INDIAN METALS & FERRO ALLOYS LIMITED (IMFA) Q2 FY23 Earnings Concall Transcript

INDIAN METALS & FERRO ALLOYS LIMITED (NSE: IMFA) Q2 FY23 Earnings Concall dated Oct. 28, 2022

Corporate Participants:

Mamta Samat — Investor Relation

Prem Khandelwal — Chief GCS, CFO & Company Secretary

D K Mohanty — Head – Ferro Alloys Business Unit

Bijayananda Mohapatra — Chief Operating Officer

Analysts:

Shubham Agarwal — Aequitas — Analyst

Saket Kapoor — Kapoor & Companies — Analyst

Yash Chandan — — Analyst

Joe Shah — 7seas — Analyst

Dhaval Shah — Annual Wealth Management — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Indian Metals & Ferro Alloys Limited Q2 FY 2023 Conference Call. As a reminder, all participant lines will be in the listen-only mode. And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]

I now hand the conference over to Ms. Mamta Samat. Thank you and over to you, ma’am.

Mamta Samat — Investor Relation

Thank you, Mike. Good morning, everyone, and thank you for joining us on IMFA’s Q2 FY 2023 Analyst Conference Call. Today, we have with us the senior management represented by Mr. Prem Khandelwal, CFO and Company Secretary, Mr. Bijayananda Mohapatra, COO, Mr. Deepak Mohanty, Head of Ferro Alloys Business Unit, Mr. Binoy Agarwalla, Head of Power Business Units and Mr. Sandeep Narade, Head, Mines Business Unit.

Before we begin, I would like to say that some of the statements that will be made in today’s discussion may be forward-looking in nature. We will begin the call with the opening remarks from the management, after which we will have the forum open for the interactive Q&A session.

I would now request Mr. Prem Khandelwal for the opening remarks. Over to you, sir.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Thank you, Mamta. Good morning, ladies and gentlemen, and thank you for joining our Q2 FY 2023 earnings call. I hope you had a very cheerful Diwali and festival you’re your friends and family. So happy to Diwali to all of you once again.

Coming back to Q2 results, after almost nine quarters of up-streaming ferrochrome price finally they are corrected quite sharply, which is getting reflected in Q2 results. Those who are tracking the metal industry must be knowing that we are at that leg of cycle where the cost at the peak, but the prices have corrected quite sharply. Now, the costs are coming down, and ferrochrome prices have increased a little bit. It started moving up. With this now, I would like to open the Q&A session.

Questions and Answers:

Operator

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] We have the first question from the line of Shubham Agarwal with Aequitas. Please go ahead.

Shubham Agarwal — Aequitas — Analyst

Yeah. Thank you for the opportunity, and happy Diwali to the entire team. Sir, my first question — yeah, thank you. So the first question was related to the cost of production. So as you mentioned in the opening remarks that the cost has peaked and the prices of ferrochrome has started increasing, which we are observing in the market currently. But in the Q2, our cost per ton reached almost Rs. 90,000 per ton. So I wanted your guidance with respect to the next two quarters. How do you see this trending in light of the current coal prices and the coking coal prices?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

The two major costs, which is the coal and coke, which are not in our control, both of — coke had gone up to almost $700 and it has come down now to around $450, $500. And similarly, coal at the peak, we had bought e-auction booking book at the peak of around 10,000 to 12,000 and it has come down to 7,000.

Shubham Agarwal — Aequitas — Analyst

Okay

Prem Khandelwal — Chief GCS, CFO & Company Secretary

So both these — it should figure in Q3 result, because the consumption of these low-cost coal and coke is going to be in Q3. So we should see some dip in Q3 costs.

Shubham Agarwal — Aequitas — Analyst

Okay. So this is now the peak of cost cycle in Q2?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Likely, it looks like this was the peak of cost and it should come down going forward.

Shubham Agarwal — Aequitas — Analyst

Okay..

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Deepak, would you like to add anything on the coke front?

D K Mohanty — Head – Ferro Alloys Business Unit

No. Yes. Coke, actually coke front, Chinese coke has come down, but Colombian coke, which is the ultra low cost that is not coming down, primarily because the coking coal is going to Europe for power generation. As you all know, because of Russia-Ukraine war, the gas supply from Russia is stopped and for that reason Europe as the energy crises going up. And particularly in the winter when heating is the first priority for that reason, it’s going there. So Coke, although some Chinese coke has come down, even that is also volatile. Although it was in the range, it come down to around $370 coal price, but it has gone up again to say 90,400. So it’s quite volatile depending on Chinese production. It goes up and down so — quite volatile, but has come down from 700 level to 450 level.

Shubham Agarwal — Aequitas — Analyst

Okay. [Technical Issues]

D K Mohanty — Head – Ferro Alloys Business Unit

So coal regarding, actually spot deduction price has touched around 11,800. Now it is coming down to INR7,500. So we are expecting another dip in Q3 also.

Shubham Agarwal — Aequitas — Analyst

Okay, okay. And all the high-cost coal and coking coal that we had is almost over, right?

D K Mohanty — Head – Ferro Alloys Business Unit

Yes.

Shubham Agarwal — Aequitas — Analyst

Okay. Got it. And in terms of realization, sir, so almost 103,000 was our realization in Q2. Now going forward, we had observed in the last quarter that ferrochrome fell almost 93,000, 94,000. So for this quarter and the coming quarter, and now it has again spiked up significantly, increased more than INR10,000 per tonne. So for the Q3, do you expect a further average realization drop or it will trend upwards from Q2 level?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Deepak?

D K Mohanty — Head – Ferro Alloys Business Unit

It will be going down from last quarter slightly because mostly the spot prices also, it has improved domestically to around 105,000. And in China also, it has gone up from INR0.25 to INR0.92, INR0.93 So overall, looking at such things, I think it will go down a little bit further for the Q2.

Shubham Agarwal — Aequitas — Analyst

Got it. Got it. Fair enough.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Just to add because it might come down a little bit from Q2 by the average price Q3. But again, the cost will also come down. So, yes, maybe we’ll be seeing a little better yes — in Q3 compared to Q2.

Shubham Agarwal — Aequitas — Analyst

Got it. So

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Better that this — this to predict anything.

Shubham Agarwal — Aequitas — Analyst

No, sir. It’s fair. So I think everyone was expecting Q2 and Q3 to be below a par.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Yes.

Shubham Agarwal — Aequitas — Analyst

Which is all right.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

I think from Q4 onwards, things will start improving.

D K Mohanty — Head – Ferro Alloys Business Unit

It will fixed at the same thing. Q4 onwards again things should improve.

Shubham Agarwal — Aequitas — Analyst

Yes, yes. And sir, secondly, on the compensation part, I think on 17 August, we signed our agreement. So is it fair to assume that in November or December, we will receive the money.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

You are talking about UCL?

Shubham Agarwal — Aequitas — Analyst

Yes.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

No, UCL vesting order has been issued on the 10th of October to DSP

Shubham Agarwal — Aequitas — Analyst

Okay.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

So we should be getting back that statutory portion of around INR20 crores now, and there was indicating by the end of this month, we will be getting that money. And then the valuation process will start, we should take another three to four months’ time. So the balance amount we are expecting at the end of this year. By March, we should be getting back that money.

Shubham Agarwal — Aequitas — Analyst

Okay, okay. So this is further delayed then?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

They were committed to pay as soon as the vesting order is signed, but the balance thing will take time, because of the valuation process, they will start now. So it will take time, yeah, three to four months, I think will take time.

Shubham Agarwal — Aequitas — Analyst

Okay. And sir, lastly, the general trend in the market, I think South Africa also, there was a slight spike in the power tariffs. So how do you see the general market for ferrochrome over the next like one year also? If you can guide us anything?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Deepak?

D K Mohanty — Head – Ferro Alloys Business Unit

Yeah. Actually, at this juncture, South Africa had two problems. So one was that power, which is continuing. But that was the Transnet workers strike, which has been resolved now. But it still takes some time to get normalized operation and on. That is one part. But looking at, if you talk about stainless steel where we are bespoke, stainless steel for 2022 calendar is expected to be — world production would be around 57.8 million, which is around 2% less than the last year. And for 2023, it is projected to grow by 3% to something like 59.56 million tons. So there is a positive for the next year. We said already, as you know, in the first half Chinese production has went down by about one million tons.

Shubham Agarwal — Aequitas — Analyst

And sir, in South Korea also we observed that their production had gone down significantly in the last two, three months. So does that impact us?

D K Mohanty — Head – Ferro Alloys Business Unit

Yes. That impacts us because we have the long-term contract with Posco. But as you know, because of the typhoon, they are particularly the stainless steel site mill, which is closer to the river that affected, and they have already out of three furnaces already one have started at a lower level of operation further to their planning in the next month, but even then also their rolling mill is affected quite a bit substantial, for which their operation is affected at the moment for this quarter, next quarter onwards also to stabilize, it will take some time, another maybe three months, first quarter may come to the full level.

Shubham Agarwal — Aequitas — Analyst

Okay. But is that also impacting our uptake in terms of volume?

D K Mohanty — Head – Ferro Alloys Business Unit

Absolutely. This quarter, the uptake is impacted, because they have declared post measures, because their furnaces are not running. They have also lot of stock. But next quarter wise, it will start to normalizing.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

We are supplying to other customers, I mean Posco may not be taking the tonnage, but we are in a position to sell it to some other customers, so that we are doing. So overall, that will not be impacted. But yes, to Posco there would not be any surprise to Posco.

Shubham Agarwal — Aequitas — Analyst

Got it, got it. But we will be able to maintain close to 60,000?

D K Mohanty — Head – Ferro Alloys Business Unit

Yea, yeah. Absolutely.

Shubham Agarwal — Aequitas — Analyst

Got it. Sir, thank you for answering all my question and best of luck.

Operator

Thank you. We have the next question from the line of Saket Kapoor from Kapoor & Companies [Phonetic]. Please go ahead. Mr. Saket, can you hear us.

Saket Kapoor — Kapoor & Companies — Analyst

Yes, yes, yes. Sorry, I was on mute. Namaskar, sir, hello?

Bijayananda Mohapatra — Chief Operating Officer

Namaskar, Saket, Namaskar.

Saket Kapoor — Kapoor & Companies — Analyst

Yes, sir. Sir, firstly, what is the total tonnage on a long-term basis annually if you could give the tonnage number?

Bijayananda Mohapatra — Chief Operating Officer

Deepak, would you have that number?

D K Mohanty — Head – Ferro Alloys Business Unit

Tonnage for projected around 240,000 to 250,000 tonnes product and sell for long-term.

Bijayananda Mohapatra — Chief Operating Officer

Long-term tonnage, he is asking for

D K Mohanty — Head – Ferro Alloys Business Unit

Long term or long term, we have around — if you say Odia Posco, it would be 80,000 to 90,000 per annum. And other spaces, we have been Japan and China also, we have also another 80,000 to 90,000 tonnes on long-term basis.

Saket Kapoor — Kapoor & Companies — Analyst

Okay. So total, we have around 160 to 180

D K Mohanty — Head – Ferro Alloys Business Unit

170 its being 180

Saket Kapoor — Kapoor & Companies — Analyst

As to the previous answer, you were mentioning that the uptake from Posco has been lowered, so what’s the agreement basis on — the basis of this but if they can — on their availability or on the plant uses, can they lower their terms, they are the variables in the terms, wherein they can lower their consumption.

Bijayananda Mohapatra — Chief Operating Officer

Yes, of course post measure condition is there, and this is the post measure

Saket Kapoor — Kapoor & Companies — Analyst

Okay, sir. And sir, sir, there is a lot of talk about Russian coal availability in the country that has gone up significantly to — for our clean and plants, have you tried with the Russian coal grade? Or these are not suited for our consumption.

Bijayananda Mohapatra — Chief Operating Officer

No, we are dependent on the coal only.

D K Mohanty — Head – Ferro Alloys Business Unit

You’re talking about Russian coke or coal

Saket Kapoor — Kapoor & Companies — Analyst

Coal.

Bijayananda Mohapatra — Chief Operating Officer

Coal we are not — we are dependent on [Indecipherable] and we often and we often pull from NCM.

Saket Kapoor — Kapoor & Companies — Analyst

Okay. I was — earlier I was only taking the price arbitrage and the quality since the prices on this 4G auction have gone up significantly. Have you looked at alternative resources for the same? Or it is — the setup is like that, that this coal will only work there?

Bijayananda Mohapatra — Chief Operating Officer

Binoy do we answer that At the — our power plants are our best in CFBC and design. So basically, the design with the coal of — this have been approximately great cut-in of Indian coal that is approximately DC3,000. So the Russian and South African coal they are not suitable for running with this coal — and their rate also very high compared to the Indian coal. I can say that South African coal costing around 18,000 per tonne.

Saket Kapoor — Kapoor & Companies — Analyst

No, I was particularly speaking about the Russian coal. They were telling they were….

Bijayananda Mohapatra — Chief Operating Officer

Russian coal also because of high DC is not suitable for [Indecipherable]

Saket Kapoor — Kapoor & Companies — Analyst

Right, sir. Sir, when we look at your other expenses line item, that has also was at INR144 crores. So if you could explain what led to this increase, what are the key components is one-off item, any time, sir, is there in this?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Mainly, it has gone up because of two things. One is that freight cost has gone up very high. So that is the one factor and other factor is the CSR expenses. The two factors

Saket Kapoor — Kapoor & Companies — Analyst

Sir, your line is very disturbed. I cannot hear you properly.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Hello, are you able to hear us?

Saket Kapoor — Kapoor & Companies — Analyst

Yes, sir.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

So it has gone up on two counts. One is the freight cost rates has gone up this quarter.

Operator

This is the operator here. Mr. Khandelwal, your voice is still breaking up. I’ll try to connect you back again, sir. Just give me moment, we’ll reconnect you back.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Okay, right, right, right.

Operator

Ladies and gentlemen, please stay connect as we connect Mr. Khandelwal back again to the conference. Ladies and gentlemen, we have Mr. Khandelwal well connected now.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Saket, are you able to hear me now?

Saket Kapoor — Kapoor & Companies — Analyst

Yes, sir. Now very clear. For the other expenses you were mentioning, sir.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Two counts, I said it has gone up. One is the freight cost has gone up very high because of that. And another — some CSR expenses were there in this quarter. So for these two counts, it has gone up by almost INR20 crores.

Saket Kapoor — Kapoor & Companies — Analyst

Okay. So freight will remain the same in the same vicinity going forward also for the same tonnage or freight costs have also declined?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

In fact the freight cost has gone up — in fact, the freight cost has gone down very drastically now. It’s almost 25% — I mean come down to 25% level. It’s down by 75%.

D K Mohanty — Head – Ferro Alloys Business Unit

Particularly container freight, which was in the range of $1,000 per container to give a feel about it has come down to $200 to $250 per container. So that is one measure. But in dreadful also, it has come down, but not very much maybe 50%, around about 60%, it is it is at the moment. And —

Prem Khandelwal — Chief GCS, CFO & Company Secretary

50%, 60% is also a bit selling for us.

D K Mohanty — Head – Ferro Alloys Business Unit

Yes, yes, yes.

Saket Kapoor — Kapoor & Companies — Analyst

Sir, going ahead for quarter three, what should be the ballpark number? What should be the bottom line impact just on the reduction of freight cost, sir? Can you give a ballpark number, sir?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Saket, that would be very difficult for us because so much wallet seen every peak won’t be able to — it won’t be proper for us to give you any number.

Saket Kapoor — Kapoor & Companies — Analyst

Sir. Okay. Sir, I just rephrase it.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

I can just tell you that since the costs are now going down and silicon prices have inched up from the low. So the Q3 should be better than Q2. That’s what I can tell you. But number is very difficult.

Saket Kapoor — Kapoor & Companies — Analyst

No. I’m not at all highlighting that guess, sir. But just to understand, the September freight cost month of September and October cost, if you could give that difference that would also….

Prem Khandelwal — Chief GCS, CFO & Company Secretary

So much especially would be difficult Saket.

Saket Kapoor — Kapoor & Companies — Analyst

No issue, sir. No issues. I was just trying to gauge the impact sir, [Foreign Speech] that means when that relief is there on the downwards side also there will be a significant contribution to the bottom line. Just understanding is correct, sir?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

So that’s why Deepak gave you the numbers that…

Saket Kapoor — Kapoor & Companies — Analyst

Correct, correct.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

It’s almost you can count from the top.

Saket Kapoor — Kapoor & Companies — Analyst

Correct. Correct, sir.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

So we should be getting a lot of saving on account of freight and on account of coke and coal cost.

Saket Kapoor — Kapoor & Companies — Analyst

Okay, sir. And sir, CSR, can you quantify what was the figure for this quarter?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

No, I need to check that one. The number I need to check, Saket.

Saket Kapoor — Kapoor & Companies — Analyst

Correct, sir. Sir, if you.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

I will give you separately for that, yes.

Saket Kapoor — Kapoor & Companies — Analyst

I will — I would ask later on, sir. When we look at the finance cost component also I think so this foreign exchange part is, is ACV part, sir — what is the reason for the INR14 crores, INR15 crores loss on foreign exchange?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Our entire working capital is in foreign currency. So the fluctuation — this is the INR14 crores, whatever you are seeing is because of the exchange.

Saket Kapoor — Kapoor & Companies — Analyst

That is all dollar denominated.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

All dollar denominated. Our entire working capital, because our exports — 90% is getting exported. So we are getting dollar earnings.

Saket Kapoor — Kapoor & Companies — Analyst

Okay. So it gets netted off whatever we are getting gaining from the revenue

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Because the revenue — gain from revenue is not getting differently into revenue itself. So that is not shown separately as for the accounting standard. But the interest portions whatever exchange is there, we are showing it separately.

Saket Kapoor — Kapoor & Companies — Analyst

So two more questions. Firstly, I guess [Foreign Speech]

Prem Khandelwal — Chief GCS, CFO & Company Secretary

So the gain in revenue is getting blocked into the revenue. So that’s why you are not able to see that again.

Saket Kapoor — Kapoor & Companies — Analyst

Sir, on the CapEx front, would you like to elaborate more? So where are we in terms of, I think some land was allocated, we made some payment also. So where are we in midst of that? And how are you progressing in that part, sir?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Bijayananda, would you like to brief about that?

Bijayananda Mohapatra — Chief Operating Officer

Actually, we had a land of 124.26 acres land in Kalinganagar, so this we have exhibited that listing on 14 October. So after that, there will be slightly RR supplement by IDCO and if you area doing it separately for 15 around or 77 people, who is there in the process. And we have given the DPR to M N Dastur, which is expected by December end, then I will start overall attributes. And side by side, you are going to — this IPSI, IPSI you are giving to EIC

Saket Kapoor — Kapoor & Companies — Analyst

Right, sir. So by March, what is our goal in terms of this expense? What are we trying to achieve by March 23. And if the coming six months is from either…

Bijayananda Mohapatra — Chief Operating Officer

These six months, we are going to construct the boundary wall after the possession. And also we’ll start from stringing a power line and also ordering of our equipment once the PRL freeze

Saket Kapoor — Kapoor & Companies — Analyst

These six months, we are going to construct the boundary wall after the possession. And also we’ll start from stringing a power line and also ordering of our equipment once the PRL freeze

Bijayananda Mohapatra — Chief Operating Officer

We are expected to commission in the month of April 25. So the major CapEx will be going by 23, 24 and to some extent, 25.

Saket Kapoor — Kapoor & Companies — Analyst

And last point, sir, on the cost of material consumed, sir. If on a quarter-on-quarter basis, sir, if you could give the impact of the increased coke and coal prices — if you could quantify for us, how that has affected because on a Q-on-Q basis, it has gone up by INR20 crores. So what was our cost for Q1 and vis-a-vis what was the cost for Q2?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Coke cost has gone up from almost INR19,000 crores to INR22,000 crores, INR20,000 crores to INR22,000 crores. That is 10% increase from Q1 to Q2. And power cost has gone up from INR23,000 crores to INR25,000 crores. So these two are the major factors, which has led in the past.

Saket Kapoor — Kapoor & Companies — Analyst

Okay. And how are they likely to shape sir?

Bijayananda Mohapatra — Chief Operating Officer

I’ve already told you that these coke prices — both the prices have come down quite significantly. So Q3, we should be seeing a bit in both these costs.

Saket Kapoor — Kapoor & Companies — Analyst

Okay. So, it will be lower than Q1 prices, sir, just to get an understanding, no other figures?

Bijayananda Mohapatra — Chief Operating Officer

Again, Saket, you are asking a specific question, and it would be difficult for us to give any number. We’ll come know after the end the quarter only.

Saket Kapoor — Kapoor & Companies — Analyst

Only I was looking at the trend?

Bijayananda Mohapatra — Chief Operating Officer

There will be a combination of — it all depends on what kind of coal and coke they’re consuming. So, not possible to give these numbers now.

Saket Kapoor — Kapoor & Companies — Analyst

Okay, sir.

Bijayananda Mohapatra — Chief Operating Officer

I can give you the sales only that we are buying now at a cheaper price or whichever is lower.

Saket Kapoor — Kapoor & Companies — Analyst

I can give you the sales only that we are buying now at a cheaper price or whichever is lower.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Yes, thank you, Saket.

Saket Kapoor — Kapoor & Companies — Analyst

Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Yash Chandan [Phonetic] from — who is an Individual Investor. Please go ahead.

Yash Chandan — — Analyst

Hello.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Yes, Yash.

Yash Chandan — — Analyst

Yes. First of all, wish you a very Happy Diwali, sir and congratulation on good use of number even in a troubling set of time. Sir, I had a few questions majorly on the business aspect. I can see that our power cost per tonne of ferro chrome has gone up. But power cost per unit of power production has gone down. So how have we managed that? Given that coal prices have gone up from Q2 — in Q2 over Q1. How is our per unit cost of power generation has gone down by almost half a rupee?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

No, I’m not able to get you — you’re comparing from what Q1 to Q2.

Yash Chandan — — Analyst

The Q2 cost of power generation rupees per kilowatt unit, it has gone down, sir, which I believe, given that our production has gone up for power 274 million units…

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Yash, I think I don’t know from where you’re getting the number, but I’m seeing the number if the power cost has gone up from INR3.60 to INR4.11 from Q1 to Q2.

Bijayananda Mohapatra — Chief Operating Officer

No, no, I’ll make it correct sir. He is asking about Q1 to Q2, that is INR6.57. So initially, this is Q1, we have got the price at the end of the call is around 10,000, 11,000. Now it has spend in this quarter to INR7,500 is auction coal production. That’s why that is a INR0.20, INR0.30.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Okay. INR5.94 to INR5.69 has come down, yes.

Yash Chandan — — Analyst

Sir, on the Balasore alloys part, are we planning on valuation of that asset? Or what are your thoughts on that?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

No. If it comes in NCLT, definitely, we are open to that. We will be very keen in participating in that. But as of now, there is no news about that.

Yash Chandan — — Analyst

No. If it comes in NCLT, definitely, we are open to that. We will be very keen in participating in that. But as of now, there is no news about that.

D K Mohanty — Head – Ferro Alloys Business Unit

Yes.

Yash Chandan — — Analyst

Sir, but like you said in Q3, we won’t be dispatching anything to Posco. So roughly 20 kg, 25 kg are we losing in Q3 for Posco contract?

D K Mohanty — Head – Ferro Alloys Business Unit

No, for Posco contract we would be losing but we are suppling to other customer, so overall we are not going to lose on tonnage, sales tonnage.

Yash Chandan — — Analyst

So we are planning that in spot-only in domestic or in export and in spot or with some other long-term contract customer? How are we planning to sell that?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Deepak, what are you planning for this?

D K Mohanty — Head – Ferro Alloys Business Unit

We have some long-term contracts with other countries like China, Taiwan and Japan. So where — we are increasing the quantity there. So particularly in China and Taiwan also, we are increasing the quantity and making up that tonnage. So, we are not basically on sales front there is a need.

Yash Chandan — — Analyst

But we are not exploring domestic also?

D K Mohanty — Head – Ferro Alloys Business Unit

Yes, domestic also we are supplying some quantity. So based on that, as per — wherever there is requirement and with proper price we are open to all and we are doing that.

Yash Chandan — — Analyst

No, Deepak, I’ll just — at the risk of repeating myself are we planning to sell the extra quantity from Posco’s contract in domestic market?

D K Mohanty — Head – Ferro Alloys Business Unit

Yes, in domestic market, there is not so much of demand but so much of quantity we cannot sale here in domestic market, has go to export market. So we are exploring the other long-term customers as well as spot customers in China. And already we have tied up some tonnage and the rate book also be tied up. So overall tonnage, sales tonnage, we are not worried about that even if Posco is not taking in this quarter.

Yash Chandan — — Analyst

Understood, sir. And sir on the future outlook for Q3 or for the ferro chrome market in general. Now we have seen our EBITDA margins have come down significantly. Do you think ferro chrome NHR is going to go down again or — I’m sorry, sir, if you have answered this question already because I joined a bit late? So do you feel the ferro chrome prices can go down again? Is there some space for them to correct or now they have bottomed out and they will go up in the coming time?

D K Mohanty — Head – Ferro Alloys Business Unit

See it all depends on the cost currently, the cost is not coming down, I don’t think the ferro chrome price can come down because in Q2, whatever we have seen, if we are not — we are coming to this kind of margin, then almost 70%, 80% of the world capacity will get closed, okay they cannot make. So that has led to again some spike in the prices, ferro chrome prices. So going forward also Q3 and Q4, we are seeing further increase if the cost is not coming down.

Yash Chandan — — Analyst

So you are saying, sir, we are better than 80% of the production, at least 80% of the…

D K Mohanty — Head – Ferro Alloys Business Unit

Yes. Obviously, yes.

Yash Chandan — — Analyst

Yes, that’s all — those are all the questions I had.

D K Mohanty — Head – Ferro Alloys Business Unit

Thank you, Yash.

Operator

Thank you. We have the next question from the line of Joe Shah from 7seas. Please go ahead.

Joe Shah — 7seas — Analyst

Happy new year to all of you. Deepak, I have one question about the Q3 export realization guidance, now we have seen total domestic market export prices going up to INR1,05,000 in last Q3 — Q2 realization was 1,02,000 so those improvement in the trade and so as we discussed, the trade is in the coke and the core on the coke side going down. So Q3 do we expect better performance? Deepak?

D K Mohanty — Head – Ferro Alloys Business Unit

Better performance on which front? On the production cost front, are you talking about or about the price front?

Joe Shah — 7seas — Analyst

Yeah price.

D K Mohanty — Head – Ferro Alloys Business Unit

Yes, price will be according to the market at the point-in-sale. And which is going up, as you have mentioned now it is 105.

Joe Shah — 7seas — Analyst

Right.

D K Mohanty — Head – Ferro Alloys Business Unit

Yeah.

Joe Shah — 7seas — Analyst

So our realization natural, our realization for Q3 could be better than Q2, right? Export realization.

D K Mohanty — Head – Ferro Alloys Business Unit

No, no, no. So overall realization because our major is export and the international price in tonnes of sales per pound is lower than — it will be lower than the last quarter.

Joe Shah — 7seas — Analyst

I see.

D K Mohanty — Head – Ferro Alloys Business Unit

So that’s why it can’t be higher than that.

Joe Shah — 7seas — Analyst

Sure. Okay and what about EBITDA? Because our coke is going down, coke ended low last year. So EBITDA for Q3 would be better?

D K Mohanty — Head – Ferro Alloys Business Unit

No. Joe, we have already answered this question to previous analyst that in the Q3, we expect a better yield than Q2, because the costs are coming down. And so coke prices eased up a little bit, although overall average Q3 real prices will be lower than in Q2, but the cost will also come down.

Joe Shah — 7seas — Analyst

Okay.

D K Mohanty — Head – Ferro Alloys Business Unit

Q3 should be better than Q2. That’s what I have already told in the previous quarter, I have already answered that.

Joe Shah — 7seas — Analyst

Okay. So Deepak, what is the analysis of Chinese demand? I guess, Chinese demand now going up.

D K Mohanty — Head – Ferro Alloys Business Unit

Chinese demand is going up at a moment, but there are two zero COVID policy, resurgence happens. Even in pocket it will affect. So that is the only main hurdle, otherwise, daily stress is coming back.

Joe Shah — 7seas — Analyst

Right.

D K Mohanty — Head – Ferro Alloys Business Unit

So things are moving up. So, unless like again COVID resurgence without that, I don’t see any other issues risk and affect.

Joe Shah — 7seas — Analyst

UG2 price for China total come to $45 so that will put pressure on Chinese ferrochrome. So we can expect some better prices for ferrochrome price in China?

D K Mohanty — Head – Ferro Alloys Business Unit

Absolutely, but that has happened because of the transit strike, which is already over.

Joe Shah — 7seas — Analyst

Okay.

D K Mohanty — Head – Ferro Alloys Business Unit

So maybe it will remain at this level, may not go further up. But naturally, cost being high for everybody, prices need to remain or go up slightly from what level, where it is at the moment.

Joe Shah — 7seas — Analyst

Right, right. Okay. So frame about the UCL, my question is, is there any total transparency about compensation calculation or there are some weak in that?

D K Mohanty — Head – Ferro Alloys Business Unit

There is no transparency at all about that. Yeah. We don’t know how they’re going to do it. So they have appointed some value or were going to do the valuation, we come to know about the numbers once they their report. But there’s no transparency. I don’t know what method they are following. We give the valuation only after getting the report.

Joe Shah — 7seas — Analyst

So this value would be appreciated by whom by the government MCA?

D K Mohanty — Head – Ferro Alloys Business Unit

And has already appointed the valuation will be doing by the valuation work.

Joe Shah — 7seas — Analyst

Okay. Because I got to come before some market that new LOT space of INR125 crores to MCA, you obviously be able to accepting the payment. Our expectation is much higher than the INR173 crore.

D K Mohanty — Head – Ferro Alloys Business Unit

Yes.

Joe Shah — 7seas — Analyst

I worry whether it gave no transfer in case, again we get and come and go on and on. It cannot be settled fast.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

No, no. INR176 crores was a tentative valuation given by at the the bip-side. So that’s what they might have paid. And they have already return their tax, which is subject to final valuation by valuer.

Joe Shah — 7seas — Analyst

Okay.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

So anything over and above whatever value is arriving at the number that will be further paid by their allottee.

Joe Shah — 7seas — Analyst

Okay.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

New allottee.

Joe Shah — 7seas — Analyst

And about interest payment — they circulate interest payment on the leased land, there absolutely clarity, right? That is they —

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Sorry, I didn’t get you. Can you repeat it again?

Joe Shah — 7seas — Analyst

Interest payment on leased land, which would do you’ve a major component of our compensation.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Yes.

Joe Shah — 7seas — Analyst

There is clarity about — I think, Delhi High Court order something like they clears about that, that interest is payable on the leased land.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Yes, yes, interest will be payable on the leased land also.

Joe Shah — 7seas — Analyst

So there is no ambiguity in this?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

No, ambiguity in that, because INR176 crores, whatever you are talking about, in fact, contains the interest on leased land also.

Joe Shah — 7seas — Analyst

Okay. To our expect this to be about INR375 crores to INR400 crores, compensation?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Whatever we have invested, we should be getting back that money. We are expecting that the entire back.

Joe Shah — 7seas — Analyst

So that will be clear by March ’23.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Should be, should be.

Joe Shah — 7seas — Analyst

Okay. As we told that it will take three to four months time.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

So, we should be expecting that money by end of this year.

Joe Shah — 7seas — Analyst

Okay. Perfect. And also this Kalinga land, there’s also — the orders which would be able to start by December ’22, Kalinga land?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Kalinga lease land already — lease we have already signed. Now the possession work is going on.

Joe Shah — 7seas — Analyst

Right?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

So by end of December, we should be getting the possession and thereafter, we start boundary construction.

Joe Shah — 7seas — Analyst

Right. But by December, we would be getting the land purchasing, right?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Yes, yes.

Joe Shah — 7seas — Analyst

Okay. Thank you. Thank you and no more query.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Thank you.

Operator

Thank you. We have the next question from the line of Dhaval Shah from Annual Wealth Management. Please go ahead.

Dhaval Shah — Annual Wealth Management — Analyst

Hello.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Hello. Yeah, Dhaval.

Dhaval Shah — Annual Wealth Management — Analyst

Yeah.

Operator

Sir, Dhaval, your voice is pretty low. Could you come closer to the mic or go off the speaker phone?

Dhaval Shah — Annual Wealth Management — Analyst

Yes, sure. Now is it better?

Operator

Yes. This a much better.

Dhaval Shah — Annual Wealth Management — Analyst

Yes, sir. Just wanted to get a blended coal cost for the quarter and the previous quarter?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Landed coal cost?

Dhaval Shah — Annual Wealth Management — Analyst

Blended — Blended coal cost.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Blended coal cost. Binoy, you have that number?

Bijayananda Mohapatra — Chief Operating Officer

In this quarter, Q2, washery reject came at INR2,447 and spot has come at INR7,800 and linkage INR2,900. It is a weighted average rolling rate.

Dhaval Shah — Annual Wealth Management — Analyst

Okay.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

So, what is the blended cost? What is the blended cost he is asking for?

Bijayananda Mohapatra — Chief Operating Officer

Blended cost will be around INR5,200.

Dhaval Shah — Annual Wealth Management — Analyst

And what was that for last quarter?

Bijayananda Mohapatra — Chief Operating Officer

In Q1?

Dhaval Shah — Annual Wealth Management — Analyst

Yes, Q1.

Bijayananda Mohapatra — Chief Operating Officer

Q1 was much — a little bit higher than Q2, because spot option price was high. It was around INR5,500 crores, INR5,600 blended cost.

Dhaval Shah — Annual Wealth Management — Analyst

Okay. And what would be the spot as it currently — not for Q3 or — but current what the prices are for the same?

Bijayananda Mohapatra — Chief Operating Officer

Sorry, I couldn’t get you actually. Spot e-auction coal price?

Dhaval Shah — Annual Wealth Management — Analyst

All of them, the washery reject, I think it should be same amount.

Operator

Sorry to interrupt. Dhaval, your voice is breaking up again. If you could go off the speaker phone, it would be better for the call.

Dhaval Shah — Annual Wealth Management — Analyst

Okay. Is it better now?

Operator

It’s still pretty low for all of us.

Dhaval Shah — Annual Wealth Management — Analyst

Okay. I’m actually not on the speaker.

Operator

Okay. You need to come much more closer to the mic or to the handset.

Dhaval Shah — Annual Wealth Management — Analyst

Less possible I’m closer.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

All right. Go ahead.

Dhaval Shah — Annual Wealth Management — Analyst

Okay. Yes, I’m asking, sir, the current prices — currently — the price is currently for washeries and e-auction and the spot prices.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

It will be remain more or less at par with the Q2, the auction price will a little bit come down. But otherwise, it will be at par with Q2.

Dhaval Shah — Annual Wealth Management — Analyst

So blended, we should get INR5,000 — it is around INR5,000…

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Yes, yes, yes.

Dhaval Shah — Annual Wealth Management — Analyst

Okay. Okay. Yes, that’s it.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Okay. Right, Dhaval. Thank you.

Operator

Thank you. We have the next question from the line of Saket Kapoor from Kapoor & Company. Please go ahead.

Saket Kapoor — Kapoor & Companies — Analyst

Sir, with respect to this compensation amount, the nominated authority must have zeroed in some numbers at the time of their submission of report, so have they come up with any numbers or the entire thing is still not close?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

No, no. As I said, Saket, there – we have mentioned a number of INR176 crore on the website. There is the tentative value and they have second. And in that INR176 crores, there are a lot of things which we need to take a bit within once we get the final report. INR176 crores whatever they have indicated, they have also mentioned that this is tentative value and the final number will be arrived after getting the valuation report from the maneuver.

Saket Kapoor — Kapoor & Companies — Analyst

Okay.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

So we are able to get that number.

Saket Kapoor — Kapoor & Companies — Analyst

Sir, as the previous participant, the coal costs were was — the blended coal cost was lower by INR300 crores, INR400 crores Q-on-Q. So out of the total raw material cost component, there is an increase of INR20 crores from June to September. So which component explained this increase if the coal costs were lower, sir?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

I’ve already explained that one. It was on two accounts, it was lower. One is that the coal cost that has gone up from INR20,000 to INR22,000, and coal cost has gone up from INR23,000 to INR25,000.

Saket Kapoor — Kapoor & Companies — Analyst

Sir, coal costs, I’m just missing the number. So we mentioned the blended cost at INR5,200 vis-a-vis 5,600 from June to September?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Okay.

Saket Kapoor — Kapoor & Companies — Analyst

As compared to the previous participant, Dhaval sir, you mentioned that for June, it was 56, for September 52, the blended cost for coal.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Just — I’m answering this one. We have thee power plants, 50 megawatts, 30 and 120. We are using 70-30, obviously we get 70 and 30 in 30 megawatt and 120 megawatts. But in 50 megawatts, 30, and 120. We are using 70-30, 70 and 30 in 30-megawatt and 120 megawatts. But in 50-megawatt, we are using only NCL coal. That is the reason why the coal cost is going up. When we are running 50-megawatt at that time, we are using only NCL coal, that NCL coal nothing but spot reduction and linkage. And spot reduction price is high, so coal cost is becoming high.

Saket Kapoor — Kapoor & Companies — Analyst

Okay, sir. And on the linkage term, sir, when is the renewal does, I think the five-year contract or something–?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Now, we have linkage quantity of 3,93,000 and it is — we’ve done the agreement in November 2021, and it will be valid for five years.

Saket Kapoor — Kapoor & Companies — Analyst

Okay. Offtake in 3,93,000 annual?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Yes.

Saket Kapoor — Kapoor & Companies — Analyst

We will be looking forward for more of linkage as and when the situation arises or as and then the offer comes?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Yes, yes. We will be looking for more linkage.

Saket Kapoor — Kapoor & Companies — Analyst

Okay. And any roadmap the government has given for the non-power producer or other than the electricity consumption player that they will be coming up with more linkage scores. I think there would be capacity for — from Coal India is also being ramped up. So, any projection they have given going ahead for that? Or would you throw some light on that?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

They have not mentioned anything regarding captive power plant, linkage to — linkage e-auction. But actually now, we are getting only 75% of our allocation from MCL. Now, they have reduced our allocation quantity from 100% to 75%. And by road, they are giving, but by rail, they are not giving because of IP, they are diverting their rates to IP. That is the reason — even if we have more coal through linkage e-auction, but we are not getting. Hello?

Operator

Mr. Yash Chandra, can you hear us?

Yash Chandan — — Analyst

Yes. Hello, am I audible?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Yes, yes.

Yash Chandan — — Analyst

So sorry for that. Sir, just a few more questions on the coal part, which we are talking like right now we’re explaining. Are we going back to get 100%? Or is this changed temporarily from 100% to 75% per linkage?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

This 75% began from January 2022, now it is also continuing up to 75% of our allocation quantity, but when they will change that also unpredictable.

Yash Chandan — — Analyst

Understood, sir. Sir, second question I had on the — are we evaluating — on the business development part, are we evaluating ferromagnet — other ferro-alloy, silica, anything? Or we are going to expand only in chrome sir?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

It all depends on getting the mines, Yash. If you get some more mines, maybe mines, then definitely, we can look for submitting our — really chance into ferromanganese. We are looking for some mines, but nothing available in the market at the moment.

Yash Chandan — — Analyst

But we are open for outside India also in that care, but not only —

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Yes, yes. But it has to be integrated play, if you get mine then only we’ll think about putting a furnaces.

Yash Chandan — — Analyst

Understood, sir. Sir, very clear. And again, on the coal part — coming back to the coal part, you are saying that the 71% quantity we have done. So are we getting any rebate for — because MCL is not able to give us 100% of the coal?

Bijayananda Mohapatra — Chief Operating Officer

No, no, no rebate. No rebate. No rebate from MCL side.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

If you’re getting coal, if you’re getting gold, that is good enough, that is

Yash Chandan — — Analyst

Yes, that is the main. Understood, sir. Understood. Very clear. And like-to-like on Posco, also sir, since they are moved the force majeure. Is there any rebate or anything in the coming quarter in the start off-take again, any reduction in discount or anything?

Bijayananda Mohapatra — Chief Operating Officer

No, no, no. Looking at based on the benchmark.

Yash Chandan — — Analyst

Okay. Okay. So no rebate on that front?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

No, no, no.

Yash Chandan — — Analyst

Understood, sir. Just one last query, sir, I’m sorry, I again missed the coal number. There are some connectivity issues, I’m facing the coal cost, which Deepak sir and you telling in different points of coal. If you could repeat that, that will be very helpful.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Binoy, can you repeat that coal cost again?

Bijayananda Mohapatra — Chief Operating Officer

Which one?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Coal cost part term blended —

Yash Chandan — — Analyst

You gave 5,200 per ton for Q2 and 5000 per ton for Q1 but you have a break-up also, sir, so that part I was asking for?

Bijayananda Mohapatra — Chief Operating Officer

Now — now we are getting washery at weighted average rolling rate — and we are — that is coming around 2,400, 2,500. And linkage, it is coming around 2,900 because we are mainly — we are receiving linkage coal by road. That is the reason why we are getting at a higher rate. And spot e-auction that is coming around 8,000.

Yash Chandan — — Analyst

Understood, sir. Understood. All this for Q2?

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Yes, for Q2. Yeah.

Bijayananda Mohapatra — Chief Operating Officer

Yeah, for Q2.

Yash Chandan — — Analyst

Thank you very much, sir. Those are all the questions I had.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Okay. Thank you, Yash.

Yash Chandan — — Analyst

Thank you.

Operator

Thank you. That was the last question, sir. On behalf of Indian Metals & Ferro Alloys Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.

Prem Khandelwal — Chief GCS, CFO & Company Secretary

Thank you. Thank you very much.

Bijayananda Mohapatra — Chief Operating Officer

Thank you. Thank you

D K Mohanty — Head – Ferro Alloys Business Unit

Thank you.