The inventory also in addition to the inventory, which Mr. Rao pointed out, has got built up at the port 120,000 odd tons, which could not be Because of congestions and vessel delays, we have consciously built up inventory in the pipeline because of A very low level of inventory as on 1st April to enable better servicing as the demand again picks up Because as usual in the end of March, we bring the inventories down. So some part of that inventory buildup is conscious in nature and some part which is basically limited to the port which would go. The other thing is that new lines have started And some of that would require raw material feed to be kept with the lines. So therefore, some inventory buildups have taken place consciously on that side. But having said that, I think during the course of the year, we expect this inventory to moderate to The levels and therefore the guidance doesn't change. Yes. There was a second question on this, I don't know the external sales volume and revenue. Mr. Dixit sir, I would request you to rejoin the queue for follow-up questions, sir. No, no, that was the second question. That's what I'm saying. Before the second question, all you need is more than guidance. Your question is answered, Mr. Dixit. Yes. You can move on, please. Okay. Thank you. The next question is from the line of Somil Mehta from BNP Paribas. Please go ahead. Yes. Thanks. First, in terms of the export market, what we hear is Most of the Indian players are close to exhausting their limits for the export market in the European region, which typically will shift us back to a traditional market, right, Maybe Southeast Asia or Middle East, where I think Chinese competition is going to be a lot more clear. So a view on the export market for the balance Part of the year, will be shut down on our export quota for the year? And is actually, do you get Basically, the net profitability in those markets a bit deeper than Europe. That's my first question. And second is on basically So, iron ore, what has been the experience of mining of our captive iron ore in terms of the logistics Challenges or any mining challenges because there have been press reports about being planning to surrender a few of our mines. I'm sure there is no But how I've seen the overall iron ore mining experience for us? Those are my 2 Thank you. On the first question of quotas, which you mentioned, I think you may be referring to Europe. European quotas for some of the products have got exhausted, but for certain other products, They are still available. We will be accordingly calibrating our exports to that market. We are developing Alternate markets in around the European regions other than EU in particular, Some of them, we were already present, where we are increasing our supplies. We are increasing our supplies into Latin America, Mexico, apart from the Middle East and Asia, which you mentioned. So one is the development of markets, continue exercise, and I think we will do that. The other shift, I think, which is structural in nature, which you have to keep in mind, Is that our hot rolled more and more of it is getting consumed into our downstream operations. And downstream operations quoted Even in this time's export, our value added component was 61%, even in export, it was 59%. So those go out in smalls and containers across the world, and we touch almost 100 countries around the world. As we increase our value added exports, our reach for those countries, the base is already there. We will be able to increase some more volumes in those countries as well. So the diversification of markets is what we are already on. Sure. In regards to capital iron ore issues which you pointed out, last time also we shared with you Majorly, the quality. Quality, we have to improve to enable our Steel plants more efficient and less fuel consumption. That is why we committed investments in the beneficiation plants near the mines. The second is problems which are there in regard to compliances and also safety and security. We wanted to digitize the entire operation, thereby this compliance will be digitally done. There won't be any problem. This is the second area. The 3rd area is logistics related either at the ports or not regulated rigs not being available Our complete roads are congested. These are the problems with regard to evacuation of iron ore produced at the mines. So to address this long term, we have to set up a slurry pipeline. So pending that, we have to eliminate it. I think certain steps are taken With regard to other two problems, as per logistics are concerned, working continuously in this how to improve, how we are working on the captive iron ore side. Sure. Alfa, any comments on some of the news reports about we planning to surrender 2 of our mines Maybe because of cost issues or in terms of economic sense, right? These are all speculations because as we Mentioned earlier, we survived in the entire year last year, because we have these mines. If these mines are not there, then there was no supply of iron ore No availability. Therefore, having a reliable supply of iron ore is essential to feed our plants consistently. So these are all speculations that we are surrounding the mines. In fact, there are 10 more mines, which are announced for auction in the state of Odisha. So we are participating even in those mines. Okay, thank you so much and all the best of future calls. Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead. Thanks for the opportunity. So two questions. First for Acharya, sir. Sir, what are the lead times in U. S. And Europe? That's one. Also the earlier comment, you indicated that coated or downstream is a major chunk of exports, and you also said that it goes in containers. Now the concern over here is, is container issuers a problem for us, which can actually hinder the way in which we would want our export trends to move going forward? And lastly, do we have visibility on export booking into next calendar year or October to December this year? So your first question was the view on U. S. And European prices, is it? Lead times. Okay. So the lead times in both these markets actually have increased. And if you look at the supplies also in the United States, while they have sequentially improved, The lead time still continues to be reasonably high. Similar is the case in Europe. The demand has picked up better. While the supplies have improved, the demand continues to overtake the supply side. So Therefore, the lead times are still high. Most of the mills are all booked out till October, and some of them for the contractuals even up to October, December quarter. So having said that, your second question was with respect containers and the export reach. So downstream products, which constitute area of products, One is cold rolled, hot rolled pickled and oil, galvanized, color coated, galvalume, etcetera. The smaller countries, we reach out by containers by virtue of the fact that it is smaller quantities. And while there have been congestion in the container market, we expect that to ease As the supply side of the on the shipping side is improving, we have also shifted some of our volumes where we are able to combine ports to break bulk and from there supply onwards to the smaller market. That with that combination, I think we are able to reach the markets in downstream, and that's why you'll see a 59% component In exports, our overall is 61%, 62% is in the domestic, value added as a percentage of the total and 59% is exports. So we should be able to manage this. No doubt the rates have gone high that I think everybody is aware. But that's something which we will have to play out and wait for the supply side to stabilize and the price pressures to ease on the Great. And so the third thing, basically export booking visibility for October to December. The reason I'm asking is we have cost inflation And the Indian exports have been at lower pricing as compared to other regions. Given the cost inflation that we have, are we confident that we could probably increase the prices and cover up for Cost inflation and the Fed's stable to better spreads going forward. So basically, I'd like to comment on pricing and spread would be very useful. So the on the order side, I think what we need to keep in mind now Is that post COVID? The government's infrastructure initiatives, which had been announced in the budget are, I think, coming to play. Highways, National Highways has been some a project which has been continuing across and is doing very well. In addition to that, we are seeing the oil and gas and water pipeline projects across various states coming up with Sizable volume of tenders. In we are seeing some export opportunities for Larger volumes of, let's say, slurry pipelines, which are being now taken up in countries where iron ore movement is there. So People are becoming much more environmentally conscious as we discussed earlier also the carbon footprint everybody wants to reduce. So the slurry pipeline concept is increasing, And we see opportunities to export both plates, coils and products to those kind of initiatives. So these are longer lead time orders, which we are in the process of booking. We are also booking longer lead time orders in wind and solar, which is again a part of the renewable mission. We see that Preeti, so yes, there is some visibility of orders on the longer side. The other contractual orders, which will be automotive and the Quarterly contracts will continue in its normal course. We see the pre engineered building segment doing quite well, Data centers, warehousing doing quite well. So these areas again are quarterly bound contracts, so quarterly volume Indications are available. Sure. That's helpful. Can I take my second question, if I may? Yes. Yes. This question is for Mr. Rao. Sir, I just wanted to understand, you did indicate the coated Steel capacity has increased nearly 34 fold. Just wanted to understand how much is the Total requirement for industrial paints, putting in context the total CapEx plans what JSW Paint had highlighted, if I remember it right, it was around INR 600 crores. So just trying to understand from a mass balance perspective, how much is it that JSW Steel will require for capital consumption versus the total capacity decorative plus industrial paints for JSW Paints has? Yes. Decorative, we are not presenting. We don't need decorative paints. We need only industrial paints. Industrial Paints are concerned. If you see the total consumption of industrial paints in India, the share of JSW is sizable considering the Increase in the overall capacity, the exact amount of requirement as a percentage of the total Industrial paints that are consumed in India, we will come back to you on that. Sure, sir. Thank you so much. I'll handle it. Thank you. Thank you. The next question is from the line of Sumangal Nematia from Kotak Securities. Please go ahead. Yes, good evening. First question is with respect to our International Businesses, which has soon a very remarkable turnaround. So just want to understand a little bit better, is the U. S. Turnaround Most sustainable in terms of how we have visibility over the coming quarters. And then with respect to IK business, Do we expect breakeven in the coming quarter? The opening remarks you shared that because of the delay in the rail mill, The turnaround was a bit delayed. So can we expect to pre Q1 and then profitable quarters coming ahead? So the Italian side, as you're aware, we have 3 product lines there. The main Stay is the rail mill, which basically supplies rail to the national railway network in Italy and surrounding countries. Italy recently issued a tender and in which we have won certain volumes. The contract issuance, the awarding of that has been a little delayed. So that should be coming in the 1st contract part should be coming in to us in this quarter. And therefore, that would be that would make the rail mill run at a much better capacity. The other thing which the Italian Rail is doing is that they are now in the process of tendering or in the process of coming out with contracts for Rail requirement over the next 5 years because they are overhauling the entire railway system and Changing maybe certain sections of the rail, which are older already. So that is also expected soon. Once the railway contracts are finalized by the Italian rail, we expect that the Italian operations will automatically start doing much better. We are also seeing we have lined up the supply of semis from Various sources, including India, to our wire rod operations. And we have started building on the wire rod mill customers, and we are seeing good traction on that. So on the wire rod So on the wire rod mill side, we are seeing the order position improving. So that also will help us to basically add to the EBITDA as we go forward. So yes, I think July, September is a seasonally Weak quarter at times in the West, especially Europe because of holiday. So we'll See certainly an improvement in the quarter July, September. And going forward in H2, I think we are looking for a breakeven and beyond. As far as U. S. Is concerned, the capacity utilization was low in the quarter 1. It is ramping up. Therefore, things should look better going forward. The local demand was okay and the prices are quite good in the U. S. So with that, we find there will be Improvement from here on in the quarter 1. Understood. So my second question is, We would like your thoughts on the inorganic opportunities. There are a couple of things talked about NINL, RINL, NMDC. Just want to know your thoughts, which are the probable assets to get divested and how does these fit our portfolio strategically? Yes. On date, if we look at the government actions, Two plants are ready for auction. 1 is NINL, second is Nagamalar plant of NMDC. Whereas RINL, we have not seen any roadshows or any progress from the government. If you look at these 2, both are sizable. Sizable in the sense NIML has iron ore mine. The Nagarndar plant is 3,000,000 tonne plant. We expect it to be commissioned by end of this calendar year or early Next year. So considering that both are interesting, therefore, we are evaluating both the options. So we will take a call once the data room full data is available, then we will take a call. Understood. Thanks and all the Thank you. The next question is from the line of Inderjit from CLSA. Please go ahead. Hi, congratulations on good set of numbers. Thank you for the opportunity. I have two questions. First, in this What were how much have auto realizations increased on a quarter over quarter basis when the revisions are happening in a month basis? And my second question is for Mr. Acharya. Ex of China, globally, where are we seeing some of the capacity So on the first question on the automotive contracts, for the April June quarter, we have We've been able to get the increase for hot rolled products, long products and cold rolled and galvanized products. The ranges, it ranges between for flat products between INR 7,500 to about INR 9,500 Per tonne. In Long Products, it is in the range of about INR 6,000 per tonne. That is for the quarter gone by April, June. As you know, automotive operates with a lag. So whatever increases have happened during April, June would become due basically from July to September. So therefore, that discussion with the automotive Companies are in the process. As far as capacities are concerned, I think I would say different regions will probably behave differently. Some of the older capacities which have been mothballed now are being looked at with the lens of What is required to achieve environmental compliance? And with that level of compliance requirements and investments, some of the capacities May not like to come back because the cost of compliance and the cost of operation becomes high. With the current level of coking coal and the current level of iron ore, I think in many areas, it is not making sense, especially outside U. S. And Europe to restart some of the mothball capacities. But in Europe and U. S, I think some of the Capacities may restart and some have just started. So but while The capacities have come up. They are still behind from a supply perspective as that is what their earlier rates were. So we expect that to catch up probably by the end of this year, and they would stabilize to a level of where they were earlier With respect to the volumes, I don't see that going up too much because some of the capacities Would also go for some shutdowns because of certain compliance requirement to be met. Thanks a lot. I'm done with my question. Operator, we can take the next question please. Hello? Sir, as you wait, if I can ask one more question. On the power asset, the energy asset, have we done some kind of IRR calculation in terms of what kind of IRR you may generate through the course of Yes, yes, that has been done. It is above our threshold as regards to the investment in the renewable power. 1 is return. 2nd is the entire world is moving towards decarbonization. So it is one of the essential elements that we should do this. That is why we are moving towards going for renewables, but it is above our threshold. Okay. Thank you so much. Thanks. Thank you. Ladies and gentlemen, please hold on. We are Just checking. The person you are speaking with has put your call on hold. Please stay on the line. Okay. Sorry about that, ladies and gentlemen. There seems to be some I have got a question by messaging. We can't unmute your lines, but I have a question by message from Abhijej The question is, last year's HRC sales were 9,000,000 tonnes. How much was export? And after Dolby ramps up, how much HRC sales are we looking at? So as far as hot rolled coil sales are concerned, Our current supplies of hot rolled have been diverted to the downstream. We were expecting the Dolby operations to start a little earlier. You are aware The COVID impact has taken the project out into July, September quarter, so it should start soon. Post Dolby startup, actually our sales have currently to for the hot rolled coils have gone down into the market because of lesser availability. Post Dolby startup, it should gradually stabilize to normal levels and improve thereafter during the course of the year. I will not be able to give you an exact number as to how much of the hot rolled coil sales exactly will come about. That we can share, Vishesh or Ashwin can share that later. Thanks. The next question is from Ashish Kejriwal of Centrum. He's asking about this issue of iron ore and duplication of royalty. Is there any resolution around that? Royalty and royalty is an issue which is being agitated by the industry, both Mining and also Steel Industry. What we understood is that government has appointed a committee to Examine this point and make the recommendations to take a call. So the committee has been constantly in touch with the industry and they are taking presentations from the industry. So we are in that process. Hopefully, in the next few months, They will take a view on this and then government will take a call. Thank you. Then we have a question Asking on capital acceptances and revenue acceptances from Shorin Shah. Raw material acceptances were $955,000,000 as on 30th June 2021. The capital acceptances were 565,000,000. Thank you. Then the next question is from Bhavan Shehda. INO Mining premium and royalties are paid on the IBM index. So what is the lag effect here, please? Generally, it is 2 months, that is what we have been seeing. But it gets adjusted whatever premiums we are paying, if it is extra, that will get adjusted. If it is a shortfall, we have to make the payment Alan, when announcement is done. Right. And the next question from him is mining run rate at Odisha and Karnataka is higher, but This usage was only 42%, which means merchant sales of iron ore was much higher in Q1. So any color around that, please? These mines are also supplying to Bhushan Power and Steel and Monetas Path. They won't qualify as the captive. So that's why overall, the matter we are supplying other than companies under joint management, Giant Control and also Captive, if we exclude that what is sold in the market is not very high quantity. Thank you. The next question is from Sumangal of Kotak. PLI's The PLI scheme, which has just been announced Yesterday is very welcome. I think it is going to encourage investment in India, will create Opportunities for expansion and self reliance within India as envisioned by Prime Minister under the Atmanirpal Bharat scheme. It is also a very good step to substitute imports, produce these specialty steel within the country and Leverage our base for exports of specialty products from India. As far as JSW is concerned we have already initiated certain measures to look at some investments in some of the specialty products, Which is in the process, and I think we'll be able to give you more color as we go along. Just to add what Jain has mentioned, they said 25,000,000 tonne is the incremental capacity that is expected as an outcome from the Payline scheme involving INR 40,000 crore investment. But what is very, very encouraging is It is melted and poured is the requirement for this 25,000,000 tonne incremental capacity. So PLS Key will enable more investments in the downstream. That will create demand for upstream to the extent of 25,000,000 Because of this one condition of measured and poured, so that is very encouraging Thank you. And we'll take the last question from Pallav Agarwal of Antique. Any guidance on net debt And whether working capital levels have stabilized or will increase further from here? Working capital more we are not looking we are not envisaging further investment in the working capital. As regards to net debt, we can only talk about the overall ratio of 2.35 is to 1. We have enough headroom from The current level which is there today. So we will be managing our entire growth plans within this ratio of 2.75. Thank you, sir. Any closing remarks from you? We have commissioned, as I mentioned to you, the pellet plant at Vijayanagar, the CRM plant at Vijayanagar, Cocon plant at Dolby and PP power the pellet plant at Dolby, the CDQ plant at Dolby, I'm very happy to say that they're all stabilized. The workers came back to Dolby and the hot strip mill is almost ready now. So we are also planning to send some slabs from Vijayanagar to Doolgii and roll those slabs into coils. Over and above that, only unit is Meltshoppe, their work is in full swing. It will be it will get completed before end of this quarter. So we are very confident that we will be able to commission this 5,000,000 tonnes. So the trigger here for JSW is the volume growth that would come in from Dolby expansion. Over and above that, the downstream capacities more or less got commissioned, accepting the CRCA 0.5000000 tonne And the TIM II, more or less balanced all completed. So downstream is a good contributor for value addition and increasing our value added product So proportion in the overall product mix plus the backward integration through iron ore mines. I think these are the 3 very important things That would contribute in future the performance of JSW. Over and above that, we have given the guidance about ESG. What is the target for the year 2013? So we have been very actively evaluating to raise The sustainability linked bond, based on these commitments which we have to achieve by 2030 by 2030, This is one thing which we are evaluating to fund our capital expenditure program for increasing by another 5,000,000 tonnes at Vijayanagar, plus other requirements of the company. So with that, we expect The demand scenario in India is concerned, we are seeing good demand from solar appliances And also the packaging industry plus signs of revival in the auto sector And also residential construction site, we are seeing some uptick. So we are optimistic that the demand will pick up In the months to come, if not in this quarter because of the general subdued demand to the seasonal factors, So the demand will pick up. Why we are very confident is that even after the second wave impact where economic activity came down. The total steel consumption in the last quarter was 24,700,000 tonnes As in this 12,000,000 tonne in the quarter 1 of last year. So the impact was moderate compared to last year. Similarly, the way it picked up in the last financial year, the Q2 it was around 24,000,000 tonne last year. It went up as high as 30,000,000 tonne. So even assuming that the same amount of demand will come back into India, we will be close to 110,000,000 tonne total Demand for the year, total consumption for the year in this financial year, so we are quite optimistic as regards revival in steel demand in the Indian markets. Thank you. Thanks, Mr. Rao, and thanks, everyone, for joining us And bearing with the technical glitch, have a great evening and a good weekend. Thank you. Bye.