Steel Authority of India Ltd Q4 FY22 Earnings Conference Call Insights

Key highlights from Steel Authority of India Ltd (SAIL) Q4 FY22 Earnings Concall

Management Update:

• SAIL said it clocked its best ever production and sales during the year. The sales for the year have been the highest ever at 16.15 million tonnes as compared to 14.94 million tonnes in the previous year.

• For the first time in the history of SAIL, the company crossed revenues from operation of INR1 lakh crores.

Q&A Highlights:

• Amit Dixit from Edelweiss asked about the coking coal cost in 4Q22 in dollar terms and how it is expected to change in 1Q23. Anil Tulsiani ED answered that it is likely to go up substantially. In Q4 it was about INR28,000-29,000 in that range and it is expected to be up 10-12% in 1Q23.

• Amit Dixit from Edelweiss asked about govt. of India imposing export duty and does this move change SAIL’s capex plans in any way in next 2-3 years.  Anil Tulsiani ED said SAIL has some long-term plans for expansion. In the immediate future, SAIL is basically going in for some rehabilitation and debottlenecking schemes. SAIL added that it cannot take a call immediately that it will defer something or continue.

• Amit Dixit from Edelweiss asked about the capex for FY23. Anil Tulsiani ED answered that SAIL has planned a capex of INR8,000 crores for FY23.

• Rajeev Bajaj from Systematix asked about the total borrowing as on 31 March, 2022.  Anil Tulsiani ED replied that total borrowings are INR13,386 crores.

• Saket Kapoor of Kapoor & Company asked how the introduction of export tax is going to impact industry and SAIL in particular. Anil Tulsiani ED answered that SAIL doesn’t have that much quantity of steel exports. And advantage for SAIL is that it’s basically into exporting of semis, which are not impacted by this tax.

• Saket Kapoor of Kapoor & Company enquired about the finance cost increasing from INR316 crore to INR440 crore QonQ. Anil Tulsiani ED answered that it’s mainly the forex loss which has also been accounted for out here, the interest cost is quite low. Actually the interest cost for the particular quarter is in the range of around INR250 crores. The balance is the forex loss.

• Saket Kapoor of Kapoor & Company asked that on the demand side, how is the demand shaping up and realization currently for the flat and the long product. Anil Tulsiani ED said that realizations in April were better. But in May again there are some pressures on the prices, which SAIL is trying to cope up with.

• Saket Kapoor of Kapoor & Company asked about where the company is in terms of divestment of smaller units. Anil Tulsiani ED said there is not much headway made in the disinvestment of the smaller units. It is more or less at status quo what it was a year back. Deepam is driving this particular disinvestment so SAIL is not much in the know of these things.

• Rajesh Majumdar of B&K Securities asked about the wage bill going forward. Anil Tulsiani ED said that it should be more or less stagnated at this level or maybe a bit less.

• Aditya Welekar with Axis Securities asked about the production profile in FY23 and if there will be any reduction in semis as a proportion of total production. Anil Tulsiani ED replied that it’s always an endeavor to reduce its semis. So now most of SAIL’s plants are stabilizing. SAIL is optimistic that in FY23 it will be more than what it was in FY22.

• Ritesh Shah of Investec Capital asked about iron ore price outlook. Anil Tulsiani ED replied that SAIL expects the iron ore prices to soften. Because of the export duty, there will be a softening of the prices, which will in fact help SAIL to some extent.

• Mohit Bhansali from Bonanza Portfolio asked regarding the deleveraging plan for the future. Anil Tulsiani ED said it depends entirely on the market scenario, the coal prices and the steel prices. So it’s very difficult to give any projections.