Ladies and gentlemen, good day, and welcome to the Q2 FY 2024 earnings conference call of Steel Authority of India, 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 then zero on your touchtone phone. Please note, this conference is being recorded. I now hand the conference over to Mr. Ashish Kejriwal from Nuvama Wealth Management. Thank you, and over to you.
Thank you, Ashwin. Good afternoon, everyone. On behalf of Nuvama Wealth Management, we are delighted to have Mr. Anil Tulsiani, the Director, Finance, along with his team for Q2 FY 2024 conference call. Now, I would request Mr. Tulsiani to have his opening remark, and thereafter, we can open the floor for Q&A. Over to you, sir.
Thank you, Mr. Ashish. Good afternoon, everyone. Let me welcome all our investors and analysts who are joining this results conference call for the financial results of SAIL for the period Q2 FY 2024 and H1 FY 2024. Though the detailed results are already available on the website of the company and the stock exchanges, I will briefly apprise you on the same before we move to the question and answer session, where we would be happy to address your queries. Let me first apprise you on the economic scenario in which we have been operating.
The global economy, which which saw a sharp improvement in 2021 after the initial waves of Covid, was adversely impacted on account of multiple factors, like the inflationary pressures and consequent tightening of the monetary policy, geopolitical situations leading to disruptions in supply chain, slowdown in major economies like China and Europe, causing major imbalances in the global demand supply, et cetera. The inflationary situation in 2023 has eased to an extent vis-à-vis 2022, but the decline has been gradual, leading to a growth rate rising moderately. There are projections of further decline in the inflation, which is a sign of relief, although the rate is expected to remain gradual as the global economy continues to be impacted adversely due to the factors discussed earlier.
International Monetary Fund, in its latest World Economic Outlook of October 2023, has projected a growth of 3% and 2.9% in 2023 and 2024 respectively, which is lower than the estimate of 3.5% for 2022. Now, coming to the world steel scenario. In line with the economic situation, the global steel scenario has seen its graph falling drastically after the phenomenal rise in 2022. In fact, the world steel output during nine months of the calendar year 2023 has fallen by 0.1% over CPLY. The world steel narrative cannot be complete without the mention of Chinese steel industry. China, after two straight years of decline in its crude steel production, is poised to improve upon its performance in the current calendar year. The growth during nine months was 1.6% over CPLY.
However, the worrying factor here is that despite this modest performance by the world's largest steel producer, its share in the global output has risen consistently and reached the pre-COVID levels of around 57%. This highlights the contraction of the performance by the rest of the world, barring isolated performances by India and a few other countries. However, the projections for steel demand points towards turnaround during 2023 and 2024, although again, a gradual recovery. World Steel Association, in its short-term outlook, published during October 2023, has projected a growth of 1.8% and 1.9% during 2023 and 2024, respectively. Meanwhile, Indian economy continues to fare better than its counterparts, and this has maintained relative stability in the domestic market.
The Indian economy registered GDP growth of 7.2% in financial year 2023 and 7.8% during Q1 of financial year 2024, which has helped it maintain its position as one of the fastest growing among the major economies. At the same time, the economy has countered the forces of inflation better than the other economies by judicious use of increase in repo rates by the RBI. Indian steel industry has been one of the few to maintain a positive growth in both production and consumption of steel during financial year 2023. The steel production grew by more than 5% and the consumption by more than 13%. During the current financial year as well, the increase in production and consumption has been in the range of 15%.
The demand in India is projected to grow by 8.5% and 10.7% during the calendar year 2023 and calendar year 2024, respectively. The domestic industry has, however, felt the impact of volatility in the prices in line with the global trends. The coking coal prices, which had cooled in Q1 of financial year 2024, are currently hovering in the range of $300 per tonne for hard coking coal and around $200 per tonne for P CI. The prices of steel have also been operating in a narrow band due to pressures of imports of cheaper steel. Coming to the performance of the company, SAIL has registered its best ever second quarter physical performance during Q2 financial 2024, financial year 2024. The performance during the first half has also grown accordingly.
Crude steel production during Q2 stood at 4.8 million tons, as per four, as against 4.3 million tons in CPLY, a growth of 12%. Crude steel during H1 stood at 9.5 million tons, as against 8.6 million tons in CPLY, a growth of 10%. Saleable steel production during Q2 stood at 4.8 million tons, as against 4.1 million tons in CPLY, a growth of 17%. Saleable steel production during H1 stood at 9.2 million tons, as against 8.2 million tons in CPLY, a growth of more than 12%. Sales volume during Q2 stood at 4.8 million tons, as against 4.2 MT in CPLY, a growth of more than 13%.
Sales volumes during H1 stood at 8.7 million tons, as against 7.4 million tons in CPLY, a growth of more than 17%. Domestic sales during Q2 stood at 4.7 million tons, as against 4.1 million tons in CPLY, a growth of more than 14%. The exports, however, declined to 0.07 million tons from 0.11 million tons in CPLY. Domestic sales during H1 grew by around 19% to reach 8.4 million tons. On the financial front, the company registered a growth of 13% over CPLY in the sales turnover to stand at INR 29,560 crore during Q2 financial year 2024, which is again the best ever Q2. The sales for H1 also are the highest recorded in any H1 ever.
The improvement in the turnover was aided by the benefit of rail price revision for financial year 2022 of about INR 1,750 crore, which was long overdue. There was consequent improvement in the profitability as the company turned black, back into black during Q2 financial year 2024, compared to the loss during CPLY. The profit before and after tax during the quarter stood at INR 1,696 crore and INR 1,241 crore respectively. H1 profit registered an improvement of more than 250% over CPLY, despite taking the hit on account of liability under Vivad Se Vishwas Scheme 2 of INR 415 crore. PBT and PAT during H1 stood at INR 1,898 crore and INR 1,390 crore, compared to INR 523 crore and INR 391 crore respectively in CPLY.
In the area of operational efficiency, the company has been making steady progress for reducing coke consumption, increasing the usage of CDI, bringing down the specific energy consumption and improving BF productivity. Continuing with the drive towards improving the product mix, the proportion of semi and saleable steel stood at less than 15%. By engaging conversion services in and around the plants' local demand sector, the percentage share of semi in sales has been even lower at 8%. As a responsible corporate, we have been taking several measures for environmental conservation over the years. Drives like zero liquid discharge, eco-restoration of areas, regions around the plants, mines, plantation of trees and saplings, use of alternate sources of energy like hydropower and solar power, et cetera, will continue as we move towards sustainable and green steel.
The company has been engaged 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 the DPE guidelines. Going forward, the challenges from higher coking coal price during Q3 prevail. But given the current price trend, the cost should come down in Q4 financial year 2024. With the outlook positive for a sustained growth in domestic consumption, we are hopeful of realization and consequently, the margin will improve for the company in the quarters to come.
Further, we are also expecting the benefit of revision in the provisionally arrived price of rails for the Indian Railways for the current supply. This will add directly to the top line as well as the bottom line of the company. With these words, I hand it back to Mr. Kejriwal for opening the Q&A session. I'm sure you all have a lot of 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 their 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. We have our first question from the line of Amit Dixit from ICICI Securities. Please go ahead.
Yeah, thanks very much for the opportunity and congratulations for a good set of numbers. I have a couple of questions. The first one is on coking coal. So if you can, let us know the coking coal cost, that went into PNL in Q2, and how is it likely to evolve in Q3? Also, I would like to understand that we have seen BCCL raising its production and sales. How does it help us? Because BCCL is, you know, a primary supplier for coking coal in India. That is the first question.
Yeah. Thank you. Actually, the coking coal prices, which were around INR 27,800. This is, we are talking about the imported coal. It was in the range of around about INR 27,800. In Q1, they came down to the levels of INR 23,000 in Q2. But again, the prices have started going up, and we expect that the average cost of this imported coking coal will be in the range of INR 27,000 per ton as far as consumption is concerned.
Coming to BCCL, we have got sort of an MOU with them regarding coal and most of our coal, indigenous coal is supplied by BCCL to us, and we have a pricing arrangement with them, which is basically linked with the price of imported coal.
Sir, is it possible to quantify if you are getting higher supply from BCCL? What would be approximate ballpark difference between international price and BCCL's price?
Yeah, you can say that we are getting around about 15% of our coal, which is indigenous in nature. Out of it, some you can say 3%-4% will be from our own washeries and collieries, and the rest is supplied by BCCL. And the price differential between the two, you know, because we have got some upper and lower bands where of the supplies being made by BCCL. So the upper band is around INR 12,500, which we are operating now.
Okay. Okay, I've got it. The second question is essentially on the benefit of this revision, provisional rail prices. So while we have booked around INR 1,750 crore this quarter, is there a further, you know, benefit that we can expect for FY 2022, and in this Q3 or Q4? And will some benefit of Q3 FY 2023 also come, or FY 2023 will come next year?
Basically what has happened is that we have taken the entire benefit for FY 2022. Now, for FY 2023 and continuing on in FY 2024, we have been getting a provisional price of INR 67,500 per ton. Whereas the final price finalized for FY 2021, 2022, is around INR 85,300. So basically, what will happen is that we will be approaching the railway to give us an ad hoc increase till we submit the cost data of 2022, 2023 to the CA Cost organization, and it is finalized. So we will be requesting for an ad hoc increase for 2022, 2023, as well as 2023, 2024, since our costs are much more.
So just to be clear, sir, you said INR 57,500 per ton we are getting for FY 2023-24.
INR 67,500.
57,500.
67, 67.
67. And we are, and the price increase that we have got for FY 2022 is INR 87,300.
INR 85,300.
INR 85,300. But, sir, since FY 2022 prices have also come down, so, you know, do you expect to get INR 85,300 only, or, you know, prices for FY23, FY24 would be little bit lower?
We will not be able to comment on the FY 2023-2024. But regarding the FY 2022-2023, it is basically the entire thing is based on our costs, which is being intimated to the CA cost organization who verifies it. So we don't feel that there will be any reduction from that, since in the financial year 2022-2023, the cost of coal had also gone up substantially as compared to 2021-2022.
Okay. Okay, okay, okay. Got it. Got it. Thank you, and all the best, sir.
Thank you.
Thank you. We have our next question from the line of Kirtan Mehta from BOB Capital Markets. Please go ahead.
Thank you, sir, for giving this opportunity and the strong performance on the sales and production side. One follow-up on the rail pricing. In terms of... We are currently sort of getting a provisional price of INR 67,500. Against that, what would be our current cost based rail cost at this point of time?
We would not like to disclose our cost. But then, based on our cost and on return on our equity and all the, whatever is the calculation made, for the financial year 2021-2022, they had initially given us INR 67,500 as the ad hoc pricing for that, and finally, gave us INR 85,300. So, so based on, again, our costs in 2022-2023, and subsequently in 2023-2024, we'll be again working it out and submitting it to the the CA cost organization for their evaluation, and finally, giving us the price for that.
Right. So right now, FY 2023 as well as FY 2024 billing is also getting done at INR 67,500 only, or is that a different number?
No, no, that is still at INR 67,500.
For FY 2023, have we already submitted our cost workings to them, and is it waiting for their approval, or we are yet to submit it?
We will be submitting it shortly. Actually, we are waiting for the finalization of the 2021, 2022 costs. So once it is finalized, based on whatever assumptions are there, which are acceptable to both the CA Cost organization and sales, we will rework and submit for 2023.
Understood. Another question was about the semis. During the opening remark, you mentioned that currently proportion is 15%, but using the external conversion services, we are able to reduce it to 8%. Could you give us more color on what exactly the semis proportion in the sales currently is, and where are we deploying the external conversion services?
External conversions, we have got our wet leasing arrangements also, and we also have our conversion agents who convert mainly our long products. It's basically for the long products. So we have got conversion agents for our TMTs and also for our structures. So we have it converted by them and sell it on our branding. So semis are basically sales, which are used out there for that. And besides this, we also have some semis which we provide to our customers who use it for other purposes also, not using our branding.
Understood. So is our semis proportion in the sales mix down to 8% after using the conversion agents?
Yes. Yes. Yes.
How much do we spend externally... I mean, what would be the average cost of conversion that we pay out externally? So what would be the margin difference on the conversion, externally converted items?
See, it's basically what is happening is that we have our distinct our cost for the semis which we have got, and we have our contracts with our conversion agents, which are finalized based on a proper tender process. And then again, whatever we go and sell in the market, it is based on whatever is the prevailing market rate for this particular product. So, the margins are always there in that.
Understood. Just one more follow-up question was on our universal section mill and the Medium Structural Section Mill that we have been operating. What would be the utilization rates on those mills at this point of time?
They've improved a lot. Actually, we have planned for more than 600,000 tons of from the medium structural mill, and even a similar quantity from the universal structural mills also. In the growth of production from these mills has been, you can say, phenomenal in the last two to three years. The exact figures I can just give it to you offline if you want it later on.
Sure, sir. So, which is the plant where the... As of now, but we are not seeing the corresponding improvement coming into the respective plant profit level. So, is it primarily because of the higher coking coal cost that we are facing? Because of that, this is not visible into the plant profit levels?
Yeah, it is basically on two counts. Though, as I have mentioned to you, in the second quarter, the price of imported coal has come down by around INR 5,000, okay? But then the NSR fall has also been quite a large, you know, quantum. Because the NSR dip, which was there in Q2 as compared to Q1, has been around, you can say, INR 3,000.
Okay. Right. And one more question, if I may. Would you be able to give us a color on the current, sort of the flat and long product realization, and how does they compare with the Q2 averages that we have realized?
Yeah. Actually, the differential is in the range of INR 3,000-INR 4,000. The flat being higher than the long.
This is the current differential, and how was it during the Q2?
When I'm talking about, actually in the Q2, it was, the flat was in the range of INR 55,000 as compared to INR 51,000 of long. And if you take, for Q1, again, INR 57,500, it was around INR 54,500.
Right, sir. And would you be able to indicate the current pricing levels as well?
Current pricing, actually in the average of the month of October was INR 56,000, around INR 56,000, in which the long was INR 54,000, and again, the flat was INR 57,000.
Thank you, sir. Thanks for this clarification.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone now. We have our next question from the line of Rajesh Majumdar from B&K Securities. Please go ahead.
Yeah, good afternoon, sir, and thanks for the opportunity. Sir, I had actually a question on your overall debt and CapEx. It seems that the cash flow from operation has improved substantially this first half, but there's been no debt reduction and the CapEx rate is still very high. So what is going on in terms of our debt plans and we are still doing a significantly high rate of CapEx, despite all our major expansion program coming to an end. So what is going to be our long-term plan in terms of steel production, CapEx and debt, if you could shed some light on that?
The CapEx during the first half was in the range of INR 2,000 or close, INR 2,100, you can say. For the year 2023-2024, we are likely to end up with a CapEx of around INR 5,500 crores, which will be more or less in line with the CapEx which was there in 2022-2023. Now coming to debt reduction, actually, if you would see our figures, as on March 31st 2023, the debt was in the range of INR 25,500.
It went up to around INR 29,500 as on June 30th , and then again, we have brought it down to the March 31st levels of INR 25,500. And we expect that by the year end, we'll be probably having a debt of around about INR 22,000 crore. This INR 22,000 crore, a reduction of, you can say, INR 3,500 crore, with CapEx of INR 5,500 crore during this period, this is what we are looking at.
This is despite the coking coal price increase this quarter, which you have already mentioned, right?
Yeah. This is, including that.
Sir, how much of our CapEx is maintenance CapEx, and how much of it is growth CapEx, and what is the guideline for that?
At the moment, the growth CapEx is quite minimal. It is mainly the maintenance CapEx. The growth CapEx, we expect it to start only after, you can say from maybe 2025 onwards.
Will we increase our CapEx significantly in FY 2025, including the growth CapEx in that year?
No, no, not much, because see, I'm not talking about 2024, 2025. I'm talking about 2025, 2026, where there will be some payments, payment outflows for the design engineering part, you can say, of the first modernization, which is gonna come up, that is for ISP. We will be having the expenditures on these design engineering part of it and some supplies and some civil jobs and all. That will take place in 2025, 2026. And, subsequently, it will peak from 2027, 2028 onwards.
Our normal maintenance CapEx will be what? INR 4,000-INR 5,000 crore still, right?
Yeah, between that range. Between that much.
2026 onwards, our growth CapEx will pick up.
Yes.
is what you're saying.
Yeah.
What is our estimate of cash flows, annual cash flows, in that year that we are looking at in terms of full capacity, and what is the kind of annual cash flows we're looking at to fund that kind of growth CapEx?
Yeah, it will, it will be in the range, because we are, we are initiating investment in, in modernization and expansion of more than INR 100,000 crore. So when it peaks in those particular years, it may be in the range of INR 25,000 crore in each year.
These are the, our cash flows?
Yeah, that means the cash flows.
Okay. Okay, thank you. Thank you so much.
Thank you.
Thank you. We have our next question from the line of Raashi Chopra from Citigroup. Please go ahead.
Sorry if it's a repeat question. I missed some of the data points on the NSR. So could you just please highlight again what was the average NSR for this quarter? What was it for flats and longs?
Yeah. For this quarter, the average NSR was INR 53,400. And if you bifurcate it between flat and long, for flat it was INR 55,190 or INR 55,200, you can say, and for long, INR 51,300.
You indicated that the October prices are INR 57,000 for flat and INR 54,000 for long. Is that correct?
Yes.
Okay, and what are your expectations, you know, I mean, for November, December, like, given that, you know, there is still some room to import parity?
Actually, there is a lot of pressure of imports which are now coming up. So November, we are trying to at least, you know, retain the prices, whatever were there in the month of October. December, actually, we cannot predict the future. So though we would like to be, we would like to say that, December onwards, the infrastructure activities and all the, the building activities, start picking up. So maybe, we may get some sort of, improvement in pricing, during these two months, during the month of December.
Okay. Thank you so much.
Thank you. We have our next question from the line of Aditya Welekar from Axis Securities. Please go ahead.
Yeah, thank you for the opportunity, sir. Sir, if you can just reiterate our CapEx expansion plans and plant-wise, how we are currently where we are in the state of approvals and what will be the sequence of CapEx and start of expansion, with when it will start, from which fiscal year? And our internal threshold, when we go for an expansion, what will be our internal threshold with respect to our debt management? So because we have seen in the past that in the expansion phase, the debt was slightly... means the debt control is one of the concern, area of concern. So from that perspective, when we go for the next phase of expansion, how we will look at capital allocation and our debt control?
Yeah. This, initially, now, first of all, we are going in for shedding off our assets, where actually we'll be trying to improve our existing utilization of our existing assets by some minor investments. And, then after that, we are going in for the greenfield expansion of Visakhapatnam plant. For that, we will be most probably coming, we'll be coming to the board for its in-principle approval, maybe by the end of this quarter or maybe at the beginning of the next quarter. So we start with the expansion of Visakhapatnam steel plant, for which we'll get the approvals, and then we'll go in for tendering.
Subsequently, we are also going in for some brownfield expansion that will take place maybe in Durgapur Steel Plant, and also to some extent, Bokaro Steel Plant. So these will also take place subsequently. So the expansion plans are such that we'll be phasing it out over the next three to four years, so that we don't have that liquidity crisis which we had faced in the earlier expansion, where we had taken up three major expansions at Visakhapatnam, Bhilai, and Rourkela at the same time. So that is the thing. And the other guidelines which we have finalized in our vision document for 2030 is that we will try to maintain a debt-to-equity ratio of 1:1. All our calculations will basically depend on the debt-equity ratio of 1:1.
Understood, sir. That's helpful. Thank you.
Thank you. We have our next question from the line of Vikash Singh from Phillip Capital. Please go ahead.
Good afternoon, sir, and thank you for the opportunity. Sir, just wanted to understand, our net sellable capacity, we will peak out at 19 million tons, or there are some scope for squeezing out some more volumes?
Yeah, that's what I was telling you about, that, we'll be sweating our assets, since we'll be seeing wherever there's an opportunity to improve our production and, means utilization of our required equipment by some, debottlenecking schemes and all that. We'll be taking that up within the next, couple of years, so that we can get on board-
Can you quantify something?
Pardon?
Can you quantify what could be the bottleneck additional volume?
Our casters at Rourkela and even at Bhilai, we are having the casters out there. So these will help because we have got certain extra facilities available, like a blast furnace, hot metal capacities more. So we can actually use the blast furnaces more and get more steel produced through these steelmaking units. We can do that. And even we may also... We are also planning to go in for finished products, like we are planning to set up a TMT bar mill at Durgapur Steel Plant also. And certain other finishing facilities also will be improving on their efficiencies to improve the finished product.
So as of now, these are only plans, so no concrete action has been taken, and that's why you can't give us the quantity which could increase, right?
The casters and all, they are already under implementation.
Okay. So how much extra?
The only thing is the TMT mill, TMT mill, what we are planning to set at Durgapur Steel Plant, that we will be going in for, we'll be able to finalize that in the next few months.
Sir, in casters, just to follow up, on casters, any quantity which you can peg at, this much of extra can come out in terms of finished steel?
In both the plants, it will be around 1 million ton each, so you can say two million tons.
Understood, sir. So secondly, if I look at the slide number 20, our semis sales seems to be, you know, increased on sequential basis quite sharply, so couldn't understand the specific reason for the same?
Because there seems to be some error in that slide. We have already asked that to be corrected. Current proportion, I'll just let you know. This would be around 14.6%.
Semis?
Semis.
So, incrementally, everything comes down to the flats?
Yes.
Understood. And just one more thing. Can you just give us update on the our mining assets, basically Gua, which we wanted to do a 10 million tons, and even Rowghat. Can you just give us some update on the same?
Yeah. As far as Gua is concerned, we had gone in for a tender for appointment of MDO out there, but we have not been able to get a good response out there. But in case of Rowghat also, the interim mining has begun already out there, and we are able to evacuate around about 30,000-35,000 tons per month from there. But the main project, which is there, it will start. We have already appointed an MDO for that particular project also. And some pre-filling activities have started out there. And we hope that in the next three to four years, we'll be able to get sufficient material from Rowghat also.
Understood, sir. Just one last question: Any update on the Jharkhand inventory sale?
Not yet. We have not been able to get the clearances for that. But we are hopeful that in this financial year, 2023-2024, we will get the clearances for evacuation from there to some extent.
Sure, sir. Thank you, and all the best for future.
Thank you.
Thank you. A reminder to participants to press star and one to ask a question. We'll take our next question from the line of Somaiah V. from Avendus Spark. Please go ahead.
Thanks for the opportunity.
I'm sorry, his line got disconnected. Ladies and gentlemen, to ask a question, please press star and one on your phone now. As there are no further questions, I now hand over the call to Mr. Ashish Kejriwal from Nuvama. Please go ahead.
Yeah, hi, thank you. Sir, one question from me before we can pick up two more questions which are in the queue. Is it possible if you can give a volume guidance for this year? And, in terms of CapEx plans also, like for example, let's go how much capacity we are putting in and what kind of CapEx will be involved, at least in the first plant. And besides that, the sweating of assets involves about what kind of CapEx and incremental volume from there, and the timeline, that will be helpful, sir.
The first, if you talk about the CapEx of ISP, the DPR is under preparation and under finalization. So we are analyzing the DPR, mainly to cut down the cost. So it will be too early for us to comment on this. Regarding the sweating of assets, we have got an expenditure of around about, you can say INR 15,000 crore-INR 20,000 crore, which will take place in the next four to five years on these additional debottlenecking schemes and like these clusters which are coming up and other. Even we are planning coke oven batteries also. So this will be, there will be certain expenditure involved for these.
So sir, when we are talking about INR 15,000 crore-INR 20,000 crore, how much additional steel volume can be generated from there?
As I told you, it will be around about 3.5 million tons to four million tons.
3.5,
you can say.
Okay, and this will be in phases or it will come at one go in 2025 and-
It will be in phases. It will gradually come over the next three years, you can say.
And starting from FY 2025 or FY 2026?
From FY 2025, you can say. 2024, 2025, there will be some facility, and then, 2025, 2026, also.
Okay. Okay, and so this year's volume guidance, if you want to give?
Volume guidance, I think 19 million tons.
You are talking about sales volume?
Sales volume. Production, production.
Okay, okay.
Sales also should be in the same.
Okay, okay. Okay, thank you, sir. I think, we have a couple of more in queue.
Yes.
We can take it.
We'll take our next question from the line of Somaiah V. from Avendus Spark. Please go ahead.
Yeah, thanks for the opportunity, sir. So first question is on the domestic demand, between first half of this financial year and currently what you're seeing, and has demand kind of come off with this first half? That's the first question. And second part to that is that you did mention import, you know, bit of a increase in imports. This import parity pricing differentiation has been there for quite some time. What is changing now, which is adding a lot more pressure from the import side?
Yeah, regarding the demand part of it, there is a very good demand as far as domestic is concerned. Like, we have not increased our stock levels or anything like that. On the contrary, from the Q1 stock levels, we have been able to bring it down by around about 300,000 tons, 3, around 300,000 tons. And, regarding the... What was the second question about? The import part.
Imports adding pressure, so-
Yeah, there is a lot of pressure for that. There is, there is a lot of pressure building up for that. But then if you actually see that the quantity of imports will be quite less as compared to the total production in India. So it will have an impact, no doubt, that it will have an impact, but we are just hoping that it should not have a major impact on the local producers.
Got it. So this softening in prices in the last one month in the industry, so I mean, is it, is it more to do with imports? While you still see, domestic demand quite strong compared to, first half, is, is it primarily, driven by, import, pricing pressure?
Yeah, see, the Flat Products will be driven by the import pricing for here. Because your Long Products is slightly not affected by these by the imports, but the flats are being affected to some extent because of the import pricing pressures.
Got you. So the second question is on the, you know, cost, whereas your coking coal has gone up, thermal coal is on the relatively lower side. So is there, within the industry, there is a dynamic that probably a DRI player or a, you know, secondary player are seeing their cost curves kind of coming lower when compared to, the traditional, integrated players?
Yeah, actually, the price differential is there, so that is why there is a price differential when you go for the NSR pricing also. The longs which are produced by the primary producers, they demand a premium as compared to the secondary producers. And, basically, one more thing is that they are also not operating at capacity. They also are operating at lower than the capacity. Because maybe the demand is not there for that production.
Got it, sir. So also with respect to this, railway provision, so what was the original, I mean, the number that we have taken for FY 2021-22 vis-à-vis the number that we have got per ton? And also, what is the quantum for FY 2021-22?
... It was INR 67,500, which was the provisional pricing which we had taken earlier, and we got a pricing of around about INR 85,300. And we had actually sold around about 0.92 million tons to the railways during 2021, 2022.
Got it. So one last question on the OpEx front. You did mention that coking coal during the quarter had come down, you know, INR 4,000-5,000 per ton. So, but when I see on OpEx per ton, the number is only marginally lower. Is there any other increase in OpEx that kind of offset this full benefit? I mean, sorry.
Some marginal increase was there in the stores and sales expenditures and the expenditure on account of salaries and wages also. There were some increase, but actually, it's there is not much of an increase. Basically, if you see, the volumes had gone up, but the net sales realization being lower. So it was because of that, that the profitability has not improved to the extent. But as far as salaries are concerned, they have gone up around about INR 280-odd crore. This is basically because we have taken in the first quarter some provisions were not considered since the profitability was not there. But with the improvement of profitability, some incentives and bonuses are to be given.
So that has been considered for the entire half year during the period, and so also for the pension also, which was considered at a base of 3%, and which we have now considered at a higher rate of 8%. So the impact is for the entire year. And, some expenditure on stores and sales and repairs and maintenance has been higher, because in this particular quarter, some higher maintenance has been done, and also the production has been substantially higher.
Got it, sir. Thank you.
Thank you. We have our next question from the line of Kirtan Mehta from BOB Capital Markets. Please go ahead.
Thank you, sir, for giving another opportunity. In terms of the, you mentioned about two casters, one at Rourkela and the another one, I think, at Bhilai. Would you be able to give a timeline or target date for starting this caster? And how would the ramp up of 1 million ton production would be there? Would it ramp up within three to six months, or could it take longer there?
Bhilai will come soon. Probably the benefits of that will start accruing from the year 2024, 2025. Maybe initially at a capacity utilization of 60%, then it will gradually ramp up to 75% and 90% thereafter. Rourkela will take two years.
Right, sir. One more follow-up was on the sales and production level. You mentioned that production would be 19 MT for this year, and sales would be around that. But as we don't have much inventory in our system, would sales target for the year be lesser than that?
No, if the production is 19, and, we have a million ton of inventory, so we expect our, sales also to be in the levels of around 19. You can say, we can consider around about 18 million tons-18.5 million tons.
Understood, sir. Last question on the run rate for the employees' cost from here on. Is the Q2 numbers include basically some of the additional provisions for the Q1 as well? What should we take as a run rate going from here on a quarterly basis?
Yeah, we, you, you can consider that for the entire year, that, the employees related expenses will be to between around about INR 12,000 crore.
Fine, sir. Thank you.
Thank you. We have our next question from the line of Pratim Roy from BNK Securities. Please go ahead.
Yeah. Yeah, thank you for the opportunity. I have one question that, that you mentioned that the two million ton debottlenecking is possible, and another three to five million ton, three to five million ton is capacity extra, capacity will come by next three to four years. So for FY 2025, you made a comment on that, the 19 million tons production and 18.5 million tons in sales. So for FY 2025, 2026, if you can give some ballpark number, how much sales guidance we can expect, or any idea about that?
See, basically the casting in Bhilai will be stabilizing by that point of time, so we expect at least 1 million ton more from 2025, 2026 onwards. After that, Rourkela, when it comes, so you can expect maybe from 2026, 2027 onwards, another million ton from there.
Means, for FY 2025, one million, one million ton addition, and then, 2025, 2026 onwards, one million ton further addition. And the 3.5 to four million ton extra production?
Okay, 2024-2025, we cannot have that, because once the caster is there, it takes some time to stabilize and ramp up. So we will not be getting that much production from there. But once it is stabilized and Bhilai, then in the year 2025-2026, we can get one million ton extra.
Okay.
Means all over it will come from FY 2026, not 2025.
Okay. Okay, thank you.
Thank you. As there are no further questions, I now hand over the call to Mr. Ashish Kejriwal for closing comments. Over to you.
Thank you. And thank you everyone for attending the call, and special thanks to the management for their insightful remarks over the company as well as the industry. So, any closing remarks, sir, you want to give?
Yeah, just one sentence, that the company remains committed towards improving operational efficiencies. And with the market expected to be more benevolent in the coming quarters, I'm hopeful that the good times await us and our investors. 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.