Ladies and gentlemen, good day, and welcome t o the Q1 FY 2024 earnings conference call of Jindal SAW Limited, hosted by PhillipCapital India Private 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. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vikas Singh from PhillipCapital India Private Limited. Thank you, and over to you, Mr. Singh.
Thank you, Ushin. Good morning, everyone. A very warm welcome to Jindal SAW results con call. Today we have with us from the management side, Mr. Neeraj Kumar, Group CEO and Whole Time Director, Mr. Vinay Gupta, President and Head Treasury, Mr. Narendra Mantri, President, CFO, and Head Commercial. Without taking any time, I would hand over the dial to Mr. Neeraj Kumar for the opening remarks. Over to you, sir.
Good morning, friends. This is a Monday, bright Monday morning on the eve of Independence Day. The first, let me take this opportunity to wish all my fellow Indians, and if there are some participants from abroad, greetings for the season on the eve of our Independence Day. India is definitely making these strides in the right direction, as it appears, India would assume a space or a place of prominence in every field, which are important to the world. Likewise, we have some happy news for you from Jindal SAW as well. Finally, we are seeing the some budding, some flowering on Jindal SAW Limited.
This is the culmination of a lot of effort in the last few years, where there was a very clear strategy of working on a three-prong attack: corporate reorganization and restructuring, dealing with the legacy issues, and addressing the operational matters. On all three fronts, as we have been talking over the period, every quarter, there was a clear roadmap, and we kept on achieving milestones as we move forward. Now, we are beginning to see a result, which is a culmination of all the three, and it is also a clear indication that this is a beginning of a new phase for Jindal SAW. With these, let me very quickly run you through the quarter numbers that we have taken up in the board. The board has approved it. It has also been announced to the stock exchange.
The top line, INR 3,831 crores, as opposed to INR 4,676 crores of the trailing quarter and INR 3,019 crores of the comparable quarter last year. EBITDA, INR 615 crores , as opposed to INR 673 crores in the trailing quarter and INR 255 crores in the comparable quarter. However, let me point out to all our listeners, the INR 673 crores has a book entry, which has been explained in my last call of INR 84 crores in Q4. For the full year, about INR 197 crores, which was essentially because of the accounting treatment of the change in the terms of the RPS with JITF. If you give back impact of INR 673 crores minus INR 84 crores , you will see that it will follow through right till the PAT level.
Then there is a pattern which is emerging, that not only for the comparable quarters, Q1 last year, but, and Q1 this year, even on the trailing quarter basis, the businesses are beginning to show significant improvement. For the benefit of all the viewers and the listeners, Jindal SAW traditionally has always shown a cyclical nature, where Q1, Q2 is usually subdued, Q4 is the peak. Therefore, by the indication that we are getting in our Q1. It appears that this time also, as we did last time, Q4, we are likely to scale a new peak. That should give all of us an indication and a comfort that as an organization, we are confident that we are well poised for the next 12-18 months, and this confidence is coming from various aspects of the business.
I will get into the details as we move along. Healthy order book, good product segmentation, good value addition. Lot of things are going along, which is improving the fundamental strength of the company, and therefore, we expect that this momentum, this growth trajectory, should continue. Let me just complete the full financial highlights. Financial expenses, INR 132 crores , INR 134 crores , which is more or less exactly the same from trailing quarter. Depreciation, INR 108 crores versus INR 99 crores . This is primarily because of the Sathavahana acquisition, because now the Sathavahana assets have been added to the balance sheet, and therefore, this depreciation is largely on account of that.
As I said, if you normalize the last quarter of last year, which is FY 2023 results, then you would see that even on a trailing basis, the Q1 results are comparable or better in many fashion than the last quarter, which is usually the best quarter. Last quarter is always the best quarter for Jindal SAW. Before I move forward, let me also let our listeners, stakeholders, everybody know that in our now presentation to the board, in our annual reports and on our investment call, we are making a change. As things were progressing, we were getting a lot of feedback. Us as also, we were feeling that the investors or, or the stakeholders are finding analyzing our results a little complex.
A, the effort was to, as far as possible, simplify it for our stakeholders, investors, bank people, so that, they can have a better understanding of the results. B, align it in such a manner that the, projections again get better aligned to the market dynamics. C, we also take care of all the strategic concerns that we had for Jindal SAW, or we have been having for Jindal SAW. We have now come up with a new approach. If you all recall, we have always been saying that for Jindal SAW Limited, the USP, the strategic advantage that we have, is this is a multi-divisional organization. By design, all these products have been kept in one legal entity.
Sorry, sir, please continue.
As I was saying, by design, we have kept all these different product segments, et cetera, into one legal entity, so that we have a very robust business model. This was something that we wanted to preserve and we wanted to build on. Second, we are seeing now a very clear-cut emergence of three market segments, and all of them now are showing very clear-cut market dynamics. The third, since we are adding new products every day, but on our core competency, which is the pipe and tube segment, the product segmentation was becoming very complex because there are complementing, supplementing and overlapping products, same product being used for different segments, different products being used in the same segment. Therefore, to put all these three to rest, now we would be reporting our revenue broken up into industry segments.
We have chosen three important buckets: Water, which we believe is going to be now the driver for Jindal SAW for some time to come. Second important is oil and gas. Again, what we have seen an emerging trend, that in oil and gas, there is a very strong international element. In water segment, on the other hand, there is a strong, domestic element. Therefore, we thought it's important that we report these two segments separately, and we also report the domestic versus export mix. The third segment, which is the bucket, is for others. which includes, the power and other things. Now we would be reporting the, results or revenue broken up into others, into oil and gas, into water segment. Because these market segments are well defined and can always have a more robust outlook projection stable.
One simple question I just want to ask: Where do we will be reporting the pellets? It will be a separate line. The pipe would be these three segments, the entire pipe segment. The pellets would be a separate segment, because that by itself is a segment by itself, it's an iron, steel, immediately. Third, then there would be an other segment also, which will have power, et cetera. Pipe would be divided into three segments, pellet would be a separate segment, and the other small businesses, like other in-income, et cetera, would be a third segment. That is how now we will be reporting all our results going forward. Now keeping that in mind, let's move forward. If we see the consolidated results, I'm sure all of you are having the numbers in front.
The consolidated results, there are only two important aspect that I want to make, and then move on to more important aspects of Jindal SAW, which is, the consolidated results or the consolidated other subsidiaries, associates, are contributing to between 10% and 15%. Therefore, we don't consider that to be so significant that we discuss that in too much detail in this call, because there are very important other things about Jindal SAW that we want to talk. Because Jindal SAW per se, has become very large, so relatively the consolidated segments contribute between 10% and 15% of Jindal SAW. Second, all the segments, all the subsidiaries are positive, means they are adding to the EBITDA, they are adding to the top line. Therefore, with that, let me skip.
As I said, for both consolidated as well as the standalone, the revenues would be shown and would be split in the industry-wide segment, as we have said. As we have not been doing in the past, for strategic reasons, we will not be presenting the EBITDA figures separately, because that, as I said, is of strategic importance to us. Turning our attention to the profitability and EBITDA, if you see, it has shown a significant improvement. From a 12%-14% range, this time, first time, EBITDA percentage to sales has gone to a 16% range. For the year end, we definitely expect there is going to be an improvement, or this momentum should continue. Whether we still remain at 16% and above or a shade below, say 16%, maybe 15.8%-9%, or whatever it is.
That would depend on how the market dynamics are and how the shipments take place. This time in the order book, we also have some very large contracts, and different contracts have different profitability segments or profitability projections. Based on how many shipments we are able to capture in one quarter, and if there is any large spillover, there could be a slight fluctuation. The indication, the trend of the EBITDA staying in and around INR 16 crores shall remain. A PAT of INR 277 crores , again, we are very encouraged by the result.
Looking at now all of these three, the top line, the EBITDA, the PAT, the way things are behaving on a standalone basis, most likely for the year end, if things progress, go the way at this point of time we are able to see, we could reach significant milestones on each front, which would be unprecedented, for Jindal SAW. A top line which was never seen before, an EBITDA beyond a certain threshold which was not seen before, a PAT, maybe a significant milestone beyond a magical number which was not seen before. That's how we see our outlook for the coming year. Moving our attention to just give you some breakup sales quantity. This year, this quarter, we did INR 3.68 lakh tons of pipes as opposed to INR 12.85 lakh tons of pipe.
As we said that now It will stay in that corridor, is what we expect our order books. The composition would continue to be, water 70%-75%, oil 20%-25%, industrial sector between 5% and 10%. That's how we see our order book, that's how we see our revenue. Currently, export, because of the oil and gas emphasis and emphasis on the NEOM, which is a Saudi project, which is a major project that we have, is 35%, 65% for the entire pipe segment. We hope that the export would remain at least above 30% for the year end. That's how we see the revenue composition. I hope this new reporting, this new segmentation, would give ease, comfort to all our stakeholders. Turning our attention to the debt. Last quarter has seen a increase in the long-term debt.
This is largely on account of the Sathavahana acquisition funding debt coming on the balance sheet. Now, the long-term debt stands at close to INR 2,000 crore, INR 1,998 crore at the quarter end, to be precise. Working capital, INR 2,399 crore , as opposed to March, INR 11,362,637 crore . As opposed to INR 3,733 crore, December, INR 3,059 crore, March end. The June end number is INR 4,396 crore , which is largely because of the Sathavahana acquisition debt coming on the... What is important, the treasury team has worked hard. The repayment pressure on Jindal SAW, including subsidiaries also, this holds true, has been very well balanced and spread over.
Now, for standalone Jindal SAW, the debt repayment pressure, which puts liquidity under pressure, is not more than INR 300 crore-INR 350 crore any year. In fact, the way the standalone balance sheet stands, within the year, year and a half, except for the LIC bond that we have, which is a long-term bond, as we have spoken about, and the Sathavahana acquisition debt, there would be no other long-term debt. We will repay all of them. Every year, the repayment load will not be more than INR 300 crore-INR 350 crore. Therefore, we are very comfortably positioned as far as the liquidity of the company is concerned. CapEx continues to be within control.
We are carrying out improvements, we are carrying out capacity additions, we are carrying out modernization, but there is no major project that has been announced on the horizon. We expect the CapEx. If you see the way the cash flows, there would be a lot of free cash flows is what we are expecting to come out of the would be largely used to pay for CapEx, pay for loan, use it for shareholder distribution, and also we expect working capital reduction. In aggregate amount, because of the ramp-up of the operations, we don't expect the aggregate working capital loan to come down, but there is definitely going to be an improvement in the % of working capital loan to sales. That efficiency or that improvement, our team is working, and we expect that we will achieve that.
More or less, I think I have given you a good overview of how Jindal SAW is doing and will continue to do, forward, and how what is the outlook. We assure all of you that the management control, the visibility, the diligence that we are exercising or we have been exercising, we'll continue to do that. Let me address now a few other important aspects which are material to Jindal SAW, even if it is not directly related to the operations. The first important thing that I would like to mention is about the NTPC. Before that, okay, SIL. Sathavahana, as you know, now is operating as a division of Jindal SAW. During the first year of operation itself, we expect them to do a very good capacity utilization to a sizable tonnage.
We have the order book, and they should contribute positively to the EBITDA. Next year, we expect Sathavahana to start performing at its optimal capacity. In the first year itself, and that is again a testimony to how the whole transaction was structured, the repairs and maintenance were carried out in the intervening time. First year itself, we are achieving a significant capacity utilization, and the operations would turn EBITDA positive in the first year itself. That's one important thing that I wish to let all of you know. NTPC seems to apparently it appears to have a setback, but the answer is yes or no? Yes, because even though the judge had ruled that no more extensions would be granted, but as you know, Mr. Solicitor General is representing NTPC on this.
Therefore, he always is busy and had something to tell the court that he is busy with some constitutional bench, some important matter of Government of India in Supreme Court, and that is how he has been able to get extension so far. This time, the judge clarified that, "Give me one more date." Then Solicitor General himself was there to clarify that, "Okay, give me two days, I will finish all argument. This time I will never come for any extension. If not me..." Now, this is the first time that he said in the court that, "If not me, then somebody else will represent NTPC." That now at least gives us confidence, which is this month end, the next hearing, that the hearing should start.
He has asked for two days that he will finish all his argument. We'll have to wait. Probably, when we are having this next quarter call, there would be some announcement that I can make for all of you. This is how it has developed in the court. I thought it's important for all of us to be aware of that and be on the same page. You know, over a period of time, the significance of this whole thing has definitely come down because we have survived, we have learned how to have our finances become robust or work around it, but still, it is something that we are keeping an eye on.
The second, or the two very important aspects that I would like to point out is, now we have entered the election year, and we expect that the momentum on infrastructure spend on the water segment, on the oil and gas or domestic market to remain robust, because I'm sure, the government has a policy of using development as a major plank for their election strategy. We expect that because of the election year, the emphasis on the infrastructure spend on the projects which are nearing completion will continue, and that is good news for us, especially as we are contributing to those very infrastructures. The second very important thing that we are noting, and we are feeling happy about it, that Jindal SAW's shareholder profile is beginning to change.
It has shown some significant movement where, as we have seen that, now the share prices are reacting or the share prices are responding to the fundamental strength that the organization have built. We are seeing that there is a new class of shareholders who are entering the shareholders list. We expect that this would make our shareholders base more diversified and more robust. With all of these comments, let me end here and leave some time for questions, with wish once again for all of you for Happy Independence Day tomorrow, and a good year ahead of us as we move quarter to quarter. Thank you very much. Let me stop here now for questions.
Thank you very much, sir. We will now begin the question-and-answer session. Anyone who wishes to ask questions may please press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We will take the first question from the line of Radha from B&K Securities. Please go ahead.
Hi, sir. Good morning, many congratulations on very good result. My first question would be with regards to Sathavahana. I just wanted to understand, what is the useful life of the assets in Sathavahana?
The useful life of the assets of Sathavahana. See, Sathavahana as an organization, now it stands merged. Now, as a going concern, Sathavahana's has become a division of Jindal SAW. Then it is, as a going concern, has the same life as Jindal SAW. Now, talking about the equipments and the assets, all these equipment and assets have gone through a major overhaul before we managed to take it over and finally begin operations. This would have a normal life that a new plant and machinery would have. The way we operate, that all these major equipments, they keep on having a five-year overhaul, a few things get replaced at 10 years. It would run as normal operations of other DI facility that we have in Jindal SAW.
For the purpose of depreciation, we are following company law. For the purpose of income tax, whatever is there, provided by the thing, we are following. We don't have a differential depreciation policy for Sathavahana than what we have for, our Samaghogha DI plant. It's exactly the same.
Okay, sir. Secondly, I wanted to understand from the industry perspective, and not particularly for Jindal SAW, but if you could give insights on what would be the average EBITDA % that DI players in India and in UAE are making with the current cost structure and business scenario?
I don't think it would be appropriate for me to address, industry, kind of. Because that would be speculative, and this is being a Jindal SAW call, I would not be able to give you any guidance on the industry standard of EBITDA. I'm sure you would be able to check that with some of our other peers who are, specific to their product.
Okay, sir. Sir, lastly, could we get DI volumes for India for one year?
Madam, again, I've, I have been trying to refrain from giving the product segment. Look at the water segment. Of the 368,000 total pipes that we sold, roughly 75% have been sold in the water segment.
Okay. Okay. Okay, sir. Actually, with that part of the call-
Give you so that. Yeah, okay. Let me just give you the one example, so that you would understand why we should not get into that kind of a discussion or that kind of a problem when it comes to Jindal SAW. If you look at, in DI, we manufacture pipes from 100 mm to 1.2 m in diameter. In the spiral or the LSAW segment, we again manufacture pipes starting from, say, 16, 18 inches, which would be around 600-700, 600 mm-700 mm, and goes much higher. A good 500 mm-600 mm, there is a complete overlap between DI spiral and a large diameter pipe, and both could be used for water.
Actually, we have got this insight because some of our contracts, both domestic, internationally, we are seeing that because of the usage or because of other compulsion, customers are shifting from one product to the other, because both can transport water. Therefore, I would request you to please look at the industry segment, which you would have a lot more information in the public domain and would make your projections a lot more robust.
Okay. Actually, in between I got disconnected, so that's why I had to ask you this question again. I don't know if you have mentioned, but could you give us the oil, water, and sector breakup for the current order book?
Yes. As I said, oil and gas sector would be around 70%-75%. Sorry, would be around 20%-25%, oil and gas. Water would be around 70%-75%, and others, which includes industrial, et cetera, would be around 5%-10% in the pipe segment. The pellet would be reported separately.
Okay, sir. Thank you, and all the best.
Thank you. We'll take the next question from the line of Riya from Aequitas Investments. Please go ahead.
Hello. Thank you for giving the opportunity, and congratulations for this quarter result. My first question pertains to the gross margin, it increased significantly. What part of it will be attributable to invent?
Hello, I can't hear you. I can't hear you.
Hello.
The line dropped. I just couldn't-
Hello?
hear anything.
Ma'am, could you please repeat your question, Riya? Ms. Riya.
Sure, sure, sure. My first question is in regards to the gross margin. I just wanted to know what part of the margin is attributable to inventory gains, and what are the sustainable gross margins for us going forward?
Okay. Because-- just because of the liquidation of inventory, that's not a significant change. I have already covered in my initial remarks that the improved EBITDA margin is likely to now stay range-bound in whatever is being reported now. Now we are reporting 16%, so it would be range-bound around 16%, primarily because, A, the raw material prices have stabilized, quality prices have stabilized. We also have taken some effective steps in getting a price variation clause in the top line, so that there is some hedging and adjustment available. See, B, we have also moved up the value chain, so that we have now products which are more value-added, typically having a higher margin.
We expect our EBITDA margin to stay range-bound around 16%, a little above, little below, because still it is on 16.05%, based on the order book and the execution that we are able to achieve during a quarter.
Is it fair to assume that with the export mix being at 35%, that's why we are seeing improved rate of margins?
Okay, I'm, I'm just thinking carefully, because, see, in the export, we also have a few very high-margin orders. Yes, currently, the 35% export margin or 35% export component is helping the EBITDA. It is a combination of, again, both. That's why if you really see now, the Jindal SAW results have become so complex because of the capacity, the size, the industry segment, that it is best that we say. To answer your question, yes.
Would it, would it be, would it be possible to give the exact margin for the NEOM model or just a range?
Madam, when we are not able to share the EBITDA margin for the products, we are asking for.
Okay, that's okay.
In a specific contract.
In terms of Hunting, when we say that we would be starting in Q3-
Yes.
When?
Yeah, I should have. I should have addressed Hunting in my opening remarks. Hunting now we are going for a trial run. The trial run results are coming out very good. We are going for a grand opening, where the senior management of Hunting are going to travel to India to make sure that we have a formal opening during this year. The good part is that we still have an order book where, again, Hunting as a subsidiary, which you will all get to see, may show positive results even during this leftover period of this year. It's has entered the market on a very sweet spot. I repeat, Hunting all products would be in the nature of premium connections for oil and gas sector.
Starting from the range of two, 7/8, going right up to 36 inches, which are called the connector pipes. Pipes and tubes, casing pipes, drill pipes, and all pipes and tubes between this size range made from different grades, which includes the CRA grades, the carbon steel, and the stainless steel. A very comprehensive product. Size range, I repeat, two, 7/8, going up to 36. Grades covering CRA, which are thirteen chrome, et cetera, carbon, typical the commercial grade, alloy, and the stainless grade. So far, the trial production is successful. It's looking all the machines are behaving well, and we are hopeful that by this year-end, which will be 31st March 2024, we should have positive results even in that subsidiary.
will you be able to ramp it completely in this year?
No, capacity, madam, ramping up would be, probably we expect next year. Anyway, the max that we will get this year would be, say, five to six months, max. It will be less than six months. The capacity expansion is next year.
Okay, thank you so much.
You're welcome.
Thank you. We'll take the next question from the line of Deepak Poddar from Sapphire Capital. Please go ahead.
Hello.
Yes, sir, please proceed.
Yeah, thank you very much, sir, for the opportunity and, and many, many congratulations for the good set of results that you have posted. My first step, I just wanted to understand, now, you said 16% EBITDA margin. Are we talking here on the console level or at the standalone level?
Okay, I clarified this. Whatever I was talking about is on the standalone level.
Mm-hmm.
Console, this time, purposely, I have not given the numbers, or I have not discussed in detail, because anyway, now it is within the 10%-15% range.
Correct.
-of the standalone. Now the standalone has become significant and large, so it's important that we focus on that. All these guidance, all the numbers that we discussed today on the call were largely on the standalone basis.
Okay, understood. Fair enough, sir, I understood that. I mean, in terms of standalone, you did say that, largely it should be range bound around this level. Because of the better performance in subsidiary, can we expect some improvement at the console level margins? Because I think the subsidiaries are doing well, right, for us?
Correct. Even if, okay, even if the, even if, the subsidiaries, do very well-
Mm-hmm.
The impact overall on the console would be reduced because the entire contribution from subsidiaries are in the 10%-15% range.
Correct.
Jindal SAW is on an upward trajectory. Yes, what you are saying is correct, but will it make a significant impact, at least for this year? I don't think so.
So at the console level also, we do expect this range bound to continue, right? What we did in first quarter, largely.
Should be.
Understood. Fair enough. Sir, regarding the, I mean, the central government CapEx plan, I mean, do we have... have you seen any kind of indication or urgency you have seen, where, you're seeing the government is like, is accelerating the infra CapEx or the Jal Jeevan scheme, scheme spend? Any, any kind of, indications that we have got as we speak now?
Yes, we can practically see the, all the, ongoing contracts are definitive pressure on supplies, which are due to keep up to the, calendar that they have for the project completion. Especially for the projects which are likely to get completed over the next nine months, there's a lot of emphasis to complete those projects so that they can, you know, announce the, opening of the project.
Understood, understood. That's very helpful, sir. In terms of subsidiaries, I mean, all our subsidiaries are in green, right, in, in the first quarter?
Yes.
Okay, understood. Yeah, I think, yeah, that, that's it from my side. All the very best. Thank you so much.
Thank you.
Thank you. We'll take the next question from the line of Riya Jain from Pranjal Corporate Services. Please go ahead.
Congratulations, sir, for the amazing results. Just a couple of questions, mainly on the revenue side. I agree to your point that you said since Q4, we definitely have great revenues as compared to Q1 and Q2. To understand this a little further, I want to know why as such in Q1 and Q2, the revenue has the lower side compared to even if you look at the standalone. From INR 4,500 crore to INR 3,700 crore now. Why is that, this dip that has happened?
I have pointed out to you that Jindal SAW typically has a quarter-on-quarter cyclicality, primarily because. A lot of our revenue or a significant portion of our revenue comes from where our counterparty or the client is government. As we all know, there is a huge amount of push in the government sector, whether it is state or center, to use their budgetary allocations and to complete the projects as their budgetary allocations come to a close. Therefore, we have typically seen the Q4 being significantly higher than the Q1. Let me just take an example of the last year itself. Q1 top line, INR 3,019 crore, and Q4 top line, INR 4,676 crore. If you see INR 4,676 crore versus INR 3,019 crore, it shows almost a 50% jump.
If you look at the last few years' results, may not be exactly 50, but the trend of Q4 being significantly higher than the Q1 of any typical financial year stays, primarily because our counterparty being Government of India and state government, and they are pushed to use their budgetary allocations.
Got it. Got it. I think this in terms of order book. If I got it right, between my line actually stopped in about 20 times. You said the order book currently for Q1 FY 2024 has been, INR 3.98 crore, versus the previous year when it was INR 12.5 crore. Was that correct?
No, madam, I was talking about the top line.
Okay, okay, got it. Got it. That's it for my question. All right.
We'll take the next question from the line of Saket Kapoor from Kapoor & Company. Please go ahead.
Namaskar, Nirajji, thank you for this opportunity. Even my call got dropped two, three times. Sorry, pardon me for any repeated question. We said that better understanding from the change in inventory that we see for Q1, are the deliverables for Q2 greater than that for Q1? Because we've seen the change in inventory to the tune of INR 400 crore on the higher side for Q1 end. Is it a good understanding that deliverables for Q2 are, will be higher, or if you could give some understanding?
If you see the supply in Q2, in terms of the total tonnage, would definitely be higher than the supply in Q1. How much of that comes through the production and how much comes through the inventory liquidation, is a matter of detail which you have to work it out. Definitely we are laying a lot of emphasis on liquidating the inventory, but the supply is going to definitely be higher. We expect the Q2's results to be an improvement over our Q1 results.
Right, sir. Sir, coming to the Sathavahana story, as now this being a merged entity, and thank you to the Peji team for taking... Should be given the credit, as you have already given also. What should be the tax advantage on the carry forward losses? Because I think from a standalone, we have not made any tax provision for this quarter. Current tax, nil lag raha hai.
Yes, the current rate, nil lag raha hai. See, the accounts team, the accounts and the tax team at this point of time are engaged very intently in discussing all of these with the tax experts, statutory auditors, and all of those. Another thing that has yet not been formed as, as yet, is the gain or the addition that we are going to have in the capital reserve on account of this takeover. One thing we are very clear that the difference or the acquisition funding is less than the intrinsic value of Sathavahana. That at least has been sorted out, but the exact amount is still being worked out. Once those things are getting worked out, then probably we will be able to get a handle on how the tax treatment of the same would be done.
Probably we would have that more towards the next year, more towards the next quarter or even after that. Because, you know, what I am told is that a valuation exercise for this to get a fair value of a concern is a complex exercise. The experts are at it as we speak.
Sir, I, I got your point, and I, I understood it, but because of the carry forward losses, there, there has to be, the tax incidence would be lower. This understanding is correct? The fair valuation part would be a book entry, but Sathavahana as an entity was having the carry forward losses for over many years. That advantage would be entitled Jindal SAW now because this being a merged entity?
Okay. Yes, for this year onwards, we would definitely get a tax break, but the quantum of it, the manner of it, is being discussed and agreed between the experts and our accounting team.
Correct, sir. Sir, for the steel plant-
I'm sorry to interrupt.
Ma'am, ma'am, a small point.
This will be the last question, I'm sorry.
Uh, ma'am-
Ladies and gentlemen, due to time constraint, that was the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you, all. Sorry, Saket, probably they couldn't take your last question because, you know, these conferences are timed, and there is a hard stop. I'm sure, you could ask those questions to our team, which is handling the investor relations, and you will get all those answers. Sorry, once again, Saket, but must get your answer from the investor team. I'm happy that now at least we have been able to get some cheer on our shareholders, stakeholders, and I have to thank them for their humble wait. I know, sometimes, and I have gone through as well, they have been with us, they have gone through.
We were together in a situation where seemingly we were doing things right in terms of fundamentals, but somehow we could not see the results, especially getting reflected in the market cap. I am delighted. I am happy that now that period is over. The share market is beginning to reflect the fundamental strength that we have been able to build in the organization. As I mentioned, the shareholder profiles are also changing, which is again a good news for us. We continue to do our good work, continue on the path of dealing with the legacy issues, dealing with the operational issues. Corporate issues are more or less taken care of with the latest round of merger, et cetera, announced.
We'll continue to work on those three prongs, and we expect that we will close this year on a very positive note, while we would definitely cross some of the significant milestones. Thank you very much. Thank you for being with us. Thank you for your patience, and hope to see you next quarter. Thank you. Bye.
Thank you, members of the management. Ladies and gentlemen, on behalf of PhillipCapital (India) Private Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.