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Edited Transcript of SAIL.NSE earnings conference call or presentation 15-Nov-19 5:30am GMT

Q2 2020 Steel Authority of India Ltd Earnings Call

New Delhi Dec 6, 2019 (Thomson StreetEvents) -- Edited Transcript of Steel Authority of India Ltd earnings conference call or presentation Friday, November 15, 2019 at 5:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Amit Sen

Steel Authority of India Limited - Director of Finance & Director

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Conference Call Participants

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* Amit A. Dixit

Edelweiss Securities Ltd., Research Division - Financial Analyst

* Anuj Singla

BofA Merrill Lynch, Research Division - VP in Equity Research

* Ashish Kejriwal

IDFC Securities Limited, Research Division - Research Analyst

* Ashwani Kumar

Nippon Mutual Funds- Nippon Tax Saver (ELSS) Fund - Senior Equity Fund Manager

* Bhaskar N. Basu

Jefferies LLC, Research Division - Equity Analyst

* Indrajit Agarwal

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Kamlesh Bagmar

Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst

* Pinakin M. Parekh

JP Morgan Chase & Co, Research Division - Associate

* Sumangal Nevatia

Kotak Securities (Institutional Equities) - Analyst

* Vikash Singh

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

* Vishal Chandak

Emkay Global Financial Services Ltd., Research Division - Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Steel Authority of India Limited Q2 FY '20 Earnings Conference Call hosted by IDFC Securities Limited. (Operator Instructions) Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Ashish Kejriwal from IDFC Securities. Thank you, and over to you, sir.

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Ashish Kejriwal, IDFC Securities Limited, Research Division - Research Analyst [2]

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Thank you, Inba. Good morning, everyone. On behalf of IDFC Securities, we welcome you for Q2 FY '20 Earnings Call of Steel Authority of India. We are happy to host SAIL's management presented by Mr. Amit Sen, Director of Finance, along with his team. Now I would request Mr. Sen for his opening remarks, and after that, we can open the floor for Q&A. Over to you, sir.

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [3]

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Good morning, everyone. This is Amit Sen from SAIL. First of all, I'd like to thank Mr. Ashish Kejriwal from IDFC Securities for arranging this investor con call, and I welcome all the participants to this investor con call on the financial results of SAIL for Q2 '19-'20.

So yesterday, SAIL Board approved the quarterly results, which was uploaded, and I believe you would have seen it. So we posted an after-tax loss of INR 343 crores in Q2 and which sort of reflects the state of the economy in Q2, which was pretty bad, even as compared to Q1. And actually, the latest news that we get is that this GDP growth in Q2 was likely to be around 4.2%, and that has reflected in the earning results not only of SAIL, but also of our competitors, and it is basically across the economy.

So briefly about the market conditions, the steel industry is witnessing very difficult condition. There's a lack of demand in the market. Prices have been slashed significantly. And the international prices also have come down from about USD 489 for cold rolled coils by about almost $100. This has lasted about 8 to 10 months. And it is hurting the margins of products because we also have -- of course, the fall has been more in the flat products rather than in the long products. It has fallen everywhere, but in the flat products, the fall has been a series in this range of around 16% to 19%. And our biggest market where SAIL operates is construction and infrastructure market, where since March, there has been a decline there about 15% in this sector. All the other sectors like automobile, white goods, they have also seen their output contracting.

So coming to sales performance in Q2, our turnover was INR 13,951 crores and the EBITDA is INR 1,323 crores. The per tonne EBITDA is INR 3,709. PBT was minus INR 523 crores and the PAT was minus INR 343 crores after adjusting for some [deeper cash] effects. What -- we have taken some measures towards reducing the cost and improving the product -- the mix, making more of value added, making more of sales. And among these plants, other than Bhilai Steel Plant, almost all the other plants are in loss, mainly due to the low demand and low prices. Our inventories have gone up by nearly 6 lakh tonnes since 31 March. From 1.2 million, it has gone up to about 1.9 million as on 30 September. And as a result of the money getting blocked in inventory, our borrowings have also gone up by about INR 6,000 crores during this period.

If we compare our results with Tata, JSW and GSPL, almost all of them have shown negative growth in PBT. The difference is that, in fact, of course, we've slipped into minus because we didn't have much of a margin in the first place. So this is where we stand now. And there are some, of course, positive signs, that is a rebate which was coming almost to the tune of INR 1,000, INR 1,500 every month since April. So in the month of October, it seems to have flattened out. And low rebates have been passed on in October. In fact, there are -- there is some news that there's a pickup in the -- especially in the [longer rate] by about INR 500 to INR 600. And this could be a blip or maybe it could sustain also. We hope it sustains.

The government has also announced a number of measures like the Pradhan Mantri Awas Yojana and the construction of roads where about some INR 1 lakh crore has been budgeted. The World Steel Association has also revised the growth upwards in October in 2019 to 3.9%. And some other schemes of the government which has been announced, but they are yet to actually hit the road, especially in the highway sector and the housing sector, the sectors which actually impact SAIL more rather than automobiles and all that. So with that coming and the prices at least stabilizing, we're hoping that the third quarter and maybe more of the fourth quarter, things will start improving. There is some marginal uptick in the demand. The demand is slightly picking up. Our inventories have started liquidating a bit, but we've cut back production because of our large inventory. We consciously cut back production because it's producing and putting to stock. That was hurting the financials a lot, and therefore we have consciously reduced that scale of operation. If things improve, then again we'll start picking up.

Some of the other things is that -- other good things which are in the -- some latest developments. One is that government has allowed SAIL to sell its ire ore lumps and fines in the market up to 25%, and that is expected to bring in a lot of, not only cash and also profit. Also, government has allowed SAIL to sell the sub grade fines which we are holding, which is huge, which is like some 70 million tonnes in all our various mines, and it has a good demand in the market. So we are in the process of taking all the statutory clearances and the environment clearances, and we'll go on other things necessary so that we can start selling that. That is actually a waste product. It fetches a good price in the market. The quantity we are holding is massive. And if the sale of the sub grade fines coincides with the pickup in demand and a pickup in prices, I think at least Q4 onwards, we should start seeing something good. So that is the opening from my side. Can you open for questions?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our 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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I have 2 questions. The first one pertains to the Note 4 -- 4.1, in which you have mentioned that sales to government agency is at provisional contract price. Now just wanted to understand if this contract price is higher than the prevailing price, so therefore, is there a scope of some kind of adjustment -- negative adjustment, of course, in the future?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [3]

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Actually, we sell -- this is basically regarding our sale of rails to railways and wheels from our Durgapur plant. Rails are sold by Bhilai and wheels are sold by Durgapur. So what we do is the prices that were settled earlier, they are kept as the provisional price for invoicing during the current year. And then at the end of the year, we fix the price. We have a cross-cut model, which is finalized by the Ministry of Finance, and then approved by the Ministry of Railway, then that is announced subsequently. So because of the increase in the trend of raw material, the expectation of price increases substantially. I think what you are hinting at is, whether there is scope of any downward duration in process. I think that's what -- no, it's actually upward, and it is not only upward, it's substantially upward. So we are billing on the provisional price. And at the end of the year, when we finalize our cost and we submit our prices to the Finance Ministry and that is finally announced, we'll be getting a differential. As we have gotten and we have seen in the notes, around INR 727 crores of rail price addition. So the movement is upward, and it is substantially upward.

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

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Sir, is it possible to quantify what that provisional price is for rails, let us say, at this point in time?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [5]

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That is really hard to say, I mean, because there are...

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Unidentified Company Representative, [6]

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Different rates and all is carrying the different sizes, different locations we are supplying to. So would not be possible to zero down on one price, but definitely whatever is the price agreed with them, say, right now, whatever is the price program avenue would obtain, will be declared in the notes to accounts. The price what we have already frozen for the -- up to the period March '18, that would now start continuing as a provisional price for the invoicing and scores. And as and when this price gets revised, if it is finalized for the current year, then it becomes the final price for this year. Otherwise then this would be -- again, like it has happened for '18, '19, it would be provisional price which gets figured into that year, and subsequently, whenever the final revision takes place for that year, the further addition would take place until we go for that year.

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [7]

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So actually, we can't actually put a number on the price increase. But looking at it and our pricing template -- looking at the trend of cost and our pricing template, the increase is expected to be substantial. Already some part of the increase has been given to us. The balance increase will come at the end of the year when we make the final price and get it approved by the Ministry of Finance.

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

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The second question I have is on iron ore. So is it possible to elaborate a little bit more on the time lines, when you expect this to start? And what would be the financial impact of the same, both iron ore lump and fines?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [9]

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Okay. So there are 2 things. In September '19, the government issued 2 circulars. One circular said that we can sell our normal production, both lump and fines, the things that we consume in the plant, and there is a capping on that. What we can sell is 25% of what we produced in the previous year. So in '18, '19, we produced 28 million tonnes of iron ore. So now this year, we are permitted to sell 7 million tonnes of iron ore. This is good ore. Next -- and here there is a 2 years gap, but -- 2 years time, that we have to sell this 7 million within 2 years. This is [luckily] the good material, which fetches a very high price in the market. But the thing is we -- because we have our own steel plant, we won't be able to sell too much of this good material. We will be selling something, we're already in the process of issuing tenders. Wherever we have surplus iron ore fines, that we'll be selling. And we've also made plans for generating a little extra material, extra lump and extra fines that sort of after feeding the steel plant, any surplus that we have, we can sell in the market where it fetches a good price. But what we're really looking at is the sub grade material, the generated fines and the tailings which we have accumulated over the last 50, 60 years, and where we were not permitted to sell, but there was a good demand from the -- with pellet plant maker for this material. So they wanted this material, we had tonnes of this material, but there was a barrier which prevented us from selling. Now that government has removed the barrier, there is no embargo either on quantity or on type. So we can start -- only the statutory clearances, as I said, are required. So the initial time line that we promised will start auctioning from February of next year. But this material is lying in various mines, so as and when we get the clearances from the various states, we will start dispatching from those states. For example, in Jharkhand, the model code of conduct has started because of the election. So the Jharkhand clearances will take a little time, but we also have mines in the state of Orissa and Chhattisgarh where we expect the clearances to come. And the mines in these states will start selling first. So this year, probably up to March, we won't be able to sell very much, but we're planning lot of sales in the next financial year, '20, '21 and so on. The amount, again, it's very hard to say. The asset 70 million tonnes is -- has not been assessed. So we need to physically verify the quantity. It may be -- it may not be 70, finally, when we get it surfaced through drone and all that, it may be 60 million, 65 million. But the price that we find from the IBEF price surplus are -- vary from 700 to 2,200 depending on the Fe content. So even if I take an average price of 1,000, it's a lot of -- it's a bigger one.

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Operator [10]

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Our next question is from the line of Pinakin Parekh from JPMorgan.

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Pinakin M. Parekh, JP Morgan Chase & Co, Research Division - Associate [11]

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Just 3 quick questions. And my first is, you mentioned that the inventories have gone up to 1.9 million tonnes. So to that extent, in this quarter, there would have been the inventory mark-to-market loss side. So to that extent, inventories would have been costed at the prevailing steel prices, and that would have come through this quarter in terms of earnings?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [12]

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Yes. Yes. Thus the financial results reflects the fall in the -- so basically value inventory at NRP, see that the principal saving is just cost or NRP, whichever is lower, isn't it? So we have some products which are still being valued at cost where the NRP is higher, and there are some products where the NRP is lower which are being valued at NRP. The fall in NRP on the mark-to-market has always been accounted in the books.

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Pinakin M. Parekh, JP Morgan Chase & Co, Research Division - Associate [13]

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Understood. Sir, my second question is that -- going back to the iron ore sales, now separating the 2. The existing production of 7 million tonnes that you can theoretically sell, do you require state government approvals and other approvals to do it? And what kind of iron ore volumes are you looking to sell from your current production in this fiscal year and next fiscal year?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [14]

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We need government clearances to sell. We need government clearances of different kinds to sell these different products. To sell the good ore, we need one set of clearances; to sell the sub grade, we need another set of clearances. And we also have to revise the mining plan. This year, right now, we are going to float a tender, or at least it has been floated already, for 5 lakh tonnes of good fines and 5 lakh tonnes of sub grade fines.

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Pinakin M. Parekh, JP Morgan Chase & Co, Research Division - Associate [15]

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So these tenders, sir, I mean 5 lakh tonnes of -- basically 1 million tonnes of iron ore that you expect to sell at least in this fiscal year, or it could be more?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [16]

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More than that. This is what we uploaded just now. But as I said, it's from February after assuming we get all the clearances, we start selling in big options so that is the big quantities. This is just a sort of a token quantity or a pilot option that we're doing. This is 5 lakh tonnes of good fines, 5 lakh tonnes of sub grade fines just to test the market and see whether the option -- platform is working or not. But from February, we...

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Pinakin M. Parekh, JP Morgan Chase & Co, Research Division - Associate [17]

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Understood. And sir, lastly, in terms of 28 million tonnes of iron ore production that you did last year, based on your current approvals, how much can you go up to next year? I mean do you -- what kind of flex do you have to increase iron ore mining production?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [18]

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See, our mines are mechanized. So we -- so far, we've been producing to the extent that we need for consumption because there's no point in producing and keeping tonnes of open stock. And so we are -- actually, we used to a keep a control on the generation of ore at the mines, but now that we have one more avenue open and we have enough reserve, so we'll be increasing our contractual quantities to produce more of lumps and fines. We have the capacity. We used to curtail our production to the extent we need to consume. So now we can expand a bit more. But at least that can't be done overnight. We need to put certain things in place, we need to give some more contracts, we need to clear space for dumping them. So some things are required, but then we'll be ramping up our production so that we can also sell some portion. So far, what you had said, this situation will never end.

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Operator [19]

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Our next question is from the line of Kamlesh Jain from Prabhudas Lilladher.

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Kamlesh Bagmar, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [20]

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Sir, can you provide NSR for auto and -- like, say, longs and flat and how are the...

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [21]

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Kamlesh, sorry to interrupt you. Can you be a little louder?

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Kamlesh Bagmar, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [22]

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Yes, sir. Can you provide the NSR for the quarter, longs and flats? And what are the NSR currently going?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [23]

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For the quarter?

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Kamlesh Bagmar, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [24]

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Yes.

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [25]

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Our average NSR in this quarter has been, all the long and flat put together, it is 37,382.

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Kamlesh Bagmar, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [26]

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Okay. And how is the utilization currently, sir, NSR?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [27]

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Average we get in October?

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Kamlesh Bagmar, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [28]

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In October, yes.

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [29]

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In October, the average is...

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Unidentified Company Representative, [30]

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Close to 35.

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [31]

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It's around 35,000.

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Kamlesh Bagmar, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [32]

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35,000. And sir, secondly...

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [33]

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In October. November, we still don't have that figure.

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Kamlesh Bagmar, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [34]

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Okay. And sir, secondly, one question with regard to your notes to accounts. Sir, just on Note #5, you have mentioned about that INR 250 crores of inventory valuation, which you have done for the like (inaudible) lines. So if it is, like, say, that inventory valuation in the P&L, like, say, that has got a credit of INR 250-odd crores, is that understanding correct?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [35]

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Yes. Correct.

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Kamlesh Bagmar, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [36]

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Okay. So if we can say, like, say, INR 298 crores, which was, like, say, realizations which you got for that BPSL order, the like, say, higher realizations for the prior years. And secondly, for this INR 250 crores, so there's almost, like, say, INR 500 crores of additional -- INR 550 crores of additional, which you've got through these 2 exceptional items? Can we say that?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [37]

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Yes. Yes. We haven't shown them as exceptional because they don't fall under the definition of exceptional. They have been shown in their respective line items. But they are -- I think what you're trying to say is onetime credit. So we've got these onetime credits.

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Operator [38]

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Our next question is from the line of Anuj Singla from Bank of America Merrill Lynch.

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Anuj Singla, BofA Merrill Lynch, Research Division - VP in Equity Research [39]

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Sir, following up on the iron ore question, can you specify what kind of EC limits do you have, combined EC limit across the mines versus the 28 million tonnes production which you did last year?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [40]

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What is that, EC limit?

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Anuj Singla, BofA Merrill Lynch, Research Division - VP in Equity Research [41]

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Yes. EC approvals you have.

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Unidentified Company Representative, [42]

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65 million.

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [43]

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We have a 65 million tonne approval.

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Anuj Singla, BofA Merrill Lynch, Research Division - VP in Equity Research [44]

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Okay. So this will include the new mines as well which are yet to come into production, right?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [45]

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Hello?

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Anuj Singla, BofA Merrill Lynch, Research Division - VP in Equity Research [46]

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Yes. Sir, this will include the new mines as well, Gua mine and Chiria mine? Everything is included in this, right, 65 million?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [47]

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Yes. It is included. See whatever is included, you've told us close to 65 million. With respect to Gua and Chiria, if you would see, some portions are still pending for EC approval. Once we get them, then that would further add to the 65 million.

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Anuj Singla, BofA Merrill Lynch, Research Division - VP in Equity Research [48]

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Okay. Okay. And sir, apart from the production capability, one of the key concerns is logistics. So I think this is -- approval is a very positive step for the company. But what kind of flexibility do you have on the logistics part in order -- if there is demand, till what kind of volumes we can push from the sub grade mines because that will be additional pressure on the existing infrastructure and logistics in the region? So what kind of flexibility do we have there?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [49]

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See, part of this quantity would be transported by road and part would be by rail, right? The bulk of it would be by rail. So you're right that the logistic constraints regarding rail's availability could be an issue. For that, we are in discussions with the railways to increase the number of rail. But then from March 2020, when some of the leases expire of the private miners, some of these -- the rails which carry ore, these [box-end] rails, and those rails probably would be more available in the circuit, and they could be made available for our separate materials. At the same time, the road dispatches, they don't have any [format]. So road dispatches can continue to the extent that we have given the clearance for road dispatches. For rail dispatches, if the ore availability reduces in the other mines, more rail space will be available to sales, which we can use after transporting our own material to our plants. The balance will be available for selling there, transporting the ore processed.

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Anuj Singla, BofA Merrill Lynch, Research Division - VP in Equity Research [50]

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Okay. And sir, on this point only, you said the realization, we don't have a perfect understanding, but it could be a further of INR 700 to INR 800. Do we have to incur some cost as well for processing this material to be...

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [51]

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No. There are 2 things. One is, there are 2 kinds of materials. One is we have the sub grade fines, which were produced during mining in the early days when we didn't have sintering plants and all that, like our Burnpur plant didn't have a sintering plant. So that is actually quite good Fe; it has about an Fe of 60% to 61%. So all we have to do is simply take it out instead. Nothing is required to be done. But we also have another kind of product called tailings where it goes up with the slurry and goes into a pond, into the tailing pond. So that can be handled in 2 ways. One is we can simply sell it as such, wherein it is at a slightly lower price or we can beneficiate that and increase Fe from, say, 55% to 62%, 63% by spending a small amount as we've already done in July. We spend INR 400 to beneficiate the ore from 56% Fe to 64% Fe. 64% is [contracted] and that is a very good price in the market, around maybe INR 2,400 as of now. So what option is kept open to us that either we sell the slurry as it is or we set up a beneficiation plant, beneficiate that, increase the Fe and then sell it at a higher price. The normal fines, sub grade fines, we can sell as it is. It doesn't need any sub grade.

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Anuj Singla, BofA Merrill Lynch, Research Division - VP in Equity Research [52]

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Okay. Understood. Sir, lastly, you talked about the steel price change Q-o-Q. Can you also talk about what kind of coking coal benefit are we looking for in the next couple of quarters?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [53]

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There's a couple of -- fall in the coking coal prices?

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Anuj Singla, BofA Merrill Lynch, Research Division - VP in Equity Research [54]

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Yes. Sir, what kind of fall will we see in our coking coal cost in the -- maybe October to December and Jan to March quarter, if you have some idea on that?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [55]

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That is hard to say. The last index has been falling since April. From about $200, it has come down now to around $130, $135. But there is some indication that it might start falling off a bit. See, this is very closely linked to the steel prices. So if there's a demand pick up in the steel price, if the steel prices increase, the coal price might also increase. But right now, it's all downward movement. It has fallen from $200 to $130 -- to $135. Hard to say how would it behave going forward.

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Anuj Singla, BofA Merrill Lynch, Research Division - VP in Equity Research [56]

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Sir, very specific to our cost, what kind of benefit we can see in our numbers for October to December versus -- in our recovering cost for coking coal? Because this is having a 45-day of inventory and these prices are already -- I think you will have a very good understanding of what kind of cost decline we could see in October to December.

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [57]

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Yes. You're talking of the consumption rate or the procurement rate?

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Anuj Singla, BofA Merrill Lynch, Research Division - VP in Equity Research [58]

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Consumption, sir.

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [59]

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See, there is a 2-month lag between procurement and consumption.

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Anuj Singla, BofA Merrill Lynch, Research Division - VP in Equity Research [60]

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Right.

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [61]

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Right? So what we are consuming in the month of November, it's something we purchased in the month of September.

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Anuj Singla, BofA Merrill Lynch, Research Division - VP in Equity Research [62]

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Right, sir.

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [63]

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Right? So right now, the coal that is being consumed, the September prices were around $140. So that is the rate at which we are consuming now.

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Operator [64]

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

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Sumangal Nevatia, Kotak Securities (Institutional Equities) - Analyst [65]

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I missed some part of your previous clarification on the iron ore question. So the good quality fines, which you said, which is 7 million tonnes, what is the Fe content of that?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [66]

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Good quality fines, lumps are about 65% plus and the fines is 63% plus.

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Sumangal Nevatia, Kotak Securities (Institutional Equities) - Analyst [67]

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Okay. So this 7 million tonne is mix both lumps and fines put together?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [68]

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Yes. 7 million tonnes is total what we are allowed to sell, but we may not be able to sell 7 million because we have to consume a bit.

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Sumangal Nevatia, Kotak Securities (Institutional Equities) - Analyst [69]

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Okay. Okay. And this 7 million tonne will be a one-off -- onetime thing or even from, say, some surplus production in this year, we will -- we plan to sell in FY '21?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [70]

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The surplus is 25% of the production of the previous year. So 7 million tonnes in '19, '20, it is basically 25% of what we made in '18, '19, which was 28 million. So what we're going to produce in '19, '20, 25% of that will be available in '20, '21. That means if I increase my production from the mine, I can sell more.

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

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Okay. Sir, this year, do we expect surplus production where we'll be able to sell more in '21? Or I mean, how is the year going?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [72]

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Right. See, today -- as I said earlier, today, we produce the iron ore only to the extent that I need for my consumption because there is no point in extracting ore and keeping them sub. But now that I have an avenue open for sale, so in the various mines, the contracts have been awarded for increasing the extraction from the ore -- from the mine, so as I generate more material, I have more percentage available next year, 37% of that available next year, and that I can sell. So I have to produce more this year to be eligible for higher sales next year. For that -- it can't be done overnight. Contracts that we have got in, certain things have to be done. The plant capacity needs to be ramped up. So we are in the process of doing that.

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Sumangal Nevatia, Kotak Securities (Institutional Equities) - Analyst [73]

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Understood. And sir, when you spoke about upgrading the tailings, do we have existing surplus beneficiation facilities? Or it's -- I mean, you will have to set it up and it will be a medium-term plan?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [74]

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See, we have one beneficiation plant in the Dalli MTPA. This is the one which has beneficiated and increased the Fe from 56%, 57% to 64%. We don't have any other beneficiation plant right now, but we have tailings in many other mines. We have tailings pond in Kiriburu, Meghahatuburu and Barsua. Right now, we don't have beneficiation plants over there. But seeing the experience of Bhilai and seeing that it is possible actually to upgrade the Fe by such a large extent, now we are planning of -- we are thinking of setting up beneficiation plants in those tailing ponds as well. Maybe 1.5 to 2 years to float the tender and finalize and for that contractor to actually make the plant.

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

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Okay. Okay. But do you think the industry has surplus beneficiation facility, if we decide to sell these upgrade materials?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [76]

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I saw a report somewhere that the beneficiation capacity in India as of date is 117 million, and the pelletization capacity is 85 million. And most of these facilities are about 50% lighter. So there's a big market for this material if I want to sell it as it is.

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Sumangal Nevatia, Kotak Securities (Institutional Equities) - Analyst [77]

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Understood. Understood. Sir, is it possible to share the location of these mines state-wise -- not the mines -- sorry, the inventory?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [78]

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That, I can't give it to you offhand.

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Sumangal Nevatia, Kotak Securities (Institutional Equities) - Analyst [79]

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Okay. But majority will be in Orissa?

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Unidentified Company Representative, [80]

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Majority will be in Jharkhand.

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Sumangal Nevatia, Kotak Securities (Institutional Equities) - Analyst [81]

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Okay. Jharkhand, okay. And just one last question. I mean what do you think is the pellet third-party demand, where -- I mean I'm trying to understand what proportion of this 70 million tonne can be practically sold in a year? So what could be the demand which is dependent on third party and which could be in deficit once the mining deals expire in Orissa?

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Unidentified Company Representative, [82]

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See, there is one thing. The -- why did this pellet industry came -- come up? Because earlier these blast furnaces used iron ore lump as it is, and they had very high Fe content. But most of the mines in India are now -- the existing mines are depleting. So as steel goes down into the sinter, the Fe contents are reducing and you have more of impurities, like silica and alumina. So that ore cannot be used directly in the blast furnace. That needs some kind of processing [if issued and appreciated]. And the blast furnace technology, especially those who have set up these new high-capacity blast furnaces, that's about 25% of -- 30% of pellet will increase the productivity many times.

So there is a demand for pellet for 2 reasons. One, because people are setting up these big furnaces. SAIL itself will set up 3 big furnaces. And also because of the poor quality of coal from all the mines, not only the SAIL mines, also the NMDC mines and OMDC mines. So now there's a big industry for beneficiation and pelletization which takes this lump, this poor-quality ore, makes it a good-quality ore and then converts it into pellets which is good benefit in blast furnace.

So today, even though we have 85 million tonnes pellet capacity in India, once these -- the demand picks up in the market, the steel industry picks up, there'll be more demand for pellets. Most likely, more capacities will come up. Maybe we, ourselves, will be setting up capacity. SAIL will be setting up capacity.

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Operator [83]

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Our next question is from the line of Bhaskar Basu from Jefferies.

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Bhaskar N. Basu, Jefferies LLC, Research Division - Equity Analyst [84]

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Just a couple of questions. Just firstly, a clarification on the slimes, would you need to pay royalty? Or that's already paid for?

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Unidentified Company Representative, [85]

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Some part of the slimes is already paid, some quantity, and some part of it is not paid. So we have the accounting of that.

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Bhaskar N. Basu, Jefferies LLC, Research Division - Equity Analyst [86]

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Okay. And secondly, in terms of the capacities which you gave in your presentation for the various mines, that doesn't seem substantially higher than what you were producing currently, barring some of the mines which are yet to open. So are these capacities not equivalent to EC or are these much lower than the EC?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [87]

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These are -- yes, these are lower than the EC. EC is we can tell you this is close to 55 million, whereas the current infrastructure-wise capacity, what we have is close to 35 million, 37 million.

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Bhaskar N. Basu, Jefferies LLC, Research Division - Equity Analyst [88]

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Okay. And of that, I mean I understand Dalli Rajhara is depleting. And I guess Meghahatuburu, Kiriburu, is in that elephant forest area, where I think there are issues in -- around expansion as well. So how much realistically do you think it's possible to kind of ramp up?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [89]

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See for us, the lease, especially, we are already taking steps for that and with the state. Like we are starting production from, say, Kalinganagar mine and we also -- we have also engaged the NDA for development of Rowghat mine, which would be enough to take care of the entire need of the live steel plant. As far as Meghahatuburu and Kiriburu are concerned, in any case, the reserves from them are also on the downward side. So we are looking at the other blocks there like the south central block, and going for the new mines like -- maintained like Barsua, Kalta, Taldih and then the other mines in the Orissa state.

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Bhaskar N. Basu, Jefferies LLC, Research Division - Equity Analyst [90]

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Okay. And given the fact that your beneficiation plant generally will take about 1, 1.5 years, so is it a fair understanding that you will basically try to sell slimes to third-party pellet that will kind of beneficiating them?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [91]

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See, like we said, when we would be setting up the beneficiation facility that would be with respect to how much would be hand-made and what we could be able to utilize out of that. Apart from that, depending upon how the market wants it, we can do the sales in either ways. We can sell it as slime also. Like, those already mentioned by Director of Finance that there is beneficiation benefits available, additional capacity available in the country. So there would definitely be bias, you would be keen on taking it as slime in the form as it exists right now. In case it is possible for us to beneficiate it and sell and people do want it in that way, then we would be open to that option also.

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Bhaskar N. Basu, Jefferies LLC, Research Division - Equity Analyst [92]

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Okay. And so just my final question on the Bhilai Steel expansion, how is that progressing, and when do you really see that ramping up? I missed the initial comments, so maybe if you have spoken about it, I missed it.

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Unidentified Company Representative, [93]

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I didn't speak about that. So the amortization of (inaudible) is almost complete, except we have the third converter and fourth caster left to be commissioned. The third converter is expected to be commissioned maybe by February of 2020. And the fourth caster will take some time because we are thinking of converting it from its present shape into another project or with some changes have to be done in the BS and other.

So with the commissioning of the third converter, the entire expansion of the Bhilai Steel plant will more or less be over. The bar and rod mill is also under that commissioning track and they would also -- and that will also be commissioned I think very shortly. So with that, the expansion of the Bhilai Steel plant will be more or less over by March, definitely.

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Bhaskar N. Basu, Jefferies LLC, Research Division - Equity Analyst [94]

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Okay. So by March, you will be at -- at least from a capacity perspective, at full capacity?

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Unidentified Company Representative, [95]

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Yes. But it will take a little bit of time to ramp up. We are already in the process of ramping up, but it will take some time. By March '20, we'll probably have full capacity in place. It'll be another 6 to 8 months for the -- and again, subject to the market demand because you can't ramp up if there is no demand in the market.

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Operator [96]

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Our next question is from the line of Ashwani Kumar from Nippon India.

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Ashwani Kumar, Nippon Mutual Funds- Nippon Tax Saver (ELSS) Fund - Senior Equity Fund Manager [97]

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My question was that in terms of cost reduction plans, both on variable costs as well as the fixed costs, what are the kind of initiatives the company is taking? And when do you expect them to result in improved profitability?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [98]

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See, Ashwani, this is Amit. The kind of initiatives, what we have been taking we've been discussing, actually, these are falling into maybe 2, 3 kinds of categories, if I didn't talk about starting with the fixed cost. Obviously, the most important thing before us is the employee cost. On that front, we've been taking measures like bringing -- coming up with the VRS schemes, another thing to reduce the manpower number. Plus the compensation side, we cannot control being a government company. We are guided by the EP guidelines and all. So those, we cannot fully take into account, but we are looking at reducing the numbers, naturalizing them and redeploying then reverse approvals by [scaling] and all and controlling the recruitments as such. And as soon as the production would increase, the certain impact of the fixed cost would also itself come down.

Coming to the variable cost, definitely, there are certain areas like, most important of them, again being the coal consumption and the other raw materials like iron ore and all. So coal rate, coke rate, what -- the rate has decreased and [consumer] coal is also coming down over the period. As we shift to these new capacities, these get ramped up, we shift fully to these from the old facilities, the efficiencies would improve. So the conversion level for these inputs and all also would come down. Apart from this, the other conversion costs, the administrative cost, we are taking measures to control them in whatever way possible, like the power cost or if you talk about security costs and other related costs.

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Ashwani Kumar, Nippon Mutual Funds- Nippon Tax Saver (ELSS) Fund - Senior Equity Fund Manager [99]

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Yes. Second, in terms of your distribution, basically, in terms of leadership all across the country, primary dealers and the secondary dealers, what kind of expansion the company is doing? And are there any specific locations where you need to expand your distribution network?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [100]

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Coming to the marketing network, if we are really looking at Bhilai, initially following the dealership model that you already have mentioned in your question, very recently, we have shifted now from the dealer model to the distributor model. I think we have -- one thing we have identified, our products subdivide the country into 38 different clusters and we will be appointing distributors there. And below that, the distributors would be appointing their own dealers to cater retail needs and all.

Many of our products, if you look at, it's sold to the -- directly to the users of the industry in the sense if you talk about plates or coils, those kinds of things. These products which go to the retail market need to be catered through this channel. But it is close to right now, maybe 0.7 million is what we have done last year and maybe close to 1 million is what we are targeting this year. And from thereon, as we further increase our production, improve the production and all, we will be looking at selling anything close to around 2 million in the coming years.

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Operator [101]

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Our next question is from the line of Indrajit Agarwal from Goldman Sachs.

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Indrajit Agarwal, Goldman Sachs Group Inc., Research Division - Equity Analyst [102]

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I have a follow-up question on the NSR. So the NSR that you talked about at current rate of, say, INR 35,000 versus the quarter average of INR 37,382 last quarter. Does it include the impact of rebates being reduced or going away at the current moment or is it over and above that?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [103]

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You see the prices, like what we have mentioned right now for the month of October, as I was already mentioning in these remarks, relates for the month of October like -- sort of actually come down compared to quarter 2. In the month of November, we've seen certain price increase in the market, especially the longs, close to INR 500-odd, but that is not reflected in these. And maybe this will be available to us in a day or 2.

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Operator [104]

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Our next question is from the line of Vikash Singh from PhillipCapital.

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Vikash Singh, PhillipCapital (India) Pvt. Ltd., Research Division - VP of Metals & Mining [105]

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Sir, like you said that you are reducing the production run rate, so what could be the second half run rate net we would expect from you? And in terms of (inaudible), would you like to revise it?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [106]

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See, the numbers, we are not revising because it is (inaudible). We are not revising the numbers for sales. We are taking it step by step as to how the market responds to it. Like we already said the market is showing some signs of improvement in the current month. Already, I shared with you tentatively these sales for these first 12, 13 days we see over the previous months -- 13 days was up by close to 80,000 to -- 80,000 to 90,000 tonnes. So if the market continues to improve this way, then definitely we'll be also taking that call of improving -- increasing the production also.

As such, we are not keeping a tab on any number specific. We are only looking at keeping it at these levels so that our inventory levels do not go beyond acceptable. Actually, we kept some of our assets on standby. On standby means we haven't actually shut it off. So at any point, if we want to start the production, we can do it. But right now, because of our huge inventory buildup, we are still keeping it in standby mode. But if we find the demand has picked up in end of Q3 or start of Q4, then that mill on standby can be ramped up immediately. So that option has been kept open, and we are only waiting to see how the demand phases.

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Vikash Singh, PhillipCapital (India) Pvt. Ltd., Research Division - VP of Metals & Mining [107]

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Okay. And my second question pertains to a mix of the SMS and overall sales. It remains higher than 20% because of Durgapur Steel Plant. So exactly what's the problem there? Why is it we couldn't go further more, because as per last year, I think it was somewhere around 10% to 15%?

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Unidentified Company Representative, [108]

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We have, in Durgapur, about maybe 60% of the production is in the form of SMS. The reason is because we set up a mill in the middle of September. Again, because of lack of demand from -- of the product of that mill, we are not able to ramp it up, which resulted in loss of SMS getting [visibility]. Now again, we are trying to take some more investments, setting up a bar mill in Durgapur basically to absorb SMS. See, SMS can be handled in 2 ways. It can either be rolled into a finished product if there is demand for the finished product. If there is no demand for the finished product, then there's no point in incurring further expenditure. In that case, we said, see, it's a question of cost benefit, which one sells more. So the problem with that MSM is that -- is there a demand for the MSM product, because of which, we had to sell the same.

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Vikash Singh, PhillipCapital (India) Pvt. Ltd., Research Division - VP of Metals & Mining [109]

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Okay. Just lastly, one more thing. If you -- any peaks in debt level guidance you would like to give or...

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Unidentified Company Representative, [110]

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We won't give a peak guidance -- peak level guidance on the quarter. It's already very high at [debt to EBITDA] ratio at plus 8, and we want to bring it there. So we are taking all actions to monetize assets, and basically, it's linked to the inventory. So we have to bring down the inventory in order to bring down the borrowings, for which estimates already started, inventory levels have started coming down a bit. And we're also doing other greater means of generating cash so that we can free up the volume. But we won't give a number on what that is.

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Operator [111]

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Our next question is from the line of [Davar Joshi] from [Midpoint Capital.]

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Unidentified Analyst, [112]

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Sir, sorry if I missed it. I just wanted your view on the steel pricing, a, what has it been in November? As we heard, there has been some uptick. And has the market absorbed this? And how do you see things going out?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [113]

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(inaudible). Like we were mentioning, the prices in November have seen a slight increase both from long and flat, especially in the long segment. Maybe the increase has been close to the tune of INR 500, INR 600 per tonne. The market seems to be well absorbing that because, like I was also mentioning to the previous periods, our sales have also -- the quantity volume has also started to increase during the first -- same quarter of the year because we have a plan. So that is also raising the premium, and if it is coming at a higher price, then definitely, market seems to be absorbing that quite well.

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Unidentified Analyst, [114]

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Sir, second thing is we've seen a good amount of destocking that has happened at the dealer end. Do we expect a destocking demand given that prices are being absorbed, or will you see some destocking demand coming through?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [115]

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See, the destocking question with respect to dealers remain more on the lines of how the perceived steel prices would move. The actual demand of September or even to middle of October, they were expecting the prices to go down so there was a destocking -- massive destocking being done on their end because they were already expecting whatever they would want to buy would be available at the market again at a later date. But now that these prices have started showing an increase and maybe if this increase can be sustained for another month or so, definitely, I expect the dealers also to start picking up resales and restocking as well.

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Unidentified Analyst, [116]

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So largely, December is when you expect that to happen?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [117]

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Yes, definitely. We would be hoping that December the prices will be showing -- go up and the sales should also pick up on the basis of this.

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Operator [118]

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Our next question is from the line of Vishal Chandak from Emkay Global.

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Vishal Chandak, Emkay Global Financial Services Ltd., Research Division - Research Analyst [119]

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I maybe have missed it in the prepared remarks. I just wanted to understand what is the strategy for the raw material CapEx. I understand you have a CapEx signed up for about INR 10,000 crores, which is above the INR 60,000 crores planned for the expansion and modernization. So where are we in terms of the mining CapEx, and what is the guidance on that?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [120]

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The guidance -- I'm going to say, on the raw material side, we had CapEx of close to INR 10,000 per tonne, close to maybe 1,500-odd up to now. This is majorly because the 2 most important mines, that is Gua and Chiria. These are not having the easy clearances now. So we are not able to really move anything ahead of those line -- these mines. Also, Rowghat, we had planned something, but now that we have gone for the NDA route in Rowghat, so that CapEx altogether for Rowghat at least may not be required.

Coming back to Gua, we have got certain clearances -- forestry clearances in the current year. So as soon as we -- sorry, the lease mines -- leases have been clear for us. The forestry clearances have come from 1 or 2 leases out of that. Only one of them that is the Durgaiburu lease which is pending now. So once that comes up, we would be taking up CapEx and we will approve the leased area. This would help us to ramp up the production from the other leases of the Gua mine.

Chiria is still pending, and then when we get it, we'll definitely look at the CapEx from that side also.

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Vishal Chandak, Emkay Global Financial Services Ltd., Research Division - Research Analyst [121]

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Okay. So just a follow-up on that. So overall, when do we see the CapEx going through the cash flow for this mining expansion, number one? And number two, along with that mining expansion, what are the plans for the logistics and evaluation from the expanded capacity as well?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [122]

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See, as far as the logistics is concerned from the mining area, if I may answer in the terms of short-term and long-term plans. For the short term, definitely we will indeed requesting the railways and we are already in discussions with them, not only to meet our own requirement but also the selling permission, what we have right now to evacuate that material for the other buyers that will be required. So the rate of availability, we will request the Ministry of Railway to help us out in that way. But along with that, we'll also be looking at whatever can be moved through the road network.

In the longer term, definitely, we are looking at a number of ideas. We would be purchasing some [bracing on it]. And I think you see the Ministry of Steel, which has been introduced. We've already signed an MOU with them. Different clients are putting their requirement to be in this -- under that scheme. Along with this, we are also (inaudible) end up steady right now, but we would also be looking at whatever we can do with respect to transporting the material to slurry pipelines or through waterways and all. So that could be a long-term plan, but it would also depend upon how soon we start ramping up and how soon we are able to get these [things for] mines and all. So the CapEx for both these sites are the best for the mines as well as for the acquisition part can start doing it simultaneously.

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Operator [123]

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Our next question is from the line of Kamlesh Jain from Prabhudas Lilladher.

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Kamlesh Bagmar, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [124]

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Sir, if I think the realized calculated on the basis of revenue divided by the sales volume, then I see INR 1,700 fall. But if I see your NSR fall and it's close to INR 3,500. So what has gone into the revenue incremental basis?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [125]

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If we can get the question once more?

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Kamlesh Bagmar, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [126]

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So if I see the revenue which you have provided in the press release. So on that basis, it comes at INR 1,700 fall quarter-over-quarter. But on the NSR, I think it is coming at around INR 3,500. So what is happening around that one, sir?

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Unidentified Company Representative, [127]

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Okay. So the revenue, you would go to -- we are also discussing, if we -- the realization, what we would be getting from the (inaudible) pricing of rails and all, what we have moved into accounts as well as the INR 250 crores, what we have moved into accounts on the mines that we would be using at our (inaudible).

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Kamlesh Bagmar, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [128]

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And is that reflected in the revenue or in the inventory part, sir?

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Unidentified Company Representative, [129]

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That one is in inventory. INR 85 crores is the income we have taken in the realization from the rate distribution. Even at the site, there has been a fall in NSR for about INR 3,500 per tonne quarter-to-quarter.

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Kamlesh Bagmar, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [130]

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Okay. And sir, lastly, like, assuming this mine disruption doesn't happen in March 2020, so actually, assuming the road and everything, so how much iron ore can we dispatch, sir, into the market? And I mean like, there are no disruption happening in the -- for this last year.

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Unidentified Company Representative, [131]

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How much iron ore we can sell? You mean the sub-grade iron ore or what?

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Kamlesh Bagmar, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [132]

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Yes, all putting together.

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Unidentified Company Representative, [133]

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See, I told you that there are some category clearances which are required before we can start doing it, and we are in the process of doing that. Actually, there are 3 clearances required. Also, I told you again. I haven't even gotten the first one yet. So assuming that all the 3 go through and we are planning some quantities from the month of February, again, that will be mine [life] because the clearances have to be given by [mutual states]. And the way you clear that because (inaudible) that certain clearances will come a little late. (inaudible) the clearances are likely to come and so we can sell some quantities from these mines this year.

How much quantity we can sell is very -- to get, actually it depends when the clearances come, and then we have to go for auction and then tying up the quantities and then actually dispatching the quantities. It will fall a number of times, but the time that we've drawn up is at -- if all goes well, then we'll be starting to dispatch from the month of February. So we have already issued a pilot tender, as I told you, for 5 lakhs standard booked fines and 5 lakhs standard sub-grade fines. That tender has already been uploaded. But this is only a pilot. The real tender will start from February.

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Operator [134]

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Our next question is from the line of Pinakin Parekh from JPMorgan.

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Pinakin M. Parekh, JP Morgan Chase & Co, Research Division - Associate [135]

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Just to clarify, so that 1 lakh, 5 lakhs tender standard issued for fines and lumps, does it require any state government approvals, and have they come through?

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Unidentified Company Representative, [136]

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They haven't come through yet. So we've started the tendering process and we put a write-up that this is subject to getting the clearances. And so by the time we finalize the tender, we hope that's something -- because we can also (inaudible) until that clearance comes through. So we -- our intention to sell.

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Pinakin M. Parekh, JP Morgan Chase & Co, Research Division - Associate [137]

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Understood. So just to clarify, of that 70 million tonnes that you have these slimes mined, in which state will be the highest deposit would be between Jharkhand or in [Orissa] as well?

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Unidentified Company Representative, [138]

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Highest deposit is in Jharkhand. It's not only the slime, but it is the total complete material, which includes slime.

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Pinakin M. Parekh, JP Morgan Chase & Co, Research Division - Associate [139]

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Understood. That would be in Jharkhand. And over there, the approval process would only happen after the elections are over and the new government comes in?

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Unidentified Company Representative, [140]

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True.

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Pinakin M. Parekh, JP Morgan Chase & Co, Research Division - Associate [141]

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Understood.

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Unidentified Company Representative, [142]

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But not after new government comes in. Once the most important contract period is over, then the government clearances can start coming.

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Operator [143]

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Our next question is from the line of (inaudible) from [Jarin Securities.]

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Unidentified Analyst, [144]

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Sir, just a question on raw material side. How much of coking coal will be required to convert -- to produce 1 tonne of steel for our company as a whole?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [145]

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The ratio is actually 1:1.

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Unidentified Analyst, [146]

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And for iron ore?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [147]

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1.7 tonnes of iron ore to make 1 tonne of steel.

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Operator [148]

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Thank you. Ladies and gentlemen, that was the last question.

I now hand the floor back to Mr. Ashish Kejriwal for closing comments. Over to you, sir.

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Ashish Kejriwal, IDFC Securities Limited, Research Division - Research Analyst [149]

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Yes. Thank you, everyone, for the call. And (inaudible) Sen. Any closing remarks, sir?

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Amit Sen, Steel Authority of India Limited - Director of Finance & Director [150]

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So basically, we are all hoping that the market improves. There are some signs that it's improving. We hope these signs are [seen] and things improve. And maybe in the last quarter, we'll be able to post a good profit, with good prices coming, the demand picking up or iron ore sales picking up. And definitely, we are hopeful that next year is going to be good, but we are hopeful for Q4 also.

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Ashish Kejriwal, IDFC Securities Limited, Research Division - Research Analyst [151]

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Okay, sir. Thank you, and best wishes.

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Operator [152]

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Thank you. Ladies and gentlemen, on behalf of IDFC Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.