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Edited Transcript of JINDALSTEL.NSE earnings conference call or presentation 16-Aug-19 5:30am GMT

Q1 2020 Jindal Steel And Power Ltd Earnings Call

New Delhi Aug 26, 2019 (Thomson StreetEvents) -- Edited Transcript of Jindal Steel And Power Ltd earnings conference call or presentation Friday, August 16, 2019 at 5:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Bharat Rohra

Jindal Steel & Power Limited - MD & CEO of Power Business

* Deepak Sogani

Jindal Steel & Power Limited - CFO

* Nishant Baranwal

Jindal Steel & Power Limited - Head of IR

* Vidya Rattan Sharma

Jindal Steel & Power Limited - MD & Additional Executive Director

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Conference Call Participants

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* Amit A. Dixit

Edelweiss Securities Ltd., Research Division - Financial Analyst

* Ashish Kejriwal

IDFC Securities Limited, Research Division - Research Analyst

* Atul Tiwari

Citigroup Inc, Research Division - VP and Analyst

* Bhavin Chheda

Enam Holdings Pvt. Ltd - Analyst

* Kamlesh Bagmar

Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst

* Ritesh Shah

Investec Bank plc, Research Division - Analyst

* Sumangal Nevatia

Kotak Securities (Institutional Equities) - Analyst

* Vikash Singh

PhillipCapital (India) Pvt. Ltd., Research Division - VP of Metals & Mining

* Yash Doshi;SBICAP Securities;Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen. Welcome to the Jindal Steel & Power Limited Q1 FY '20 Results Conference Call hosted by Prabhudas Lilladher Private Limited. (Operator Instructions) Please note that the conference is being recorded.

I now hand the conference over to Mr. Kamlesh Bagmar from Prabhudas Lilladher Private Limited. Thank you, and over to you, sir.

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Kamlesh Bagmar, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [2]

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Yes. Thanks, Lizan. On behalf of Prabhudas Lilladher, I welcome you all to the Q1 FY '20 First Quarter Results Conference of Jindal Steel & Power. Without much ado, I hand over the call to Nishant Baranwal, Head, Investor Relations. Over to you, Nishant.

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Nishant Baranwal, Jindal Steel & Power Limited - Head of IR [3]

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Thank you, Kamlesh. A very good day to all of you. We would like to welcome all of you on this conference call to discuss JSPL's First Quarter FY '20 Financial Results.

To begin the call, we would like to introduce our Managing Director, Mr. V R Sharma. Mr. Sharma has more than 30 years of core industry experience in steel, parts, cement and mining, both in India and abroad. Prior to joining JSPL, he's worked in companies like Abul Khair as their Group CEO.

For those of you who know Mr. Sharma, he has been long associated with JSPL. And before his stint with Abul Khair, he was our Deputy Managing Director. Before that, he also worked at Bhushan Power as Joint Managing Director for Bhushan Steel Limited, Whole time Director at Ispat Industries. And apart from that, even in overseas ventures like the Lloyd Steel Group, Arrasate, Socialist Steel and [Bilbao] and likes of those.

Also on the call, we have with us Mr. Bharat Rohra, our MD this year; and Mr. Deepak Sogani, CFO, JSPL.

Without much ado, I will hand over the call to Mr. Sharma to start his opening comments. Thank you.

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Vidya Rattan Sharma, Jindal Steel & Power Limited - MD & Additional Executive Director [4]

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Hello. Good morning. We are -- we have the team sitting over here. And I'd like to inform you that the company has done very well in the first quarter. We could do in JSPL stand-alone a turnover of INR 7,085 crores and EBITDA of INR 1,608 crores. The EBITDA margin is 23%, which is rated today in the industry as the second highest after the Tata Steel. The Tata Steel has done 25%. We are at a level of 23%. JSW is at 21% and SAIL is at 11%.

Company is doing very well in terms of productivity. Overall production have increased in the first quarter. It is up by 17% on year-on-year basis.

The Angul plant is in the ramp-up stage, which is going to be a flagship company of JSPL within this year. We will be touching around 4 million tonnes in the financial year 2020 from Angul. The blast furnace, which is the largest blast furnace in the country, is performing very well. And by the end of the year, we are going to restart our gold execution unit and DRI plant, which will give another impetus to the productivity as a whole.

We have brought down our cost of production by INR 2,100 per tonne. And we have also maintained the EBITDA per tonne more than INR 11,200 per tonne.

So the company is doing exceptionally well, but the best is yet to come. So I'm sure the best is waiting. The 3 quarters from now, that is quarter 2, quarter 3, quarter 4, you will see much more better sales because of the stability in the operations. And yesterday, on [level premise] has declared a lot of investments in terms of infrastructure growth. We, being a company, which is not in the general commodity, we are a company which is producing rails for Indian railways. We are producing specialty plates for defense, we are producing specific plates for L&T- and BHEL-type companies. It's a very large organization in the country. And we produce structural steels for the bridges, especially for the railway bridges and for the other infrastructure growth like high-rise buildings. Now the trend is to go for the high-rise building.

So we have the niche markets. We are not affected adversely the [decline] scenario, international scenario of steel glut, so called. We are also not affected because of the Indian automobile industry is not doing well so -- because we supply hardly and in quantity to the Indian automobile industry.

So our main customers are Indian railway. We have hope our Indian -- our rail manufacturing facility, we have hope for the whole year. This is one good news. Then similarly, for the -- we have a product line called medium and light structure mill, which is also booked for the whole year. We have 2 treadmills, state-of-the-art treadmills. We produce wide steel in the country, the specialty team, and this is also fully booked for the whole year. So we don't have any problem in terms of maintaining the EBITDA level and maintaining our overall sales volume.

We aim to achieve more than INR 40,000 crores of turnover despite of price reductions and the overall price is coming down.

In the FY 2020, the steel per se was interval in terms of raw material prices, but we could maintain still the good EBITDA level as you have seen. And in the next quarter, that is quarter 2, quarter 3, we are expecting the coking coal prices will go down and so will the iron ore prices coming down.

Domestic iron ore will also come down and coking coal price will also come down. So this will allow us -- this will enable us to maintain the EBITDA of INR 11,200-plus per tonne. This is what we are contemplating now, and we are sure we will do it.

As far as the total overall cash are concerned, we had an opening cash of INR 39,500 crores. We have paid INR 1,500 crores in the first quarter, and we are aiming to reduce the debt burden from INR 39,500 crores at the beginning of the year to the end of the year by FY 2020. So we will be bringing it down to INR 34,000 crores.

So this is all from the internal accruals. This is where the company is doing well. EBITDA level is good. Anything -- if there's any divestment takes place that we order and above, but we are not registered seller for our -- any divestments or bringing some new partners because company is doing well, so we are looking for the right partners. Whether in full or part, we can do the divestments.

Our Mozambique mines are doing extremely well. We are in profit there. EBITDA is very much positive. We are now ramping up the production so that we can bring the coking coal from our own mines as a captive. We bring to India, and also we'll be trying -- we'll try to look out the other markets in India like the other steel companies, those who are importing coking coal from Australia, from rest of the world. So we'll be playing a particular grade of coking coal to them as a good blend.

Then our African mines, African entity, they're also doing very well. The concern is Australia, where we have already applied for some of the government clearances and approvals. We feel that we'll get it very shortly. And the moment we get it, then we'll see. We'll wait for the right time, right opportunity so -- to do the divestments. And if any divestment takes place, this will further add to the liquidity in the company. So this is what we are aiming for.

As far as the -- I would like to also cover some of the areas, like iron ore availability in-country. Iron ore availability in-country has improved because the domestic exports is reduced in last 2 weeks time because the iron ore prices have gone down from $120 to $85 a tonne. So whatever the iron ore was being exported that has got aid, which is good for the Indian steel industry. And we feel that availability of iron ore will be better in quarter 2 and quarter 3, also quarter 4.

As far as the international scenario is concerned, there is always a problem in between America and the U.S. as well [retail] areas are concerned. For last 2, 2.5 years, the world is witnessing this kind of rifts in between 2 major economies of the world. And India being a part of the global economy, we are not scared of this kind of situation. But I think the 2 large economies, they cannot keep on struggling and debating on these issues. There'll be some solutions by the end of the year, maybe in the third quarter, and both the economies will definitely sit together to settle the matter forever. So I think things are better. The -- and very promising, and we'll be in a position to achieve our overall targets.

We have planned to produce around 6.5 million tonne of steel in this year from India, and we will maintain it. The operations are very much stable. The supply chain is very much stable. We are not finding anything wrong in the supply chain item in the pipeline.

The Oman entity, they are not done with the construction in the first quarter because in the first quarter, it was a very hot summer in Oman and Middle East. So the construction work that stops because there, we are mainly in the construction business, and we are making TMT and our rebars, deformed bars. And since it is a very hot summer there, so when the temperature -- as soon as it goes more than 50 degrees Celsius, the government ban the outside preserves. And this is what happened there. So we are expecting that the weather will be better in the second quarter and the end of the second quarter. Third and fourth quarter are definitely winter season. We shall be in a position to recover the sales.

As far as the price pressure is concerned, there is a price pressure, of course, everywhere whenever there is a higher connectivity from any part of the world. Like in last 1 quarter, despite of all of China has increased their production by 10%, which is a very significant increase and very unusual in such kind of situation. So we are expecting that in the coming quarter because of pellet prices going down, coal prices going down, energy prices going down, overall, crude price is going down or stable. We will be in a position to maintain a very good equity level in Oman also.

As far as the Indian scenario is concerned, like iron ore mining, the next year, by 2020, early 2020, most of the mines will be put on the auction once again. We are planning opportunity in these kind of minings. We'll definitely try to put our bids to acquire some of the mines or kept to use for the -- for any trading business or something because we need iron ore for our -- to run our steel plants. And we will try our luck. Hopefully, we will get it, and we'll try our best.

As far as the domestic coal is concerned, there was a problem today because of heavy flooding situation in most of the mining area. But still, our Power division has done very well. We have bought 15% EBITDA level in Power, and we are aiming some more PPAs from governments like Kerala. And we are also playing in railways, whether we can play more power or not. This is what our aim is.

If we get into these kind of deals and good, better PPAs, then we can definitely increase the EBITDA level in terms from JPL side also.

We have Managing Director of JPL with me, Mr. Bharat Rohra. He'll throw more light in this session on Power sector.

So I'm through from my side. We are aiming with a INR 42,000 crores, INR 43,000 crores of turnover, with a debt of less than INR 35,000 crores, which shows a very healthy situation. We will end the year 2020 with this kind of note. So internal accruals are good. We are not going to invest too much in CapEx except for the balancing facilities. The CapEx will be done only in those areas where we've seen that we can get the instant results. And otherwise, no.

So we will think -- we will first -- our aim is -- Chairman, Mr. Jindal, has already cleared his business philosophy, earn and invest. Anything we have to invest, we have to earn first. So this is a very good insight given by him.

So we are -- the slogan, earn and invest, we will earn and invest. And this is what our aim is.

So thank you from my side. Everything is over. Thank you so much.

So I'll transfer the line to MD, JPL, my colleague, Mr. Bharat Rohra. Over to Mr. Bharat Rohra, please.

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Bharat Rohra, Jindal Steel & Power Limited - MD & CEO of Power Business [5]

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Good morning to all the participants. The first quarter of FY '20 for JPL under review has seen a much better performance on a Q-on-Q basis and as well as on a Y-o-Y basis.

The comparison on a Q-on-Q basis has seen an increase in the turnover from INR 999 crores to INR 1,114 crores. That is, it's up by 11%.

The generation has gone up from 2,609 million units to 2,982 million units, up by 14%. And similarly, the P&L has gone up by 15%.

The EBITDA has seen an increase of 35% from INR 267 crores to INR 360 crores primarily due to higher generation, higher NSR and lower coal costs. Similarly, comparison on a year-on-year basis, the turnover has increased by 15% from INR 968 crores to INR 1,114 crores. Generation has increased by 8% from 2,751 million units to 2,982 million units. And PLF is also up by corresponding 8%.

The EBITDA on a year-to-year basis has gone up by 15% from INR 314 crores to INR 360 crores. I'll come for my comments on the sector as such.

The sales in the power sector continues. However, the central government has realized the importance of giving a boost to the power sector. In view of this, the government had earlier come out with a series of measures to build relief to the power sector. In continuation of these steps, the government has come out with directives to all state governments and discoms to buy power only with a proper statement security mechanism in place.

The order issued in June 2019 makes it mandatory for all discoms to open LCs for container power as for the terms of the existing PPAs. The discoms have started compliance of these directives, and JPL has -- only had to regulate power for 3 days to one of the discoms and they have also complied to the LC requirements. As a result, with effect from August 1, 2019, JPL is supplying power to all the discoms with proper payment mechanism in place as per the PPAs.

The central government is also considering sanction of a grant to the defaulting states as a onetime settlement so that all the previous use of the generating companies [payable with a discom] get liquidated. And we have only outstanding views from [Tengasco]. All the other discoms are from paymasters.

The future outlook for JPL is bright, and the pilots into being coordinated by an [SBC] is likely to be finalized towards the end of this month. JPL is likely to be allocated in the first instance, 315 megawatts under the scheme, and the PPA is at a tariff of [INR 4 crores 41 paisa] for a period of 3 years.

A few other short-term PPAs are also under the bidding stage, and we shall continue to offer competitive tariffs for short-term PPAs as and when discoms come out for such requirements.

Now regarding the coal availability, it has been off and on, up and down, but we have managed to get all to honor all of our PPA obligations. And for the future also, the government has recently announced options of coal mines for the industry except power. Hence, JPL -- JSPL plans to participate in these options and secure a mine for the steel plant operations.

JSPL will also be able to make available 25% of the coal mine to JPL on a regular basis. This will further ensure operating JPL units at a much better PLF.

Lastly, I come to the reduction in debt plan by JPL. The current debt in JPL stands at about INR 7,000 crores, and JPL plans to repay the debt sooner than the existing repayment plans. This shall be done as and when lump-sum payments are received from Tengasco , for the current outstanding views and also out of the interest being bid by JSPL on the loans given to JSPL.

It is also fortunate to mention that on the directions of the affiliate tribunal, Tengasco will regularly pay the installments towards JPL loss use payable to JPL.

With these comments, I would come to a close, and I will hand over to our CFO, Mr. Deepak Sogani.

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Deepak Sogani, Jindal Steel & Power Limited - CFO [6]

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So good morning, everybody, on the call. I'm very pleased to announce a set of very good financial results for us. And let me begin my commentary on the financial results and some color on the financial results after that.

So from a revenue point of view, on the consolidated revenue side, we reported a revenue of INR 9,946 crores in the reported quarter, which was 3% up on a Y-o-Y basis and minus 2% on a Q-o-Q basis. On a stand-alone basis, we declared revenue of INR 7,085 crores, which was 5% up on a Y-o-Y basis.

Taking the comment to EBITDA, we have reported consolidated EBITDA of INR 2,173 crores in the current quarter, which is up 18% Q-o-Q. Last quarter was INR 1,845 crores. On stand-alone basis, we have reported EBITDA of INR 1,608 crores, which is up 12% sequentially. Last quarter was INR 1,440 crores.

We have declared positive PBT. We've declared INR 11 crores as consolidated PBT. And on a stand-alone basis, we have declared INR 344 crores positive PBT.

Now to give you some commentary on our financial performance. I'd like to kind of pull out few facts that are underlying the reported financials.

Firstly, as we have been saying all along that our main thesis is that we are going through a fair amount of volume growth, given our new Angul plant and also the capacity expansion in Oman. So in line with that, I'm very happy to report that as we have been saying that our volume will grow, it has been growing pretty much in line with what we've been saying.

So as you're aware, in FY '18, we had in India about 4.02 million tonnes of sales; and in Oman, we had 1.67 million tonnes of sales. So that's 5.7 million tonne.

In FY '19, the same data was 6.96 million tonnes, so we had a 22% growth.

In FY '20, we are forecasting -- or estimated around 6.5 million tonnes of sales in India and 2 million tonnes in Oman, a total of 8.5 million tonnes. And therefore, we are, again, looking at a 22% volume growth in FY '20 over FY '19. And in FY '21 and FY '22, again, because Angul will continue to ramp, in India, we should be able to do 7.5 million tonnes next year and 8.5 million tonnes thereafter. Again, reflecting in the next 2 years also resulting in double-digit volume growth number. So that's -- the core thesis is intact that our business is, obviously, from a volumetric point of view, showing very robust growth. So that's the first point that I thought I'd kind of highlight for you.

The second point that I'd like to pick up, we have been saying that we will make our business efficient, right? In particular, we've been saying that Angul in FY '19 was producing steel, which is more expensive than Raigarh. And over a period of time, as we grow the volume of Angul, the business will overall become more and more efficient. So let me kind of add some color on that.

In the reported quarter, the NSR for us went down by INR 700 per tonne. But the cost of promising steel for us went down by INR 2,100 per tonne, right? Partly because Angul ramped up and the efficiencies led to about INR 1,100 per tonne reduction, the cost of making steel. And also, the raw material cost came down by INR 1,000 per tonne. So our net EBITDA went up by INR 1,400 per tonne. So all along, we've been saying that our cost of making steel will become more efficient, and the numbers are kind of very clearly talking the same story.

To add a little bit more color on the efficiency, just look at the Angul cost of producing steel. In the reported quarter, I'm very happy to report that Angul is now producing steel at a cost comparable with the cost of Raigarh in the current quarter.

Just to take you back in the journey, in the last quarter, Angul produced steel, which was more expensive than Raigarh by INR 1,000. And in the corresponding quarter of last year, which is 4 quarters back, Angul produced steel, which is INR 2,600 more expensive than Raigarh. So progressively, Angul has started making steel, which is much cheaper. Obviously, as we grow the Angul business further, more benefits are likely to come.

So that, again, kind of -- is in line with our regular commentary that we are talking about.

In addition to that, as our volume goes up in Angul, we would actually -- our targeted improvement in Angul steel is going to be somewhere around INR 2,000 to INR 2,500 below Raigarh. So there is a lot more benefits that we are likely to see as the quarters pass by. So that we should see in the next couple of quarters, more benefits coming in from Angul.

Now let me also take the time to comment on the current quarter. Obviously, for the sector, obviously, different place have a different situation. But for us, as we are seeing right now, at this point of time, the first payments have been down by INR 1,000. And in the second month, the NSR has gone down by another INR 1,000.

So as we stand today, in the second quarter, our NSR has gone down by INR 2,000. But at the same time, the cost of making steel for our system down by INR 1,200, so there is a net impact of INR 800 as we speak today. However, as Mr. Sharma, MD, had commented, we have seen significant decline in the coking coal prices. So the coking coal price on a blended basis for us has come down by around $30, and that will impact our cost of sales by INR 840. And the iron ore prices have already gone down by INR 200 per tonne, should go down even more. But even with the limited INR 200 per tonne reduction, that will reflect in a cost of steel reduction by INR 320.

So already, we are seeing about INR 1,200 per tonne additional reduction cost of producing the steel from the raw material point of view.

At the same time, I've not yet spoken about the efficiency. Angul will obviously make steel even more cheaper. So that's one commentary that we've been saying time and again that Angul will make steel cheaper, and we are also working on several efficiency initiatives to improve our cost of making steel, both at the parent level, steel level and national level, at all levels.

The second commentary that I would like to make is on the rail side. On a quarter-on-quarter, our rails gone -- our rail sales have gone up by 21%. On a Y-o-Y basis, our rail sales have gone up by 126%. And our order book for the full year is completely choked for the railway, right? So I think that's one important differentiator for us versus the other.

I'm also pleased to kind of inform you that while the NSRs for some of our other products may have moderately gone down, but in the reported quarter, the NSR for the rail business went up by INR 1,300 over the previous quarter.

Further, I think as we have been saying, and even before I go further on the NSR journey that we kind of say, that today, we have almost 1.73 lakhs of pending orders to be delivered to the rails. Under negotiation, another 1.4 lakhs turn of orders are there. So overall, 3.16 lakhs turn of orders are yet to be delivered. And as we deliver these, many more orders are likely to come. So I think that's one very robust side of our business.

Again, a quick commentary on how we see our NSR movement versus the market movement. For us, rails and structurals are about 1/6 of our volume; plates are about 1/3 of our volume; and pure [longs] which is TMT and wire rod, et cetera, are about half of our volume.

So while the pure longs NSR may move in tandem with the market, but the rails actually are improving. And the plates, the NSR movement doesn't go down as much as the market. So on a blended portfolio basis, we see significantly less volatility versus the market price. I would like to just kind of comment on that.

And I would like to also reiterate that, obviously, we are a long agribusiness. We have about 70% in bonds, and we also have very unique products in form of rails and highly value-added plates, and we do not cater to the auto segment, which is, obviously, in a bit of a slow mode at this point of time. So clearly, from a differentiation point of view, we have no share in the auto segment, right? So I'd like to highlight that.

Then I would like to also kind of take my time now to compliment and comment on the JPL business. The Power business has done extremely well in the current quarter. We have seen the production go up quarter-on-quarter by 14%. We have seen, on a Y-o-Y basis, the production of the Power business go up by 8%. The EBITDA has gone up sequentially by 35%. And on a Y-o-Y basis, the Power business, EBITDA has gone up by 15%. The NSR has improved. And on the whole, there is a fair amount of visibility of additional PPAs, medium-term and short-term PPAs on the table. As Mr. Bharat Rohra, MD of the Power business, has commented, we are on the angle of getting 1 aggregation order of 315 megawatt.

So ballpark, JPL business will do much better than last year, and that is one interesting and important point that I wanted to comment on.

Then let me do my commentary on the international side. On the international side, very happy to report that our Mozambique business has started doing extremely well. It has shown production increase of 126% on a Y-o-Y basis and 19% on a Q-o-Q basis. So that's one important development.

And it is important to note that for the first time, obviously, Shadeed was always making profit. But other than Shadeed, right, which include the 3 -- Australia, obviously, we make some losses. But when we bundle Australia and Africa together in the reported quarter, we have reported INR 26 crores positive, which means that on a normal basis, our international geographies are now positive. Obviously, we have to obviously take care of the debt repayment at this point of time. But from an operational point of view, the management focus to include the operational performance of our international business is delivering excellent results. We see Australia improved as we mentioned earlier on. We are waiting for 1 approval to come in Australia, which will happen in the next few months. And thereafter, the future for Australia will improve considerably, and Mozambique and South Africa are also kind of improving in terms of the operational performance.

It has been reported that we are in a transaction. We have signed some -- we've signed a share purchase agreement for sale of our Botswana business for $150 billion (sic) [$150 million], and the sale's obviously being inked. There is diligence and other conditions precedent-related activities going on. The transaction has not yet been consummated. The transaction will get consummated only upon the conclusion of the condition precedent and all of the procedural matters. So while we have inked the share purchase agreement and we are waiting for the transaction to get consummated, still there are steps to be done before the conclusion of the transaction can actually happen. So that's another commentary that I'd like to kind of make.

So with that, I think the larger part of my commentary on the business is over. Let me just share and now take time out to discuss on our debt levels. We had gross debt on a global basis of INR 39,084 crores at the end of 31st March 2019.

In the current quarter, we have deleveraged significantly by INR 1,441 crores, in line with the total goal of deleveraging the share by minimum INR 4,000 crores from operational initiatives or from operational cash flow. Obviously, what's going to happen and if other divestments happen, we will be able to kind of take this even further. So the balance debt that we are carrying at the end of this quarter, reported quarter, is INR 37,621 crores, which is significantly lower than the peak rate of around INR 44,000 crores that we used to carry.

I'm also pleased to inform you that the net debt-to-EBITDA levels on a stand-alone basis has come down from 3.14 at the end of last quarter -- at the end of last year and last quarter, that is, to 2.64 levels currently, and we are looking for this number to come down to 2 by the end of this fiscal year.

The comparable data for the consolidated business at the end of last year, the figure of net debt-to-EBITDA was 5.3, which has already come down to 4.38 at the end of this quarter. So we are deleveraging at a fairly fast clip.

So that's the commentary on the debt for you. Let me also take the time out to talk about the loan against the shares matter as lot of investors have asked us a question on this matter. So I thought it would be prudent to kind of table that provision in a uniform manner to all the listeners on the call.

As you're aware, let me just take a couple of minutes, we have total shares of INR 101.79 crores outstanding, of which promoter shares are INR 61.60 crores, which includes the largest family, including our marine industry family as well as the other business family. The total reported pledge on the stock exchange is INR 39.95 crores. And as you're aware, and we've been making the statement that of this INR 39.95 crores, INR 9.13 crores shares are basically in the form of nondisposal undertaking commitments given to banks in our documentation we did. These shares are not pledged. These shares are freely available with us. However, as the civic guidelines have changed and it is becoming now mandatory to even report the different commitments that we may have against the share and therefore, INR 9.13 crores has been reported by us to the stock exchanges to be on the prudent side of law, right? And if you kind of exclude the INR 9.13 crores shares, again, let me repeat, these shares are free shares in our factory, right?

If you net them off, the total number of pledged shares comes down to INR 30.82 crores shares, which is 50% of the total promoter holding. Our total debt is significantly lower compared to this, the shares on the promoter side.

Now let me take one more commentary on the loan against shares. We had a peak loan against shares number of INR 1,151 crores in September of 2018. And progressively, we have been repaying the loan against shares number. As of today, the loan against shares number has come down to INR 906 crores. And in the last month, we have actually kind of paid off almost INR 100 crores of loan against shares. So the loan against share number is almost INR 300 crores below the peak number, and it's a significantly lower number compared with the total promoters' shareholding, if you will, right?

The next commentary that I'd like to talk about is, as you're aware, obviously, the shareholding with [marine energy] is INR 40 crores shares and he has pledged INR 14 crores shares out of that for borrowing the loan against shares number that I spoke about, right, which is 35% of its holding. Another INR 4.31 crores has been pledged by [Fin] which is 21 -- which is for -- which has been given to banks towards the security and other purposes, which has been actually pledged to the banks. This is in addition to the INR 9.13 crores nondisposal undertaking that I spoke a little earlier.

So only 35% of the shares have been pledged as far as the loan against shares matter is concerned. And we have taken proactively certain steps to further kind of manage the loan against share issues given the volatility in the stock market at this point of time.

We are on our way to consolidate and to reduce the loan against shares by another INR 400 crores to INR 500 crores, of which we should be able to see over INR 200 crores happen over the next 1 week to 2 weeks, right? So we are well on course to kind of reduce or consolidate some of it in the near-term and balance over the next 1 or 2 months. So that work is in progress.

And just again, the share price has been volatile. Capital markets have been volatile. So consciously, what we've done is we have taken the call, we have taken the call to kind of do additional pledging to make sure that all the lenders of that have significantly excess shares compared to the amount that they have given to us, right?

In line -- obviously, this is basically a respondent step that we are taking given the volatility in the capital markets. Our results are good and our performance is excellent. But nevertheless, we do not control the stock market movements. And in order to manage the volatility in the share prices, we have decided that we will pledge additional INR 4 crore to INR 5 crore shares and make sure that every lender has shares covering them at the price level, which is significantly below the current price level. So that's an initiative that we will undertake, and we will kind of execute on it. But the purpose of that, as I said, is primarily from a risk management perspective and no more.

And I would also like to say, repeat, that by end of -- in the next 2, 3 months, actually, we would like to bring this last number to -- from a -- either consolidation or a lumination point of view, the [906] number should be [500] or below. I think we are moving in that direction, and we will be happy too because we understand that this is an important metric that the market is kind of looking at, and therefore, we are very focused on addressing this issue. But also, as you may know, right, it was a very difficult journey to get the Angul plant commissioned and all the loan against shares that marine energy has taken INR 1,000-odd crores. It was at the peak about [INR 1,200-odd crores]. Entire money in different forms has been invested in the company, right, to support the business, right?

So that money only we've been able to kind of ensure that the Angul plant comes up, and we are at a point where we are talking about significant improvement in our business and cash flows. All that was enabled by the contribution made by the money that's given to pledge all these shares.

So that's my commentary on the loan against shares, and I will be happy to take additional questions if you would.

The only limited point that I'd like to highlight in addition to that is that our MD mentioned about 100 lakhs crores commitment by the PM towards the infrastructure investment. In addition, he mentioned about the given mission where another 3.5 lakhs crores will be spent. So all these initiatives sound extremely positive for us, and in the next few months, few quarters, we hope to start enjoying significant benefit from these initiatives in our business.

With that, I'd like to complete my commentary and over to you for your questions.

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Nishant Baranwal, Jindal Steel & Power Limited - Head of IR [7]

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Before we start the questions, I would like to request you all please do not get into data questions. We are always there to help you with the data questions. Let's stick to some strategic questions.

With that, I'll pass on the call to operator. Operator, we can take the questions now.

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Questions and Answers

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Operator [1]

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Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions)

The first question is from the line of Amit Dixit from Edelweiss.

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Amit A. Dixit, Edelweiss Securities Ltd., Research Division - Financial Analyst [2]

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Congratulations for a great set of numbers, sir. I have 2 questions. The first one relates to Power business. In Power business, we have seen that the cost of generation has gone down significantly to almost INR 2.75 per unit. Now is it because of the better coal availability from Coal India and the auction prices going down? Then we attended Coal India's analyst feed. They clearly mentioned that the availability of coal will improve further. So can we expect further improvement on cost at least as far as Power business is concerned?

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Bharat Rohra, Jindal Steel & Power Limited - MD & CEO of Power Business [3]

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Yes. We can expect further improvement as and when the coal becomes abundantly available because now the government has realized that it is the coal, which was hindering the progress of the power sector. So we are at a pretty significantly low cost of generation. But still another 10 paisa, 15 paisa reduction will be possible if the coal prices are under control.

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Amit A. Dixit, Edelweiss Securities Ltd., Research Division - Financial Analyst [4]

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Okay. The second question relates to pledging. Sir, you mentioned that if I deduct [marine energy] shares from the total number of shares pledged, so it means that the other family members have pledged their entire stake in JSPL. Just wanted to get a little bit more color on that, that where it has been pledged, for what purpose and whether there's a chance for that particular supply to come in the market.

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Deepak Sogani, Jindal Steel & Power Limited - CFO [5]

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So from a data point of view, in terms of match, the other INR 10 crores [marine energy] shares out of the INR 20-odd crores shares that are there, INR 12 crores shares have been pledged.

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Amit A. Dixit, Edelweiss Securities Ltd., Research Division - Financial Analyst [6]

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Sir, because you said INR 14 crores out of INR 40 crores shares, INR 14 crores shares have been pledged by [marine energy] and INR 61 crores shares, INR 39.95 crores have been pledged. So if I did -- get these 2 numbers, INR 21 crores comes to -- comes from the other family members. And in fact, the number grew much higher around INR 25 crores shares that have been pledged through. Just wanted to understand...

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Deepak Sogani, Jindal Steel & Power Limited - CFO [7]

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Amit, I think there are -- this is a complex subject. There are multiple numbers. Let me walk you through the numbers very carefully once more and for the benefit of everybody. And then we can talk about reconciliation is required on an offline basis.

Total promoter shareholding, including the [marine energy] shareholding is INR 61.6 crores shares, correct?

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Amit A. Dixit, Edelweiss Securities Ltd., Research Division - Financial Analyst [8]

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Yes.

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Deepak Sogani, Jindal Steel & Power Limited - CFO [9]

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The pledged share reported in the stock exchange is INR 39.95 crores shares, okay?

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Amit A. Dixit, Edelweiss Securities Ltd., Research Division - Financial Analyst [10]

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Correct.

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Deepak Sogani, Jindal Steel & Power Limited - CFO [11]

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Right. Of which, as I mentioned, INR 9.13 crores shares are wrongly reported as pledged. They're not pledged. They're only in the security documentation of the banks. They have been disclosed as nondisposable. Undertaking has been given. Those are 3 shares, but under the revised civic guideline, it was required by us to be able to -- the Board and the stock exchanges, so it was reported. So the net pledges, INR 30.82 crores shares, correct? Am I correct?

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Amit A. Dixit, Edelweiss Securities Ltd., Research Division - Financial Analyst [12]

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Yes. Yes.

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Deepak Sogani, Jindal Steel & Power Limited - CFO [13]

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Right. Out of the INR 30.82 crore, which is 50% of the total share, right? INR 14 crores shares have been pledged by [marine energy] for loans, another INR 4.31 crores shares have been pledged by marine energy to the banks as collateral security, not for loans, right, the individual loans, right? So that is the figure to INR 18 crores. Therefore, out of INR 30 crores, INR 12 crores is remaining, which is the pledge made by the -- other than marine energy , it's -- others have pledged INR 12 crores out of INR 20 crores. Is that clear number?

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Amit A. Dixit, Edelweiss Securities Ltd., Research Division - Financial Analyst [14]

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Correct, correct, correct. Sure.

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Operator [15]

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(Operator Instructions) The next question is from the line of Ritesh Shah from Investec.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [16]

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Chairman, you're welcome again back to the group. Sir, my question is specifically on power. Are there any timelines for NHPC? That's one. And we didn't comment on West Bengal and Gujarat PPAs. What is the status and are there any timelines that you're looking at over here? That's the first question.

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Bharat Rohra, Jindal Steel & Power Limited - MD & CEO of Power Business [17]

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The NHPC tender, it's mandated when the power will start flowing from October. However, NHPC could not muster up 2,500 megawatts of buyers. They have sellers for 2,500 megawatts, but they do not have buyers for 2,500. Presently, there are buyers for about 1,000-odd crores. So that is why initially because JPL was L1 for 315 megawatts. So we are expecting that they will give us the initial order of 315 megawatts.

Now this is every other NHPC. Then the West Bengal and the Gujarat tenders. Those tenders have been put under [events]. And Gujarat is waiting for some regulatory clearances because they had offered coal from Gare Palma to be converted into power and supply to Gujarat. But they are still not got government clearances for that. So that is why the tender is on the hold.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [18]

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That helps. And sir, this is a related question. We have 200 megawatts Tamnar PPA, which goes up next month. So how do we plan to recoup that? Is it just we are relying on NHPC 315? Or is there something else?

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Bharat Rohra, Jindal Steel & Power Limited - MD & CEO of Power Business [19]

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No. We had built a total of 515 megawatts for NHPC. And the 200-megawatt [Tengasco] PPA was a medium-term contract at INR 3.46, which was barely sufficient to read the generation costs. So it was no point continuing the PPAs. So we had given a 6 months notice to Tengasco that we would be not be interested in extending this. That is why they have participated in the NHPC tender, and they are seeking another 200 megawatts from there. So we may get an additional 200 megawatts at a better tariff through NHPC at 4.41 and we get this [a little bit 3.46]. So that is how it's going to work out.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [20]

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Okay, sir. That's very helpful. Sir, you did indicate about...

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Operator [21]

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(Operator Instructions) The next question from the line of Atul Tiwari from Citigroup.

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Atul Tiwari, Citigroup Inc, Research Division - VP and Analyst [22]

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Sir, this is on the order of interest cost. So over past 5-odd quarters, your consolidated net debt has come down by about INR 5,000 crores, so congratulations on that. But your quarterly interest cost has actually increased, and it is holding around [INR 11 billion] a quarter. I really -- we should have seen some decline because of the debt decline. So that is my first question. And the second question is, is the DRI plant restarted and going on time in September? Or is it pushed out a little bit?

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Bharat Rohra, Jindal Steel & Power Limited - MD & CEO of Power Business [23]

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So let me just start off by commenting on the interest cost, right? So the total finance cost that we have reported in quarter 1 FY '20 is INR 1,109 crores and in quarter 1 FY '19, we had reported a total interest cost of INR 973 crores, which means there is an increase of INR 136 crores in the reported quarter over the corresponding quarter in the last year.

Now let me try and kind of comment on that further. Obviously, our interest cost is decomposed into the interest that we pay for our loans, both working capital and long-term loans and debentures, et cetera. But in addition to that, we obviously incurred additional cost in the form of operating charges. So we do certainly -- we do almost 85% of our business, which is LC-backed. And as and when we deliver the goods, we discounted to create the financing in the business. And as our business is growing, the LC discounting charges is supplied to this part of our business. That part (inaudible) in line with the volume of the business. And therefore, that part of the expenditure gets debited towards interest. Our expense line, that is going up.

Second -- the third component rather is dealing with bank charges and financial expenses. But again, bank charges deals with the amount of NCE, the amount of [BGE], the amount of total volume. And this particular component is also going up, right? So while on one hand, we have seen -- so for example, in the standalone business, our working capital and short-term loan interest has gone down from INR 545 crore to INR 478 crore. I'm talking about the Indian business as such, right? We have seen a significant reduction of (inaudible) pure term loan and fee interest. But we have seen increase in the interest costs helping on account of LC discounting charges, et cetera, by almost INR 20 crores; bank charges, et cetera, by almost another INR 20 crores. We've also seen some reduction in our interest income because maybe we had more separate cash in the last year. Then this year, the interest income has gone down by almost INR 40 crore. So between the different components, there has been a differential of about INR 100 crore. So while we can submit a detailed reconciliation to you, but my request to the audience on this call is to start looking at our interest as a proposition of multiple things. One portion alone deals with -- or one portion primarily deals with the borrowing that we do and the interest working with that, but balance all portion of deals with part of our operations than as of (inaudible) that expenditure actually goes up, right? And we are very happy to kind of answer this in more detail. Nishant can take on these questions offline if required.

And with that, let me also request our MD to give a commentary on the CGP DRI question that you had asked.

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Vidya Rattan Sharma, Jindal Steel & Power Limited - MD & Additional Executive Director [24]

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Yes, please. So DRI, we are ready to produce DRI from our DRI plant in the month of October. So what we are doing now, we have 2 options available to go for DRI or to increase the production by adding scrap in our converter. So we have the 250 tonnes of converter is specially designed converter first time in the country, which can accommodate even 25% to 30% scrap over and above the hot metal availability in the vessel.

This very, very special technique. Most of the A-class companies in the world, in Japanese companies especially, they are adding 25% to 30% of scrap in their converters. So our converter design is also looking for the international standards. And what we will do at DRI increasing production through DRI route or increasing production through scrap route that will see the cost economic benefits where we are getting more benefit. If you think that the scrap prices are down, then we'll add at least 25% to 30% scrap in our DRI vessel -- sorry, in our converter and we'll increase the production pipe 30% at effectively 0 cost. And this will also reduce our overall cost of manufacturing steel. So today, we are at a level of more than INR 5,000 per tonne. And converting through the converter. And we are aiming to bring it down to around INR 4,000 per tonne.

In the first quarter, you have seen, we have reduced our cost of production by INR 2,100 a tonne. And in the second and third quarters as well as subsequent quarters, we are going to get a better number than the INR 2,100 so that we can be competitive always. And our aim is to make our company the lowest cost provisional steel in the country.

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Atul Tiwari, Citigroup Inc, Research Division - VP and Analyst [25]

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So sir, just to clarify, the coal gasifier and the DRI, both are ready to produce by October? There is nothing pending in terms of the logo, the technology, et cetera?

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Vidya Rattan Sharma, Jindal Steel & Power Limited - MD & Additional Executive Director [26]

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Nothing pending. We are ready. Technically, commercially, everything is in place. And it is only decision, which is to be taken out of the 2 good choices, which is the best of the 2. So either to add step or to start our DRI. And either of the 2 will do it.

The other factor is, we have a state-of-the-art coke oven plant. And first time, as we did coal gasification in the country, the first time we are going to produce a mix of gas from coke oven as well as from CGP and to use in [DRI plant]. This will give another additive on things, so we are not dependent on natural gas as many plants in the world are. This is what the significant advantage of technology, what JSPL has.

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Atul Tiwari, Citigroup Inc, Research Division - VP and Analyst [27]

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And sir, any comment on the timeline for Botswana [already]?

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Nishant Baranwal, Jindal Steel & Power Limited - Head of IR [28]

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Atul, this is Nishant here. So we are always there. Like always, we're always there to answer all the questions any time. It's a long queue. I'm sorry, but there is a very long queue.

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Operator [29]

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The next question from the line of (inaudible) from JM Financial.

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Unidentified Analyst, [30]

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Sir, my question is on the power side. You spoke about outstanding dues to [Tengasco], which will be used to repay debt. So just wanted to understand what's the total outstanding amount and when do we expect to receive these payments.

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Vidya Rattan Sharma, Jindal Steel & Power Limited - MD & Additional Executive Director [31]

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The outstanding amount from [Tengasco] on energy base is about INR 700 crores. And the payments would reflect from August. They have already converted into the LC mode. And for the INR 700 crores, we are in discussions with them, and we will soon try to liquidate this outstanding. They are also waiting for some grants from the state government, which are dependent on the central funding them. So as I mentioned in my opening remarks, they are waiting for that scheme to be done by the central government.

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Unidentified Analyst, [32]

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So what's the possible timeline that you look at it from JPL perspective?

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Vidya Rattan Sharma, Jindal Steel & Power Limited - MD & Additional Executive Director [33]

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Over in the next 5 or 6 months, I hope that the entire outstanding should be liquidated.

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Operator [34]

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The next question is from the line of Ashish Kejriwal from IDFC Securities.

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Ashish Kejriwal, IDFC Securities Limited, Research Division - Research Analyst [35]

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First of all, I would like to congratulate you for this wonderful results and the strong commentary. My question is on your debt repayment schedule because as you rightly pointed out that we are reducing our debt, and we plan to reduce it further. But is it possible to share a debt agreement schedule on a quarterly basis for our consolidated [DT]? And as well if it's possible to share how and when can we see reduction in interest cost because our interest cost is comprising of many things. So when we are talking about debt, not only long and short-term debt, including supplies created on that.

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Vidya Rattan Sharma, Jindal Steel & Power Limited - MD & Additional Executive Director [36]

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Okay. Ashish, let me take the commentary on that. In the current year, we had -- one second. So in the current year, the quarterly repayment schedules that we had in India -- first of all, let me start off with the commentary on India. We had INR 649 crore of long-term liabilities to be paid in quarter 1. In the second quarter, we had INR 822 crore of loan repayment. And then in Q3 and Q4, we have significantly lowered the payment schedules, which is INR 265 crore and INR 360 crore, as you would see in India, right? Out of the INR 822 crore, we've already paid INR 400 crore in the current quarter. There was a debenture of [interest accrued] of around INR 324 crore that was payable. We actually ended up paying that almost 3 days ahead of the scheduled date to ensure payment were in time. So I think we are well on course to make sure that there are adequate liquidity and support for payment on the Indian liabilities, (inaudible) issue.

On the global side, the liabilities are about INR 1,000 crore in the first quarter. INR 982 crores is already paid. I would like to also add that in the first quarter, we repaid an additional INR 394 crore because we had surplus liquidity. Some funded also coming in through the conversion of the volumes from the [Regis] family. We have got additional INR 500 crores. So we used that in the EBITDA, and we kind of deleveraged to the maximum extent possible in the first quarter. So we paid an additional INR 394 crore because kind of very comfortable with the overall cash flow renewals.

In the second quarter, the repayment globally is on a controlled basis, INR 1,293 crore. In the third quarter, INR 861 crore; and in the fourth quarter, INR 1,767 crore primarily because we had to make repayment in Mauritius of about INR 1,000 crore in the end of March.

And as you're aware, we are, obviously, looking at multiple options to kind of repay the Mauritius debt. One of them is this possible portion of the Botswana transaction. We had also launched a transaction in Oman. Currently, the Oman business is a bit slow. So we have taken a bit of a hold on the transaction. In a couple of months' time, if the window opens there, we may, again, kind of reopen it. So there are multiple international options that we are contemplating to anyway kind of create the liquidity for the payment for the March Mauritius loan.

So I think that's anyway the investments at this point of time. So suffice to say that ballpark were INR 1,000-odd crores each quarter will be in [country], okay?

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Ashish Kejriwal, IDFC Securities Limited, Research Division - Research Analyst [37]

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Yes. And so secondly, on interest cost...

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Operator [38]

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Sorry to interrupt, Mr. Kejriwal. Hello?

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Ashish Kejriwal, IDFC Securities Limited, Research Division - Research Analyst [39]

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Yes. It's part of the same question. Sorry.

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Vidya Rattan Sharma, Jindal Steel & Power Limited - MD & Additional Executive Director [40]

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No, no. No problem. Ashish, let me -- allow me to complete the answer for this. See on the interest costs, there are 2 movers. Clearly, as I mentioned, you have to break the interest -- reported interest cost into 3 buckets. One is interest that pertains to the liabilities that we have taken. Second, that pertains to the operations of discounting, et cetera, and bank charges. As the business goes up, actually that is going up. And the third part of the deal will be interest income, right? Where -- what those have to surface, which is netted off against fee interest expenditure line. So the 3 different components.

The third one depends on surplus cash, which is actually coming down. So interest income has been a bit low. Operating interest expenses are going up. Actual interest costs, as I was telling you, has actually been going down. On a Y-o-Y basis, the actual interest cost has actually gone down. If I was to talk about it. Yes. So I think that is how I would look at the interest cost component, okay? As a rule, the interest cost in India has actually come down on a Y-o-Y basis to INR 478 crore from INR 545 crore over the year back, right? So there is a clear reduction of INR 67 crore that you have seen there.

In India, obviously, there has been a -- now there is an interest cost reduction regime. But in the last year, the interest costs were hardening up a bit, right? Globally, obviously, the LIBOR is softening. So global interest rates are coming down. Indian interest also are now likely to soften. So we should see the benefit as we kind of take the business forward.

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Operator [41]

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The next question is from the line of Bhavin Chheda from Enam Holdings.

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Bhavin Chheda, Enam Holdings Pvt. Ltd - Analyst [42]

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Yes. A good set of numbers, and we appreciate the detailed presentation post the results. So my -- I had a couple of questions, but take one this time and next, call you afterwards. If you can update us what's happening at Mozambique because that was the surprise I saw this quarter in terms of both volumes and EBITDA. And in the opening remarks, you again sounded positive on the overall Mozambique mine numbers. So Mozambique -- and when you're giving an update on Mozambique, if you can also give update on the South African mine volume and EBITDA run rate and Australian mine, any volume and EBITDA or EBITDA loss run rate. So if you can just summarize your overseas coal mining, what has happened? What is the plan? And how should we see it over FY '20 and '21?

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Bharat Rohra, Jindal Steel & Power Limited - MD & CEO of Power Business [43]

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Yes, please. So the Mozambique mine, the game changes. And we have large mines, especially for the big vol coking coal, which is a very good plant at a sweetener for the coking coal available worldwide, and this is what -- when we took over this mine. So that was in the mine. Initially, it took a couple of years to bring the mines into a right level. So now the mine is doing very well. We are ramping up the production. We are bringing the coking coal from this mine to India for our own use. And we are washing over there. So whatever the washing rejects are there, we are selling to the Middle East to the cement plants. And we also produced some resin coal there, which is very, very less. But our main aim is to make this mine available to the Indian industry where -- whatever we use for our capital use, okay, that is -- that we make out from this particular mine. And then balance quantity will be sold to the other steel industry in the country. And this is what we are aiming for. Though the market for the -- this particular coking coal is available worldwide. So we can take the material to Europe, we can take the material to China, we can bring the material to India, wherever we want it to. So this is the region that the mine started producing the profit. And we are looking that we can increase the productivity by 10% to 15% on a year-on-year basis.

Now as far as the Kiepersol, that is the South African mine is concerned, is also doing well. The growth level is quite good. So our sales are up by 111% there. Our earnings are up by 10% and we are at a stage of almost marginal profit and operating profit there in that mine.

As far as the Australia is concerned, we are yet to -- there are start-up challenges in Australia. So we are negotiating with the government authorities for some of the clearances, which we think that by October, everything should be in place. And then we are open to invite divestments or some of the partners, looking some good partners. But as we stated earlier, we are not in hurry. We are not a distressed seller. We are looking the coke and give the better value for the assets. In terms of the partner, whatever the percentage we offload, maybe 20%, 30% or even up to 50%. So that -- time will tell as to what's the best deal on the table. And we will try to expect the best for our company. So this is all for coal mining. Anything else, please?

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Bhavin Chheda, Enam Holdings Pvt. Ltd - Analyst [44]

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Yes. What is Mozambique's volumes expectations for 2021?

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Bharat Rohra, Jindal Steel & Power Limited - MD & CEO of Power Business [45]

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2021, we are aiming for more than 1 million tonne of coal will bring to India. And this is what our aim is.

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Operator [46]

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The next question is from the line of Yash Doshi from SBICAP Securities Limited.

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Yash Doshi;SBICAP Securities;Analyst, [47]

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My question is Mr. Sogani said the NSR went down INR 800 a tonne during the last quarter but the real NSR were down -- were up by around INR 1,300 per tonne. If you can give us general commodities, most of our volume is -- the NSR was down how much? And how do you expect that NSR to -- how do you look at NSR in Q2?

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Bharat Rohra, Jindal Steel & Power Limited - MD & CEO of Power Business [48]

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Basically, NSR level today is average is INR 41,000 per tonne. And we are maintaining this NSR primarily because of the 3 reasons. One, we are in a rail business, which we have the long-term contracts, number one. Number two, the structural products for the high-rise buildings. Because nowadays, all 30-, 40-, 50- 60-story buildings are being constructed to this team. So there is another good market. Then we have a very good market for the specialized places for defense for L&T and for BHEL and for other companies like that, which will give us an agile what it does; whereas the steel industry, overall the prices are under pressure, but because of our good product mix, which is 60% -- more than 60%, we have evaluated products where we have raised seismic beams, some restrictions, making life structure beams and the specialty plates, hardened and coiled plates, normalized plates, tempered plates. So these are the players which traditionally India was importing and we are doing [constant pursuits]. So we are in a position to maintain the EBITDA level. And I'm sure we will maintain EBITDA or we'll increase EBITDA because now in the second quarter, we -- iron ore prices also coming down, coking coal prices are coming down. So that delta will be maintained.

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Yash Doshi;SBICAP Securities;Analyst, [49]

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Okay. So that's the -- my question earlier was for this long -- pure long product, which you sell, how that NSR has moved into your blended. I wonder how the pure long NSR has moved in Q1, and how is it improving.

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Bharat Rohra, Jindal Steel & Power Limited - MD & CEO of Power Business [50]

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Yes. Yes. The answer is the long -- like, for example, rail is also long, structures is also long, beams are also long. So please keep them away and let's say the long, your concern, what I'm understanding correctly, if I am, that is the rebars. So rebar, yes, there is a question on the rebars in the country. But on the other hand, the rebar prices have gone down about INR 3,000 in-country, across the country. But we have done a good thing. We have reduced our cost of production by that amount. So again, we are maintaining the same delta.

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Operator [51]

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We move on to the next question that is from the line of Vikash Singh from Phillip Capital.

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Vikash Singh, PhillipCapital (India) Pvt. Ltd., Research Division - VP of Metals & Mining [52]

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Sir, I just want to understand just one thing. On one hand, you're talking about INR 400 crores to INR 500 crores payment with respect to the plate shares. And you're also talking about INR 3.4 crore of additional plates. So if you're already making payment, then why are we talking about the additional plates? And how do we see the overall plate situation by the end of the year?

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Vidya Rattan Sharma, Jindal Steel & Power Limited - MD & Additional Executive Director [53]

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So let me again comment on that. As I said, point #1. Our total amount of loan against shares has come down by almost INR 300 crore from the big level and it is (inaudible) at this point in time. That's one point that I made.

Second, I said that we have put in projects underway to kind of consolidate or eliminate the loan against shares and bring it down to below INR 500 crore level over the next few months. In the near term, in the next few weeks, we should be able to kind of consolidate a couple of INR 100 crore of loan against shares. So those are the things that we're working on is as a matter of managing the market volatility because we have additional shares, which are free and we thought it is maybe prudent to give additional shares to the loan lend -- to the lenders so that they feel more comfortable. As a part of that strategy, we've decided to pledge additional shares of around [INR 4-odd crore] shares based on our own internal thinking. But with that additional pledge, the amount that reached all these people that carry the loan against shares will be almost have 50% or significantly below the current price levels, right? That is the direction in which we're headed to manage the risk. So it's a risk management strategy, right?

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Vikash Singh, PhillipCapital (India) Pvt. Ltd., Research Division - VP of Metals & Mining [54]

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Okay. So basically, it's a kind of a top-up because our share price has gone down. Is it a correct understanding?

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Unidentified Company Representative, [55]

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Top-up way beyond what is needed. As I said, we have managed the top-ups by paying almost INR 100 crores in [P&L] in the last 1 month. So I think we are comfortable in reducing. But again, the share price has been very volatile over the last few days. And global markets have also been very volatile. The Dow Jones was down 600 points few days back. So I think there is global volatility as well.

In order to manage the volatility from -- let me also take the time out there is -- I think let me comment on the business as a whole like you've heard us out for the last -- more than an hour, right? As you noted, that we are a very different steel company, and we are at a very different juncture in our own internal trajectory, right? Because there are almost 200 participants on the call, and not all of them may have the benefit of understanding the full story in its full comprehension. So let me kind of spend a couple of minutes, and then I will include total loan against shares required, right? Subsequently, right?

Clearly, from a uniqueness point of view, we are not in the auto base deal. We are into -- more into loans, which can be associated with the significant infrastructure expenditure programs that the government has, right? We have very unique products. Our Rail business is rocking. Our high value-added plates are also unique and then different, right? So we have unique and different products and mainly on the loan side and not on the [auto base] side, right? I think that's point one that you need. Kind of clearly understand because there are many kinds of players. We are different, right? I think that point is to be understood.

The second point that has to be understood that we are the only large player because of our Angul plant, there is a significant volume ramp-up that is happening, has happened in the last year, will happen in the current year, will continue to happen over the next 2 years, right? So I think that opportunity is not available anywhere else if you work, right?

The third thing that I'd like to highlight that look at our leverage ratios, we have only brought a leverage issue down in India to 2.5 level to 4. Neither all 1/3 of the level, very clearly indicating that the global and the local leverage levels have come down quite significantly.

And fourthly and most importantly, as our product mix is improving, as we are selling more of [players], more of plates, et cetera, we're really finding that we will be able to improve NSR because of the product mix. Also, our cost is coming down and we'll be able -- we've already kind of guided that Angul to raise that partly driven, we will be able to see at least INR 2,500 per tonne reduction from Angul. And by the time we finish the year, Angul will be producing 2/3 and Raigarh will be [1 to 0]. Clearly, we see good data ahead of us in terms of the cost of.

So based on these factors, we have -- also, let me highlight that we are the only players where we make 120-meter long rails and we joined features to make 260-meter long rails. These are long rails, cannot be imported from overseas at all. These are the sizes that cannot be imported, right?

So I think from a uniqueness point of view, the fact that the volume is going to go up, the fact that the leverage has already come down very significantly, the fact that we will improve our cost based on internal kind of cost structures as Angul will further ramp up and our efficiency initiative come up, we are fairly well positioned to kind of handle the market volatility and the prices. Obviously, we cannot handle the market volatility. Market volatility will be what it is. But whatever is in our control, we are kind of taking care of these things.

And also on the land, while so much of commentary has been done, we have commented upon how much we have reduced amount of shares that have pledged only 50%, amount is only INR 900 crore. They're a INR 50,000 crore company, right? This amount is very, very small compared to some of the other people in the last market. Just pretend, in fact, very small, okay? After the intended margin that we want to give additional, the levels will be just -- question of default, which is talking about INR 100 crores, INR 200 crores year-on-year and that also after -- we see, let's say, the price erosion from the current level by maybe 40%, 50%. What are we talking about? So from a market point of view, let me assure all of you guys, while there is a lot of discussion, a lot of different forces acting in the market. Let me use this call to very clearly table the fact that we are at no risk as far as our corporate debt payments are concerned. And as far as [gas] is concerned, yes, we have seen more shares available. But on top of it, we have been paying, we will pay. So there's absolutely no risk. And if you kind of listen to the rumors, let me just say, not help anybody in the market, right?

Also, I think the worst is over behind us, right? We are, obviously, as our MD mentioned, that we are already a very cheap cost producer. Our cost of making steel has come down by almost INR 5,000 over the last few quarters. It will come down even further. And that is our focus. So I think we want to become the cheapest producers, the most profitable producer of steel, if you will. And whatever is in the market, market is market. But from a pure financial point of view, we offer an opportunity to all of you on the call, which is unparalleled from a -- I would think that in perspective, right? We're just creating at a significant discount to what our intrinsic value would be, et cetera. And we see significant [increase] in our cash flows and profitability and leverage issues and we're focusing.

So from a management point of view, we've left nothing unturned, right? All our international operations, a lot of focus. We leverage, a lot of focus. Cost of producing steel, as we say we do.

So from an operator's point of view, we are doing extremely well. And obviously, next few quarters will play out and after that, obviously, our transformation will be complete. But I think you should all know that we are in a very interesting journey to build the most efficient and the most profitable steel plant.

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Operator [56]

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The next question is from the line of Ritesh Shah from Investec.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [57]

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Sir, my first question is, you indicated a deleveraging number for end of year. What is the kind of working capital release that we are factoring over here and the CapEx that you incurred for Q1? And how should one look at this number for full year?

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Deepak Sogani, Jindal Steel & Power Limited - CFO [58]

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Look, CapEx, we've been saying that we'll be around INR 700 crores for the year, which is what the balancing CapEx that is typically required for managing the size of business we manage.

In the first quarter, we reported CapEx of INR 186 crore, which is in line with our annual target, right?

Now as far as the working capital is concerned, we are running it very efficiently. And I must also say that we are now focusing on reenergizing our export business. We only are exporting almost $400 million to $500 million of goods every year for the last few years. This year, we're looking to take it even further. And as we increase our exports, there is a lot of liquidity available in form of export pre-drilling, which is available to reduce our working capital product. We see a lot of opportunity to be able to reduce our working capital by way of kind of getting some export prepayment cash flows, right?

So as the quarters pass by here, we will report further progress on this matter.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [59]

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Is it possible for you to quantify the working capital release number if you factor in the pledge from now until year-end? The reason I'm asking is...

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Deepak Sogani, Jindal Steel & Power Limited - CFO [60]

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Go ahead.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [61]

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Sir, the reason I'm asking is if Sarda mines doesn't come under [our fold] and given March 20 auctions, we might be pushed to stock up iron ore inventories. I just wanted your view on that. And that's why I'm stressing up on working capital over here.

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Deepak Sogani, Jindal Steel & Power Limited - CFO [62]

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So working capital, as I said, why it's a good point that you're making. So let me first of all say, Sarda Mine is a different entity, right? I think the matter on the table is primarily that we have certain iron ore stocks lined there, which belong to us, which are fully royalty paid, which have been declared belonging to us by the Orissa High Court also. We are in the Supreme Court to kind get those released. That is a separate matter, but that clearly matter. Hopefully, that will get released soon. Those discussions are in a very advanced stage. And the final decision is pending. So that's one part of the study.

Now as you're aware, obviously, we have our own iron ore mine in Tensa, and almost 25% of our volume is catered to -- from Arkansas mines for Brazil and for our own businesses over there. And we have ability to kind of increase our volume over that, partially if needed, to take care of any temporary interruption, if needed, right? So really no real issue for us. If you'd like to clarify a question for the billings. That's what I understand from your question, okay?

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [63]

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Sir, my question specifically is on iron ore security. If Sarda Mines doesn't come to us, how do we look at the scenario? Do we stock iron ore looking at our 6.5, 7 million tonnes number that we have guided for? Or are we building in from a debt bridge working capital release given coking coal prices are going up?

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Deepak Sogani, Jindal Steel & Power Limited - CFO [64]

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So it's a little large question. Let me try to address it in a simple part, and obviously, this will need a larger conversation, right? Clearly, first of all, if you're talking about iron ore security, you're talking about the fact that there is a potential disruption because iron ore option means process is going up, right? It is a well thought through process by the government. We do not believe that all the optioning may happen in one word, may happen in few words. It will offer enough continuity opportunity to the steel industry. The government is cognizant of that, right? We don't see any disruption happening on that count.

Number two, we have our own iron ore mine in Tensa to support us. Any temporary volatility can be taken care of from our own mines.

The third, we are still kind of increasing our offtake from [O&C] and other government suppliers. They have a lot of availability. So if the private miner volume goes down, some of the government miners volume will go up. So I think if you ask us today, are we concerned about disruption in terms of the iron ore availability? That's not on the cards at all.

As far as the working capital is concerned, as I was saying, there is enough opportunity for us to kind of raise working capital cash flows from export prepayment based on the market discussion, and what we are doing right now. Whatever we did -- the numbers that we can raise from that can be pretty large. So let me not make a large commentary on this call on what we can do in terms of working capital. We can do that in a separate meeting if required.

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Operator [65]

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The next question is from the line of [Kunal Bhakta] from [First Water Fund].

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Unidentified Analyst, [66]

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You made a point that you may have some amount of prepayment of debt on the JPL side, and it's logical given that there's some traction on the PPA front. So could you let me know what is the targeted debt reduction in JPL over the next 2 years? And what kind of PLF are you hoping to achieve for the full of the current year and the next year?

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Deepak Sogani, Jindal Steel & Power Limited - CFO [67]

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Well, as I mentioned, that we will be paying it at a faster pace than scheduled already. So that means this year, we are scheduled to repay back about INR 700-odd crores. That we are planning to schedule earlier because there is a clear statement due from (inaudible) for about INR 700-odd crores.

In addition to that, they are already paying us for the change in [law] petition, which we had fine of INR 366 crores, which they are paying us in installments. So this increases our ability to pay back the loans. I cannot comment when we will receive that money, but that money is surely going to come in this financial year. And that is why we are going to try to repay these loans faster than scheduled.

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Unidentified Analyst, [68]

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Right. But (inaudible)

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Deepak Sogani, Jindal Steel & Power Limited - CFO [69]

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And we are the lowest-geared company, and we want to become debt-free as soon as possible. That's the aim in mind.

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Operator [70]

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The next question is from the line of Sumangal Nevatia from Kotak Securities.

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Sumangal Nevatia, Kotak Securities (Institutional Equities) - Analyst [71]

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One is on the cost reduction. We saw almost a INR 2,000 cost reduction. 1,000 new shares is because of raw materials. So if you could share Q-on-Q what is the breakup of this INR 1,000 cost reduction? And lastly, if you could share your timeline expectation with respect to the Botswana deal.

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Vidya Rattan Sharma, Jindal Steel & Power Limited - MD & Additional Executive Director [72]

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First question, we have said that our cost of making steel has gone down by almost INR 2,100 per tonne in the current quarter. Partly it is due to efficiency as Angul has ramped up. As I told you, Angul was more expensive than [Raigarh amount] at par. And certain other efficiency parameters, bringing the cost down both in private and Angul. And around INR 1,000 per tonne reduction has been on account of reduction in the raw material prices. All around, raw material prices, partly Angul, partly (inaudible). So we don't obviously want to provide individual reconciliation of the items. But in general, the entire industry has benefited from better raw material prices.

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Nishant Baranwal, Jindal Steel & Power Limited - Head of IR [73]

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Botswana?

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Vidya Rattan Sharma, Jindal Steel & Power Limited - MD & Additional Executive Director [74]

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And on the Botswana side, as I've mentioned -- sorry, for your second question. On the Botswana side, we have executed the SPA. The business region has been some completed. There are certain conditions, precedents that are going on in terms of taking approval from the -- both from a government, et cetera, et cetera. I really don't have any -- obviously, we want the transaction to get completed as soon as possible. It is not very easy for me to say that'll get done in 1 month or 2. Hopefully, in the next few months, it should get done. But it will depend on the completion of the [conduction] business.

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Sumangal Nevatia, Kotak Securities (Institutional Equities) - Analyst [75]

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Understood, understood. Is there any one-offs in the quarter with respect to Australian assets? Or everything was done in the fourth quarter of last year?

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Vidya Rattan Sharma, Jindal Steel & Power Limited - MD & Additional Executive Director [76]

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That's a good question. On the Australian side, in the last quarter, we had reported at -- let me just kind of give you good picture on the JSPL side.

In the last quarter, we had taken an impairment of INR 1,286 crore in Australia, right? And that was based on management estimates. And subsequently, this has been bifurcated into 2 different line items. INR 698 crore has been taken in terms of -- so in the reported quarter, the same INR 1,286 crores. Out of that, INR 698 crore has been taken by way of impairment. And INR 500 crores has been taken by the additional depreciation because we had shut down our Wongawilli mine. And therefore, the management estimate for useful life of Wongawilli changed. And part of the impairment had got reflected there.

In addition to that, on account of certain change in the accounting policy there, whereby we started recognizing the depreciation on intangible assets based on the policy of [production] rate, right, which has not been done in the past. On account of that change, we've taken another charge of INR 567 crores, which is actually -- which has actually been reflected in the financials by way of this capability of the financials as of 1st of April 2017.

So this pertains to additional charge or a change in the accounting policy for intangible assets, right? So this is coming directly into the retained earnings section of our reported financials, right? But on the profit and loss, it is pretty much in line with what we have taken in the last quarter, okay?

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Operator [77]

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Ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Nishant for his closing comments.

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Nishant Baranwal, Jindal Steel & Power Limited - Head of IR [78]

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Thank you, Lizan. Like I said before, we are always there to answer all your questions -- all your pending questions or any subsequent questions which you might have within the day or day after.

I would like to thank Prabhudas Lilladher as well as [thank you] for joining us on the call. Thank you very much, and thanks for [Lizan]. Thanks.

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Operator [79]

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Thank you. Ladies and gentlemen, on behalf of Prabhudas Lilladher Private Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.