Ladies and gentlemen, good day, and welcome to Steel Authority of India Q4 FY23 earnings conference call, hosted by Nuvama Wealth Management. 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 and zero on your touchtone phone. I now hand the conference over to Mr. Ashish Kejriwal from Nuvama Wealth Management. Thank you, and over to you.
Thank you, Selvin. Good morning, everyone. On behalf of Nuvama Institutional Equities, we welcome you all for Q4 FY23 conference call of SAIL. We are happy to host Mr. Anil Tulsiani , Director of Finance, along with his team. I would request Mr. Tulsiani for his opening remarks, and thereafter, we can open the call for Q&A. Over to you, sir.
Thank you, Ashish Ji. Good afternoon, everyone. It is my pleasure to welcome you all to the investor con call-
For Q4 and financial year-
Let me first briefly run through the economic scenario in which we operated during the financial year 2022, 2023, which was quite challenging. We saw a consistent decline in the prices of steel in the first three quarters on the back of international prices. There was some stabilization of prices in Q4. The year also saw fluctuating prices of inputs, inflationary pressures forcing corrective action by the central banks, which in turn led to growth getting compromised, disruption in supply chains, slowdown in Europe and U.S., lockdown in China, et cetera, which impacted the GDP of economies across the globe. As a result, the apparent steel consumption saw a decline over 3% during the calendar year 2022 over the previous year. Indian economy, however, fared better than the other major economies. The growth during financial year 2023 is estimated at 7%.
The domestic production and consumption of steel registered growth of 5% and 13%, respectively, during financial year 2023. As per WSA, India, at the rate of 5.8%, was the one of the only two countries to register a positive growth during calendar year 2022 among the top 10 steel-producing nations. Coming to the performance of the company, SAIL, despite all challenges, registered best ever production and sales performance during financial year 2023. During the financial year, the company produced highest ever hot metal, crude steel, as well as saleable steel. The hot metal production stood at 19.4 million tons, as against the previous best of 18.7 million tons. Crude steel production stood at 18.3 million tons, as against previous best of 17.3 million tons in financial year 2022.
Saleable steel production stood at 17.2 million tons, as against the previous best of 16.9 million tons in financial year 2022. Coming to marketing. The marketing had to face numerous challenges, as already narrated. Despite the same, the company registered its best ever sales volume during the financial year 2023 at 16.20 million tons, marginally higher than the previous best of 16.15 million tons achieved in financial year 2022. The domestic sales at 15.8 million tons grew by 7% over 14.8 million tons during financial year 2022. The exports, however, declined to 0.4 million tons in financial year 2023 from 1.4 million tons in financial year 2022, a degrowth of 68% as the international market faced stiffer sales.
On the financial front, the company once again reached the INR 1 lakh crore mark for its turnover. The turnover of INR 1,03,768 crore was the best ever, outperforming the previous best of INR 1,02,805 crore, achieved during financial year 2022. The profitability, however, could not match the levels achieved during financial year 2022, majorly due to high input prices and marginal decline in the NSR. EBITDA for the year stood at INR 9,379 crore, a reduction of 58% over CPLY of INR 22,364 crore. PBT and PAT at INR 2,637 crore and INR 1,903 crore, respectively, saw a reduction vis-a-vis INR 16,039 crore and INR 12,015 crore in the previous year.
The borrowings have increased to INR 29,270 crore as on 31st December 2022, as against INR 13,386 as on 31st March 2022, and has reduced in the Q4 by around about INR 3,608 crore, coming down to INR 25,662 crore as on 31st March 2023. The recent decline in the steel prices, especially for the long products, is again a cause of concern and may affect the profitability to some extent. The simultaneous prices of exported coal is expected to cover up the sales. Coming to our sustenance and operational efficiencies. In addition to the production and sales in the current year, the company is committed to take measures for ensuring sustainable operations.
In the operational efficiency, the company has been making steady progress for reducing coal and c oke consumption, higher usage of CDI and improving its BF productivity. The company has achieved its best ever performance on these performance parameters during financial year 2023. The company is leveraging its new facilities to a good effect. We had already stopped production through the twin- hearth furnace route. The production of ingot route is also being brought down consistently. During financial year 2023, the same stood at 0.8%, versus 1.1% in financial year 2022. The share of value-added steel increased to 52.7% in financial year 2023, vis-a-vis 51.1% in financial year 2022. The percentage of semis in production is also coming down with higher capacity utilization of our units. The percentage, which stood at 19.3% in financial year 2022, has now come down to 13.1% in financial year 2023.
By engaging conversion services in and around the plant demand pockets, the percentage share of semis in sales has been even lower at 9%, coming down from 15% in financial year 2022. As a responsible corporate, we have been working towards cleaner and greener steel by ensuring environment preservation over the years by use of initiatives like waste utilization, over 100% in financial year 2023, as compared to 83% in financial year 2017. Reduction in carbon footprints, various projects under our commitments to zero liquid discharge, eco restoration of areas, regions around the plants and mines, plantation of more than 21 million saplings till date, use of alternate source of energy like hydropower and solar power.
Towards stakeholder management, the company has paid a total dividend of INR 3.25 per share in financial year 2023, which included INR 2.25 per share as final dividend of financial year 2022, and INR 1 as interim dividend of financial year 2023. The board of directors has recommended a final dividend of INR 0.50 per share for financial year 2023, subject to shareholders' approval at AGM. As a means to improve transparency, the company has been procuring materials through Government e-Marketplace, GeM. The procurement doubled during financial year 2023 to around about INR 9,200 crore, against the previous year figure of around INR 4,600 crore. The company has been engaging in numerous CSR activities across the country and primarily in the vicinity of our plants and units.
The activities are undertaken in conformity with the Companies Act as well as DPE guidelines. IMF, in its latest World Economic Outlook of April 2023, has projected a global growth to bottom out at 2.8% this year. As supply chain disruptions are unwinding, dislocations to energy and food markets are receding. IMF expects global growth to rise modestly to 3% in 2024, as inflation comes further to 4.9%. The major advanced economies are seeking much lower increase in GDP growth at 1.3% for 2023, with Germany and U.K. actually projected to contract by 0.1% and 0.3%. The emerging economies are expected to fare much better than their advanced counterparts, growing at 3.9%. The Indian economy, meanwhile, stands out as a silver lining, with a strong demand and consumption pattern.
Amongst the major economies, we are placed much better and beating the growth projections even for China. India is expected to grow in the range of 6%-7% over the next few years in various reports like IMF, WEO, World Bank projection, Monetary Policy Committee of RBI, et cetera. As per IMF, growth in India is expected to moderate in CY 2023 to 5.9%, before climbing higher to 6.3% in 2024. As per the World Steel Association, demand will see a 2.3% rebound this year to reach 1,822.3 million tons. Steel demand is forecast to grow by 1.7% in 2024 to reach 1,854 million tons. In India, the demand is expected to show healthy growth of 7.3% in 2023 and 6.2% in 2024.
I'm hopeful that the good times await us and our investors. With these words, I hand it back to Mr. Kejriwal for opening the Q&A session. I'm sure you all have some queries on the performance. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Amit Dixit from ICICI Securities. Please go ahead.
Good afternoon, everyone. Thanks for taking my question, sir. I have a couple of questions. The first one is on coking coal cost. If you could let us know what was the change QoQ in the coking coal cost in Q4, and what do you expect in Q1? That is the first question.
Yeah, the coal, the imported coking coal cost during the third quarter was around INR 25,500, and in the fourth quarter also, it was the same range of around about INR 25,500. Coming to the projections for the next few months, it will be a bit higher at around about INR 28,000.
When you will get the benefit of the, you know, lower coking coal prices, prevailing in the country?
See, the cycle is of round about, you can say around about 75-80 days. Like, when we get coal from U.S., so the time taken by the to reach our ports is around about 40-45 days, and when it is from Australia, it is around about 20-25 days. 40-45 days, plus the movement inside within India and, at the ports, so the average is around about 75-80 days. The benefits of, you can say the month of May. From May, we have started getting the real benefit of lower price of coal, April and May. We'll probably start getting it from the last week of June, second half of June and July onwards.
Okay. The second question is essentially on demand. What we have seen that in several quarters, there are, I mean, in, as we talk to different channel guys, they mention about the subdued demand prevailing in the country currently. While we are, at target, we are saying that, you know, the demand will grow by 13 odd %. Now, given all this, say, where in which sectors do you see for yourself, demand growing? What would be our sales volume target for this year, FY24?
For the year FY24, we have projected a sales volume of around 18.7 million tons, which is an improvement of 15% over 2022-2023. We expect the demand to be there also, which is all the segments, especially the infrastructure. Of course, there will be a slowdown in the demand during the monsoon season, but we expect more or less a consistent sort of demand thereafter also.
In last two months, have you seen any slowdown in demand, particularly infra and allied sectors?
No, no. There is no slowdown in demand, at least for our products.
Okay. Thanks, sir. Thanks a lot, and all the best.
Thank you.
Thank you. The next question is from the line of Somaiah V from Avendus Spark. Please go ahead.
Yeah, thanks for taking my question, sir. First question is on the rebar [audio distortion]
There is a lot of disturbance from your line. Sir, I request you to please-
My first question, am I audible? [audio distortion] .
The questioner has hang up the call. We shall take the next question. The next question is from the line of Mohit Bhansali from Bonanza Portfolio Limited. Please go ahead.
Yeah, thank you for taking my call. First of all, I want to know what was the employee strength, comparatively, in the year end, last year to this year? How much reduction it has been?
There has been a reduction of around 3,800, to be exact, there has been a reduction in manpower.
3,800?
Yeah.
3,800. I'm curious to know that since the reduction is year-to-year, why the employee cost has gone up 15% year-to-year?
15%? I don't think-
Yeah.
Year on year, there has been a reduction of, around about, INR 800 crore.
Last year it was INR 3,000 crore it is showing, now it is showing INR 3,400 crore.
I think you are talking about quarter to quarter.
I'm talking about last March quarter, last financial year, March quarter.
Quarter to quarter. I think you're talking, quarter on quarter.
Yeah, yeah.
Yeah. Actually, what has happened is that at the year end, normally what happens is we have a best actuarial valuation of our from our actually. Based on. Because otherwise, normally go by the previous year's figures only, with some marginal escalation. When we have done the actuarial valuation this year, there was an increase of around about INR 400 crore because of that, so which has impacted in the particular quarter. Besides that, the pension provision, which we had made up to the third quarter, that was considering since the profit was low at up to the third quarter, we had taken it at 3%, and now we had to do it at the rate of 6.6%.
That 3.6% additional for pension and another INR 300 crore-INR 400 crore approximately for this revaluation after they actually had given the figures for 2020-2023.
Okay. What is the call for this financial year? It will be gradual, like earlier in earlier con call, you said that wage revision will gradually come down.
It will be coming down this year also. There is a reduction of around 5%. When the manpower is coming down, there will be a reduction for that, besides that, there's a normal increments and the DA provision which we have to keep. That also has some impact on the salaries and wages. At least, you can say, 6%-7% for the normal employees who are still working. Basically, every year we can expect a fall of around 4%-5% in salaries and wages.
Okay, it will be more or less same, or it may come down little bit?
Yeah, it will come down.
Okay. Second question is on your debt trajectory. What do you think your debt trajectory will be in this financial year? It will come down or it will go up?
We expect it to come down, especially with these softening of the coal prices. We will surely get a benefit of that, because at the present, whatever is the outflow for coal, it is surely expected to come down by, you can say, around about INR 1,000 crore-INR 1,200 crore per month. The other thing which plays a vital role is the net sales realization of our products. We have to keep our fingers crossed for that. If this happens so, maybe with the CapEx also, what we are planning around about INR 6,000 crore, we may still be able to reduce our debts to some extent.
One thing I just want to submit, that CapEx you are doing every year, INR 4,000 crore- INR 5,000 crore, that is a huge CapEx. Why don't you mention what CapEx you are doing in your presentation, like new coke oven or SMS in Rourkela, and what is the timeline of completion? It will be very helpful for us if you mention everything in your presentation as well.
Okay, we'll keep it in mind.
Thank you so much.
Thank you.
Thank you. The next question is from the line of Pratim Roy from B&K Securities. Please go ahead.
Yeah, hello there. Good afternoon, thank you for the opportunity. The one first question is that you have mentioned a full year sales guidance of 18.7 million ton. If you can tell me where this is coming from, whether domestic or export, and how the mix will come in, that will be great. That is my first question.
Shall I get back to you regarding the domestic and this thing in a few minute by the end of this call?
Yeah, that's true. My main question is that, is there any, what is the mix from that? From which sector it will come from? That is the main question. The second question is that, employee expense that you have explained just now, but the other expense, there is a jump in sequential basis. If you can mention, is there any one-off on that basis or anything else that you can please tell me?
See, there was a substantial jump this year because of the foreign currency losses, which we have taken in this year because of the sudden hike in the USD rate. You know that most of our exports, imports are for coal are there. Nearly 85% of our entire coal is being imported. Because of the sudden jump of the USD rate in this particular financial year, we had to take quite a lot of hit because of that.
Okay, okay. You just mentioned that the overall net debt will come down by INR 6,000 crore for this year, FY24, correct, right?
We are, like, our original planning is bringing down the debt, but we are not too sure about this thing. It depends, you know, it entirely depends on the market dynamics, the NSR as well as the coal prices. The coal prices, if they continue like this, then there is a good chance of the debt coming down.
By INR 6,000 crore, right?
We cannot commit the figures at this point.
Okay, the last question is that, sir, can you please quantify the CapEx number for this full year?
Come again?
CapEx guidance for the year.
CapEx, you want to know about 2022, 2023?
2024.
2023, 2024. We have projected a CapEx of about INR 6,500 crore.
For the coming year, right?
Right.
Okay. Thank you, sir. Thank you for the conversation.
Yeah.
Understood.
Thank you. The next question is from the line of Sumangal Nevatia from Kotak Securities. Please go ahead.
Good afternoon and thank you for this opportunity. I have a couple of questions. The first one, the volume guidance of 15% growth. If we look at last five, six years, I mean, it took us on five to six years to achieve this 15% growth from, say, 14 million-16 million tons. Now we are guiding to achieve the similar performance in one year. Just want to understand some breakup as to which all plants, and how should we see on a quarter-on-quarter basis, the growth coming? Is it more back-ended, or should we start seeing this growth from 1Q itself?
Actually, the growth is more or less, from the quarter three, it will be substantially higher. If you see that, even in every year, we have a substantial growth from the third quarter onwards. We have not done bad, too bad in the month of April also. I think we have crossed 1.3 we have crossed. If you take that 1.3 into 12, that only works out to around about 16 million ton. With some sort of a growth towards the second, third and fourth quarter, we expect to achieve this target.
Okay, got it. My next question is on working capital. Every year there's a big swing. Last, two years, there was a release of almost more than INR 20,000 crore, and in FY23, the working capital increased almost INR 14,000 odd crore. Sir, what is the stable level here to expect, and why such sharp increase, in working capital?
See, basically, what is happening is this, the, we are basically the trade payables, whatever we have got, they are fluctuating a lot. That is basically depending on the coal prices, we have got these payment, deferred payment terms. That is basically playing a major role in this working capital, this thing. Collections, we are doing it quite well. Our debtors are coming down, means, you can see that they are in the range of onward INR 5,000 crore. They were there last year also, and this year also they are on the same level. Basically, it's basically the payables which are playing a dominant role in us, because it's entirely dependent on our payment terms with our core suppliers.
What is net debt, as on, the year-end?
INR 28,400. There is one more thing. There has been an increase in the stock of steel this year. As compared to last year, there is now about 4.5 lakh tons. That has also had a impact on the working capital.
Understood. One last question on the iron ore sales. What is the sales we did in FY23? I mean, we are still carrying the inventory when we revalued in 2019 of around INR 8,000 crore, INR 4,000 in each current and non-current. What is the comfort we are having in terms of realizing this value?
See, basically, the majority of our iron ore is located in Jharkhand. There are some issues about with the in case of Jharkhand for evacuation of ore from there. Some clearances are required from the Jharkhand government, we are working on that, and we are optimistic that it will be cleared very soon. We've already deposited some royalty also in the GeMS portal also for evacuation of ore. We feel that it will be we'll be able to evacuate quite a lot of quantity this particular year. Like, I think, we have projected more than onward 2 million tons from Jharkhand group of mines in this particular financial year. Last year, I think the total sale of fines was around about 4 lakh tons.
That is it. Yes, we are optimist, and regarding this, we plan to liquidate these stocks in a rapid manner, because we have got a, you can say, a three-pronged strategy in this. We'll be supplying to our own steel plants. We'll be using it for conversion to pellets, try to sell it also. We are also planning a beneficiation and a pellet plant in Goa mines through an MDO route. We feel that this evacuation will be quite fast once all the things fall in place.
Okay. You said 4 lakh tons, right, for FY23?
4 lakh tons, yeah.
Okay, got it. All right, thank you so much, sir, and all the best.
Yeah.
Thank you. The next question is from the line of Rahul Jain from Systematix. Please go ahead.
Yeah, sir. Thanks for taking my questions. Firstly, on the, there is a large amount of provisional sales. I think around INR 8,500 odd crore you mentioned in the, you know, India results. When is this going to conclude, and what do you expect the direction of, you know, this, is it going to go higher? Also, how much is receivable out of this?
Actually, this is mainly, you know, we have these provisional sales for our rails, which we supply to the railways. Basically, what is happening is the pricing is done after the financial year ends. The issue which has come up is that till now, we have not been able to get the price for 2021, 2022 also. The price at which we are billing to the railways is around INR 67,500 per ton. We expect a substantial amount from the Railways once the CA cost finalizes this pricing of the railways for 2021, 2022. 2022, 2023 also, we will try to get it this year. Otherwise, because there's normally a lag of around one year.
2021, 2022, we expect in, say, by the beginning or, say, by the second quarter of 2023, 2024. We'll try to get the 2022, 2023 pricing also, which is again still at INR 67,500, in maybe end of 2023, 2024 or maybe 2024, 2025 beginning.
You have booked, INR 30,000 crore cumulatively, right? On that number, we should see a big jump, right? Is that the right way to look at it?
Yeah. That will, like, probably add straight to my bottom line also.
Right. Any number you want to give or what percentage in a range?
We have submitted a cost, but then, I think, we should not disclose it at the moment because it is subject to CA cost checking it and finalizing.
Right, right. Secondly, yeah. Hello?
Yes.
Yeah, secondly, sir, we have now completed this large round of CapEx, which took us almost a decade. Any further plans to look at, say, go to 30 million or beyond, and what is the big picture over here?
Yeah, we have got plans lined up. We will be going in for ramping up of some of our facilities, and that will add around about 3 million tons in the next three to four years . Besides this, we are planning expansion plans in IISCO Burnpur of around about 4.5 million tons, and another, you can say, 3 million tons in Bokaro. Even to some extent, we may also up to 2030-2033, 2031, 2032, we can have a plan in Rourkela Steel Plant. Our plans are to achieve around 35 million tons by 2031, 2032.
Already, we have obtained the in-principle approval of the board to go ahead with the preparation of DPRs for Bokaro and IISCO Burnpur. Shortly we'll be also going in for Durgapur in some time now. Durgapur also we are planning an expansion.
Right. In the next two to three years, any meaningful number, like, for example, for this year, you have said 15% volume growth. Say, in the next three years, any number which we have worked based on these plans you have?
Actually, what I was telling you that there are some debottlenecking facilities and some new facilities which we'll be bringing up, which will help us to increase our production by around about 2.5 million-3 million tons in the next three to four years. After that, the benefits of the expansion will also start coming in.
Okay, sir. Thank you so much. Very helpful.
Thank you. The next question is from the line of Siddharth Mehrotra from Kotak Institutional Equities. Please go ahead.
Hi, sir. Is my voice audible?
Hi.
Can you hear me, sir?
Yeah.
Sir, a small clarification. Sir, our tax rate in this year has been around 15% odd, and this is the cash tax rate. Do we have any leftover credits, and what will be the tax rate in the future years, sir? Any guidance on that?
At 25%.
We've exhausted all our previous year tax credits?
Yes, yes. We have exhausted.
Understood, sir. Understood, sir. Secondly, just a small clarification. We are spending around INR 4,000 crore annually when it comes to our CapEx, but when it comes to capacity additions, there hasn't been any really meaningful capacity additions. Am I to assume that this INR 4,000 crore odd number is mainly for the maintenance CapEx level? Is that understanding correct, sir?
Yes. You are correct to a very large extent. We have got these old coke oven batteries, it's every 15 to 20 years, you know, we have to keep, you know, changing these batteries. Again, you know, replace the battery, maybe on the same foundation, we have to replace it. It is basically this, some improvement in the productivity for bringing up the improvement in productivities and all those things. We have these BF Stoves, we also have some facilities within the SMS and all, which, you know, actually will help us improve the operations, will not add to the capacities.
They are basically debottlenecking and, you know, like, efficiency improvement facilities which we are having installed in these, in our plants at the moment.
Sir, if that is the case, when do we start to actually start incurring, growth CapEx, sir? You highlighted repeatedly that we plan to expand our capacities. My question is on the timeline, sir. What sort of timelines do we expect for the growth CapEx part to come in?
Growth CapEx, as I was telling you, that we are in the stage of preparing the DPR for our IISCO Burnpur, and also for Bokaro, it has also started. These DPRs, once they are finalized, it will take some time for the DPR and the tender specifications to be finalized, which will be around about six months, you can say from now onwards, five to six months. By August or September, we will be getting our stage one clearances for our these projects, these expansion projects. We go out for a tendering activity, and maybe another four to five months down the line, we'll be able to finalize the tenders and come back for order placement.
We can expect by end of this financial year, we'll be ready for order placement.
Understood, sir. One, sir, last small question: What sort of steel price change are we seeing quarter on quarter for us, sir, Q3 versus Q4, in the realization, sir?
Q3 versus Q4, in case of long products, there was an increase of around about INR 2,000, and in case of flat products, there was an increase of around about INR 2,700.
Sir, the guidance for the upcoming quarter?
Upcoming has not been too good. Like, there has been a. April was quite steady. May slightly down as compared to April. By around about INR 2,000-INR 2,500.
Okay, basically we are back at 3Q levels.
pardon?
Basically, it means we are roughly back at 3Q levels. All the gains of the past quarter have sort of disappeared.
Yes, it will be at that level or very slightly, marginally more than that.
Understood, sir. Understood, sir. Thanks a lot, for your time, sir, and best of luck for the coming quarters.
Thank you very much.
Thank you. The next question is from the line of Aditya Welekar from Axis Securities. Please go ahead.
Thank you, sir. Sir, you just touched based on the next wave of expansion. For FY 25, what will be our CapEx guidance? I just wanted to understand from which year there will be a material increase in CapEx going forward?
Material increase in CapEx will probably be from, you can say from, FY25 second half, because we will be trying to place the orders by the end of FY24. Then initially, like, basically the upfront payments, which are almost between the 3%-5% of the total project cost for design and engineering and all. The real thing will start probably from the second half of FY25.
What will be that full year FY25 CapEx?
See, we are not yet, because since the DPR is not yet ready, we are not yet sure what will be the total outlay. We have projected a total outlay of nearly INR 1 lakh crore for our entire expansions and these debottlenecking facilities over the next, you can say, nine to 10 years. The... It will be peaking basically in the year 2027, 2028, 2026, 2027, 2028 and 2028-2029, when all the modernizations will be there, means going on together. Initially in 2024-2025, you don't expect much in that, because it's, it will be only one particular plant which will, for which the expansion will be, you know, commencing. 2025-2026, the next plant expansion will commence.
Basically the real expenditure will start coming from 2027, 2028, and 2028, 2029.
Understood. second question, one is, other expenses. We can see in this quarter there was a dump of 9% sequentially and, 6% on a year-on-year basis. Is any one of that or is largely because of the increased production?
You are talking about the financial year?
No, I'm talking about Q4, other expenses.
Q4. Can you just give me some time for that? I'll just revert back to you.
Thanks, that is so much.
Yeah. We'll send it to you separately.
Thank you. The next question is from the line of Mohit Bhansali from Bonanza Portfolio Limited. Please go ahead.
Thanks for giving me a chance once more again, sir. What is the inventory level, closing here?
The inventory level is 1.05 million tons.
1.05 million ton. Since you are saying that coking coal is very important and major factor, you are again going for the big, large expansion. Are you going to in the DPR, are you going to make sure that you have the raw material security or that is will what you are at present doing, that sourcing coal from other sources, the same will go on?
See, basically, at the moment, we are sourcing major, you can say around about 84%-85% of our coal from our resources at Mozambique, Australia and USA. We are importing from there. We are importing from our own, we have our own ICVL, which supplies us around about 1 million ton of coal. Besides that, indigenous coal is around 15%, which is mainly supplies from BCCL and some of our own operations. Shortly we will be now operating our Tasra mine. This Tasra mine will be able to give us around about 1.6 million tons-1.7 million tons of coal annually, number one. The ICVL has got a lot of reserves, and it has got a lot of potential.
The addition, some more additional capacities beyond this 1 million ton also, we will be sourcing from our own resources in Mozambique. Parallel to this, we will be requiring some more additional coal from Australia and U.S. and Canada. We will be going in for long-term agreements for that. We are also trying to get our coal from Russia also now. We have started that also.
Okay. Basically, the question was like, you know, you always have this volatility and how you are going to escape from this volatility, because already you are going to spend a lot of money on the expansion, and after that expansion, if same problems occur, then you will be, like, in trouble again. That was what.
This time we have actually worked on the strategy where, you know, the expansion is phased out. Like, initially, we are planning expansion in IISCO Burnpur . The next expansion, which is, which we are planning, is in Bokaro, which will come, you can say around about a year later, a year down the line, and then Durgapur, which will again be a year further down the line. So that all the funds, fund requirement is not bunched up at one place. This is our strategy which we have worked out, and we hope we'll be successful in this time.
Okay. You said that the Tasra mine, you are going to start. When it is expected to start, sir?
Tasra mine, we have already finalized the tender. We will be, let us see, as soon as possible.
All the permissions are in place to mine?
Yeah. Clearances are there. All clearance are there.
All clearances are there. Second thing is that I was going through some news that in parliament, Steel Ministry has put up that the expansions which sales are doing around of INR 2,500 crore are delayed and because of contractor issue. Are these issues are resolved or still going on?
See, we are resolving issues one by one. Like, we had some issues in Rourkela, which we resolved last year, and maybe in this particular year also, we will try to resolve as many issues as possible. That's just one thing that I do not know the, in the parliament, whatever it is there, but we are trying. Our objective now is to close all the old contracts, so that, you know, like, we bring the confidence of the people who are, who are, our partners in projects. Our objective is basically that. We have closed quite a lot of projects in the last, you can say, one and a half years. Our plan is that, close the projects as soon as possible.
Whatever is there, we are even sometimes going in for out-of-court settlement also with the parties also.
Mr. Mohit, we request that you return to the question queue for follow-up questions. We shall take the next question. The next question is from the line of Kirtan Mehta from BOB Capital Markets. Please go ahead.
Thank you, sir, for giving us this opportunity. I had a specific question on the Rourkela and Bokaro profitability. When I compare the Q4 profitability with the average quarterly profitability that we have seen over FY22, Rourkela and Bokaro still operates at 20%-30% level. Are there any specific factors which is holding back it profited these two mills?
Yes. There is a thing that what has happened in 2021, 2022, we got a very good price for our flat products. Basically, if you see, the difference between flat and long products in 2021, 2022 was in the range of INR 11,000-INR 12,000. Now, this has come down, and especially if you see in the last, you can say three quarters, Q2 to Q3, Q4, there's hardly a difference between the long and the flat products in the market. So the major reason for very good profits last year was the good NSR which we got for the flat products. I think the entire steel industry, whoever is in the flat product range, made substantial profits because of that.
Largely, as I understand, it's attributable to the external pricing factor, and there are no material plant-related issues here?
No, plant-related issue or anything. It is basically the external factor, which has played a very big role last year.
Understood, sir. Another question was about understanding the specific improvements that has been done this year. Particularly, we see that the semis volume has gone down from 19% in FY22 to 13% in FY23. VAP products have also increased from 49% to 52.7%. What are the specific improvements that has come through this year, which is helping in this?
See, basically, what is happening is our mills are performing quite well, especially the long product mills. We had set up a medium structural mill in Durgapur and a universal structural mill in ISP. These have started performing really very well. Means, like, earlier, the thing was that they were producing something like, you can say 4 lakh or, say, 3.5 lakh tons per annum. Now, we are seeing that the production from these mills has gone up to even, you can say, 6 lakh tons per annum or average of 50,000 tons per month. USM, universal structural mill, is also doing very well.
This is the major factor because of which, we are having less of semis for sale now, and more of our own finished products.
Would you be able to also share the utilization, current utilization level at both these mills?
I'll just convey it to you later on. Is it okay?
Sure, sir. One more question. I just want to know. I'm not sure whether this has been shared earlier. What was the iron ore sale during the year?
4 lakh ton.
4 lakh ton. Right, sir. Thanks. I'll return to the queue.
Okay. I just wanted to know, somebody wanted to know what is the why was there an increase in expenditure during Q4 as compared to Q3? The major reason is royalty, which had gone up by around about INR 270 crore. Then conversion charges of INR 23 crore and expenditure on CSR of around about INR 91 crore. These are the major three reasons for which the expenditure in Q4 was higher than Q3.
Thank you. The next question is from the line of Sumangal Nevatia from Kotak Securities. Please go ahead.
Yes, question, please.
Thank you, sir, for the follow-up. Just two things. One is, overall, in terms of capacity, from, say, currently 20 odds, what, for next three years, where are we going? What is the overall CapEx intensity of this expansion?
See, the total CapEx which we have planned up to 2031, 2032, is in excess of INR 1 lakh crore. Okay? With it peaking in the years from 2027, 2028 and 2028, 2029. This is the main thing, otherwise, the normal CapEx which you'll be having, say, our debottlenecking and our normal EMR schemes and coke oven rebuilding and all, that will be, you can say, around INR 5,000 crore-INR 5,500 crore every year. This is going to be our normal expenditure besides this expansion will come.
Okay, INR 5,000 normal expenditure, which includes maintenance, and then maybe around INR 1 lakh crore over the next seven, eight years?
Yeah.
Sir, what sort of leverage level are we comfortable? Because today also, I mean, FY 23, we have almost 3.5x net debt-to-EBITDA. This sort of CapEx of around INR 140,000 crore-INR 150,000 crore over the next seven, eight years.
Actually, the debt-to-EBITDA is bad because of basically the EBITDA being low also. Actually, the denominator being low also is a cause of worry for us. It was very good last year, this year, again, it's a cause of concern. We also understand that. See, last year it was around about 0.59, now it is in the range of three. Hopefully, if our EBITDA improves, I think it will have a corresponding effect on the debt part also, because we'll be able to reduce our debts also to some extent because of that.
Yes, sir. Sir, beyond what level, then we will reassess our expansion plans, and what, to what level from the current three and a half years comfortable in increasing the leverage to?
We have got our plans where our cash flows are there. We have done such preliminary work. We are trying to restrict our debt-to-equity ratio to one is to one, means not go beyond that. That is the sort of plans which we have got on hand.
Thank you. Due to time constraints, this was the last question. I would now like to hand the conference over to the management for closing comments.
Thank you. The global economy, which was earlier reeling under the stress due to inflationary forces, tightening monetary policies, supply chain disruptions, has started to breathe easy as inflation is also coming under control. Even in case of steel production and apparent consumption, India is expected to outperform its peers quite handsomely, which augurs well for the industry in India. With a strong government spending on infrastructure, the share of investment in GDP has been rising consistently. The residential sector is also expected to grow, backed by affordable housing projects and urban demands. Private investment is improving on the back of production-linked incentive schemes. India's capital sector, capital goods sector is also expected to benefit from the momentum in infrastructure and investment in renewable energy. Automotive and consumer durables are expected to maintain healthy growth, driven by sustained growth in the private consumption.
We hope that SAIL will also be able to deliver performance consistent with the projections for the domestic industry. Thank you.
Thank you. On behalf of Nuvama Wealth Management, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.