INDIAN METALS & FERRO ALLOYS LIMITED (IMFA) Q3 FY23 Earnings Concall Transcript

INDIAN METALS & FERRO ALLOYS LIMITED (NSE:IMFA) Q3 FY23 Earnings Concall dated Feb. 01, 2023.

Corporate Participants:

Mamta Samat — Investor Relations, Perfect Relations Private Limited

Prem Khandelwal — Chief Financial Officer and Company Secretary

Deepak Mohanty — Head, Ferro Alloys Business Unit

Binoy Agarwalla — Head, Power Business Unit

Bijayananda Mohapatra — Chief Operating Officer

Analysts:

Bhavesh Chauhan — IDBI Capital — Analyst

Aashav Patel — Molecule Ventures — Analyst

Dharmavenkatesan — — Analyst

Saket Kapoor — Kapoor & Company — Analyst

Joe Shah — Seven Seas Enterprise — Analyst

Shubham Agarwal — Aequitas Investments — Analyst

Unidentified Participant — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q3 FY ’23 Earnings Conference Call of Indian Metals and Ferro Alloys Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Ms. Mamta Samat from Perfect Relations Private Limited. Thank you, and over to you, Ms. Samat.

Mamta Samat — Investor Relations, Perfect Relations Private Limited

Thank you, Michelle. Good afternoon, everyone, and thank you for joining us on IMFA’s Q3 FY ’23 earnings 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 Unit; 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 Financial Officer and Company Secretary

Thank you, Mamta. Good afternoon, ladies and gentlemen. Welcome to the third quarter earning con-call of the company. Results are already in the public domain, you might have seen that. This quarter results got impacted because of shortfall in the ferrochrome realized price, which has come down from INR116,000 to INR93,000, and sharp increase in cost also. Cost of production has gone up from INR65,700 to INR79,900 in the third quarter compared to the corresponding quarter in the previous year.

As far as statistics is concerned, production figure for the third quarter production was 58,000 compared 261,000 in the corresponding quarter of previous year. Power output was almost same at 272 million units compared to 275 million units. However, chrome ore trading was more in the current quarter at 134,600 compared to 107,900 in the previous quarter.

Ferrochrome sales quantity was 65,773 tonnes in the current quarter compared to 55,400 tonnes in the previous quarter. And average, I have already told you, it has come down to 93,000 compared to 116,000 in the previous quarter. Cost of production has gone up very high to INR79,902 compared to INR65,713.

With this, we can now start the Q&A session. Thank you.

Questions and Answers:

Operator

Thank you very much, sir. [Operator Instructions] The first question is from the line of Bhavesh Chauhan from IDBI Capital. Please go ahead.

Bhavesh Chauhan — IDBI Capital — Analyst

Hi, sir. Sir, I would like to know about your expansion plans. I think we are annualizing our capacity by 100,000 metric tonnes.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Yes. We are going ahead with the Kalinganagar project, wherein we are putting up two furnaces, which can produce up to 100,000 tonnes of ferro-chrome annually.

Bhavesh Chauhan — IDBI Capital — Analyst

Sir, will this be back-back chrome ore in the near-term or it will take time?

Prem Khandelwal — Chief Financial Officer and Company Secretary

No, it is backed by — obviously backed by chrome ore. We are planning all our furnace expansion based on the further ore available. So, by the time the furnace is operational, we will have further ore available to meet the requirement of this furnace.

Bhavesh Chauhan — IDBI Capital — Analyst

Okay. And sir, secondly, on your EBITDA per tonne spread, so I mean, what do you think should be the normalized spreads once things normalize? Because today you’re facing lower price and higher raw-material prices. So, what should be normal EBITDA per tonne, maybe INR15,000, INR20,000, something like that?

Prem Khandelwal — Chief Financial Officer and Company Secretary

Our normal EBITDA should be INR15,000 to INR20,000 per tonne. But as you know, we are into cyclical industry, so it keeps on fluctuating every quarter. Third quarter was badly impacted because of sharp fall in the prices, but now in the fourth quarter, again, the prices have shot up after China reopening. And right now, it is around INR110,000. So, fourth quarter again should be much better than — compared to third quarter. So that is the characteristic of our industry, it keeps on fluctuating every quarter. But on average, if you take long-term projects, it is maybe around INR15,000 to INR20,000 per tonne, we can take.

Bhavesh Chauhan — IDBI Capital — Analyst

Got it, sir. And lastly, what is our chrome ore mining cost per tonne and what is the market price of it?

Prem Khandelwal — Chief Financial Officer and Company Secretary

Normal — our — I mean, all blended together and landed at Choudwar, it is around INR8,500 as compared to market price of around INR15,000, INR16,000.

Bhavesh Chauhan — IDBI Capital — Analyst

Yeah, yeah. Got it, sir. Thanks a lot, sir.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Right. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Aashav Patel from Molecule Ventures. Please go ahead.

Aashav Patel — Molecule Ventures — Analyst

Sir, my question is regarding average coking coal cost. So I wanted to know what was the average coking coal cost for Q1 and Q2?

Prem Khandelwal — Chief Financial Officer and Company Secretary

Deepak, would you answer that?

Deepak Mohanty — Head, Ferro Alloys Business Unit

No, you say it. Okay, let me answer. So, exactly it is not, but the coking coal, as you know, the prices have gone up drastically to about $500 and all, but have started coming down, and overall average maybe it will be — because…

Prem Khandelwal — Chief Financial Officer and Company Secretary

He is asking about — Deepak, he is asking about Q1 and Q2, I think.

Aashav Patel — Molecule Ventures — Analyst

This current quarter, which is Q3.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Q3 versus Q2.

Deepak Mohanty — Head, Ferro Alloys Business Unit

Actually, it has gone up. Based on the average price, the average price, consumption price was around INR22,000 in Q2 and this cost — total by consumption — consumed quantity cost was INR22,000, which has gone up to INR23,000. Marginally it has increased, because the low-cost inventory is over and higher-cost inventory has gone up. So, marginally it has gone up in this quarter, but it is going to come down also in the coming quarter.

Aashav Patel — Molecule Ventures — Analyst

So, sir, is it fair to assume that by Q3, we have exhausted all the high-cost inventory on our books for coke?

Deepak Mohanty — Head, Ferro Alloys Business Unit

Still something will remain, because normally we keep material for two, three months because we import coke from Colombia, China and other places. So we don’t work on month-to-month basis, and it’s always over a quarter — more than a quarter because considering the decline from Colombia.

Aashav Patel — Molecule Ventures — Analyst

Sure. So, sir, what would be our average rate of coke on books currently? Even a ballpark figure works.

Deepak Mohanty — Head, Ferro Alloys Business Unit

Coke must be in the range of 45,000 to 47,000, I think.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Coke price, met coke volume.

Aashav Patel — Molecule Ventures — Analyst

Sure. Got it.

Deepak Mohanty — Head, Ferro Alloys Business Unit

INR70,000 around at the moment.

Aashav Patel — Molecule Ventures — Analyst

Okay, got it. And sir, coming to coal equation, so roughly our annual requirement, I was going through the past con-calls and roughly our annual coal requirement is around 1 million tonnes. And broadly speaking, 70% of it is coming from [Indecipherable] and 30% of it is G12 coal. So, I just wanted to understand over last couple of quarters, how have the coal prices increased?

Deepak Mohanty — Head, Ferro Alloys Business Unit

Binoy?

Binoy Agarwalla — Head, Power Business Unit

Sir, I just wanted to clarify this one. In Q2 FY ’23, the average coal cost was INR3,500. In Q3 FY ’23, the average coal cost is INR2,850, it is slightly dropping. And really expecting in Q4, that will be around — average coal cost will be around INR2,700 in debt rate, we are just anticipating.

Aashav Patel — Molecule Ventures — Analyst

Sure. Got it. And in terms of how does it translate to the power cost, because as per the previous con-call, Q1 power plant was said to be around INR3.6 per unit. Q2 was INR4.11. And for Q3, how much would that converted into?

Prem Khandelwal — Chief Financial Officer and Company Secretary

You are asking for Q4 projection?

Aashav Patel — Molecule Ventures — Analyst

No, no, sorry, Q3. I’m asking for the quarter figure.

Bhavesh Chauhan — IDBI Capital — Analyst

But quarter Q3, the coal cost was INR3.44.

Aashav Patel — Molecule Ventures — Analyst

Okay. Got it, sir. And sir, we understand that last two quarters, very bad because of falling realization and higher input cost prices. But given the current spreads on current prices across realization, cooking coal and our cost structure, how do we spend right now? So given the current realizations, can we assume we are already at the average long-term margin rate of around 20% — INR15,000 INR20,000 EBITDA per tonne?

Prem Khandelwal — Chief Financial Officer and Company Secretary

Aashav, as far cost is concerned, I think we have seen the peak of the cost and cost is now coming down, whereas the realization has gone up in this quarter. So, this quarter, we are expecting margin again back to 20% level. And going forward, it should improve further.

Aashav Patel — Molecule Ventures — Analyst

Sure. Okay. I’ll come back in the queue.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Thank you. All the best.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Dharmavenkatesan [Phonetic], an Individual Investor. Please go ahead.

Dharmavenkatesan — — Analyst

Good evening, sir. Sir, my question is regarding the one-time settlement we have applied for the electricity dispute that we have mentioned in the presentation, so how much cash outflow that we might be looking at, like I just want to ballpark a figure. I know it’s exactly, because it’s a negotiation.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Bijayananda, would you answer that?

Bijayananda Mohapatra — Chief Operating Officer

Regarding this one-time settlement of IDBI, we have got this one deposit in lien and escrow account around INR100 crores, and interest on that is INR91 crores. And we have a principle of around INR26 crores and interest on this settlement was around INR44 crores. So total will be around INR270 crores, out of which, around INR200 crores is already moved under in-lien and escrow.

Dharmavenkatesan — — Analyst

Okay, sir.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Actual outlook — further outlook from the company would be around INR71 crore.

Dharmavenkatesan — — Analyst

Okay, sir. And sir, for the expansion plans like, I was reading your CLBs [Phonetic], so you had mentioned that if the current price levels improve or maintain at these levels, we will not be needing any long-term debt. So, in case if it’s not being able to maintain that level, like how much amount of the debt the company is like happy to take or whether we will delay our expansions banned a bit. So, I wanted more color.

Prem Khandelwal — Chief Financial Officer and Company Secretary

No, no, we cannot delay the expansion plan, expansion normally go on as scheduled. And we are not foreseeing any such danger in the near-term. So we are quite hopeful that whatever is going to be generated can be can be used for the expansion project. As of now, we have not planned any day trading for the expansion project.

Dharmavenkatesan — — Analyst

Okay, sir. Sorry to dwell up on it, again. Like in case we need to raise that, what is the debt-to-equity level or what kind of debt level that we might be comfortable with, given the [Indecipherable].

Prem Khandelwal — Chief Financial Officer and Company Secretary

In case we have to raise, we will not go beyond 0.5:1.

Dharmavenkatesan — — Analyst

Debt-to-equity ratio, correct?

Prem Khandelwal — Chief Financial Officer and Company Secretary

Yes, yes.

Dharmavenkatesan — — Analyst

Okay, sir. Thank you, sir. If anything. I’ll come back again.

Operator

Thank you. [Operator Instructions] The next question is from the line of Saket Kapoor from Kapoor & Company. Please go ahead.

Saket Kapoor — Kapoor & Company — Analyst

[Foreign Speech] I have joined a bit late, sir. If you were to summarize the quarter, sir, this was a quarter wherein we had the double whammy of lower realization and higher inventory of raw materials. This is how it should be summarized. And going ahead, for the next quarter, we are seeing the reversal of the same, that means higher realization and lower raw-material, and hence the spread improving.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Yes. You have quite happily summarized the cyclical industry nature of our industry. So, you are spot on.

Saket Kapoor — Kapoor & Company — Analyst

Okay, sir. So, sir, taking this into account, I think so earlier, last quarter [Foreign Speech]. There were some delivery issue and support, where are we, sir, in terms of Posco part and what were the deliverable numbers [Foreign Speech].

Prem Khandelwal — Chief Financial Officer and Company Secretary

Deepak?

Deepak Mohanty — Head, Ferro Alloys Business Unit

Yeah. Actually Q3, they were under force majeure. So, in fact there production only started towards end of November, that too a very little extent. So we had only 1,600 tonnes billable, [Indecipherable] whether utilized or not, they have taken in that quarter. And in fact, their production have started, the major problem then was mainly that only, so which has also started — slowly started. So in this quarter, they will be taking something like 15,000, 16,000 maximum in this quarter, that too in month of February — in this February and March. So, we have started supplies for that. So it will come back to normalcy from the first quarter of next step one.

Saket Kapoor — Kapoor & Company — Analyst

And sir, in normal conditions, what is their offtake on a quarterly basis?

Deepak Mohanty — Head, Ferro Alloys Business Unit

We roughly supply them 21,000, 7,000 per month, 21,000 per quarter.

Saket Kapoor — Kapoor & Company — Analyst

Okay, okay. This quarter, we are expecting it to reach to 15,000 to 16,000 — yeah, this quarter, January to March, it will be 15,000 to 16,000, last quarter…

Deepak Mohanty — Head, Ferro Alloys Business Unit

February and March only, they will take, yeah.

Saket Kapoor — Kapoor & Company — Analyst

Correct. February and March, January, there has been no shipment to them?

Deepak Mohanty — Head, Ferro Alloys Business Unit

We are — we have made shipments just now for supply in the month of February.

Saket Kapoor — Kapoor & Company — Analyst

Okay. And this number was 1,600 for the December quarter?

Deepak Mohanty — Head, Ferro Alloys Business Unit

Because we had last month inventory there, which they’ve obliged to take and kept that obligation and taking the material, paid us, whether they consumed or not.

Saket Kapoor — Kapoor & Company — Analyst

Okay. Correct. And sir, where did we sold this…

Operator

I’m sorry to interrupt, sir. Sir, I would request you to rejoin the queue, please.

Saket Kapoor — Kapoor & Company — Analyst

Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Joe Shah from Seven Seas. Please go ahead.

Joe Shah — Seven Seas Enterprise — Analyst

Good afternoon, everyone. Bijayananda, this OTA [Phonetic] is not very clear to me. As per the information given, we’d be paying INR45 crore per the one-time settlement. And I understand that they have a interest liability of INR91 crore, and interest amount of about INR200 crore we will park in escrow account. So overall, how much will be our saving of contingent liability in terms of our rate amount as well as interest amount?

Bijayananda Mohapatra — Chief Operating Officer

This one is already deposited inside the escrow and no-lien account, and interest on that, we have incurred around that is coming around INR200 crores, okay. Actual — it is a principal amount of INR26 crores and interest from the this period, November ’99 to ’22 [Phonetic], that is coming around INR44 crores.

Joe Shah — Seven Seas Enterprise — Analyst

So, our liability is INR200 crore — interest liabilities?

Bijayananda Mohapatra — Chief Operating Officer

No, no, no. Interest liability is not INR200 crores, Joe. Whatever — in no-lien account, we have deposited 14 [Phonetic]. So that is around INR100 crore. So that amount will go to them. And on that INR100 crores, we have an interest of around INR91 crores, that amount will also go to them. Settlement — as per the terms of settlement, we have to pay whatever is lying in the no-lien account along with interest. And INR26 crore what we have not paid to them earlier, prior to this period, over that there is an interest liability of INR45 crores. That INR45 crores plus INR26 crores, INR71 crores, we have to pay further on top of whatever amount is lying in no-lien account. That is the settlement.

Joe Shah — Seven Seas Enterprise — Analyst

Without settlement, what was our liability?

Prem Khandelwal — Chief Financial Officer and Company Secretary

Without settlement?

Joe Shah — Seven Seas Enterprise — Analyst

What was our liability — contingent liability on this issue?

Prem Khandelwal — Chief Financial Officer and Company Secretary

Yes, yes, yes.

Joe Shah — Seven Seas Enterprise — Analyst

So what was the total liability, now INR100 crore, plus INR91 crore interest earned on blended growth. Of course, we are paying for INR45 crores, plus INR23 crores toward interest amount, this settlement, how much we are going to save on this settlement?

Prem Khandelwal — Chief Financial Officer and Company Secretary

No. Where is the question of saving here?

Joe Shah — Seven Seas Enterprise — Analyst

The settlement means, we are doing 50% settlement, liability…

Prem Khandelwal — Chief Financial Officer and Company Secretary

No, no, no, it is not like that. It is not like that. We have not acquired any liability from them. We were liable for INR0.06 only, only which we were paying to them, but they were claiming INR0.20, which we have not acknowledged. So that 14% differential we were depositing into no-lien account, which was earning interest also. As a part of settlement, that entire amount goes to them. And the 26th or whatever, we have not paid to them earlier, what that interest is coming? INR45 crore. So that amount, we are paying on top of no-lien account. So there is no saving as such in this. I mean, we have not acknowledged anything on the books.

Joe Shah — Seven Seas Enterprise — Analyst

So what is the total outgo on this OTA, how much we probably would be paying for escrow account as well as the [Indecipherable] account?

Prem Khandelwal — Chief Financial Officer and Company Secretary

INR271 crore.

Joe Shah — Seven Seas Enterprise — Analyst

Totally we’d be paying INR271 crores?

Prem Khandelwal — Chief Financial Officer and Company Secretary

Yes.

Joe Shah — Seven Seas Enterprise — Analyst

And afterwards, there will be no liability, it will be zero, right?

Prem Khandelwal — Chief Financial Officer and Company Secretary

No, there will not be any liability. This is a part of settlement. As per the settlement, once we pay this money, everything will be closed.

Joe Shah — Seven Seas Enterprise — Analyst

Very good. Congratulations. Good.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Right. Thank you.

Operator

Thank you. [Operator Instructions] Thank you. We have the next follow-up question from the line of Aashav Patel from Molecule Ventures. Please go ahead.

Aashav Patel — Molecule Ventures — Analyst

Thank you for the opportunity, sir. I just wanted to confirm that, given that we have acquired for our chrome ore requirement, any rise in chrome ore would not affect our perception.

Operator

I’m sorry to interrupt, Mr. Patel. I would request you to please use your handset to ask a question. We are not able to hear you clearly, sir.

Aashav Patel — Molecule Ventures — Analyst

Am I audible now?

Operator

Yes, sir. Please proceed.

Aashav Patel — Molecule Ventures — Analyst

Sure. I wanted to clarify, given our backward integration into or any rising chrome ore will not affect our cost structure. Is that correct understanding. Yes. You mean any rise in the market price of chrome ore?

Prem Khandelwal — Chief Financial Officer and Company Secretary

Yes.

Aashav Patel — Molecule Ventures — Analyst

Yeah, yeah, that is not going to impact us.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Sure, got it. So, only impact to us in terms of variable cost would be largely coke and coal to power cost.

Aashav Patel — Molecule Ventures — Analyst

Yes, besides the inflection cost in chrome ore raising.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Sorry? In chrome ore?

Aashav Patel — Molecule Ventures — Analyst

Inflation cost. Okay, got it. And sir, I understand that regarding the settlement, the timeline is not clear, it might take one or two or couple of quarters, but just wanted to understand how much are we expecting from them?

Prem Khandelwal — Chief Financial Officer and Company Secretary

No, the valuation process is going on, Mr. Patel. So the quantified — amount quantification is not — has still not happened. So — but we are quite hopeful of getting back around INR50 crores.

Aashav Patel — Molecule Ventures — Analyst

Sure. That was on my side. Thank you.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Yeah. Okay. 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 & Company — Analyst

Yes, sir. In continuation, sir, so where was the tonnage which was dedicated for — was sold and how have the realizations that affected, sir?

Prem Khandelwal — Chief Financial Officer and Company Secretary

Deepak, would you answer that?

Deepak Mohanty — Head, Ferro Alloys Business Unit

Yeah. So, in fact, we had to go for the spot projects. And when you talk about spot permit, it is only China. And obviously the time when we — Posco was not there, the prices were at the bottom at the worst scenario because prices in China started to move-up [Phonetic] in the middle of December. After the announcement of the government taking out the COVID and other things, no — basically we lockdowns and other things lifted, so our plants [Indecipherable] also taken by the government, the deal is stimulus may dip.

So with that, they started moving past in the second half in view of also [Indecipherable]. So, what we have sold that was extra noise spot rates start cutting in the prices were also low compared to normal scenario.

Saket Kapoor — Kapoor & Company — Analyst

Okay, sir. And just…

Prem Khandelwal — Chief Financial Officer and Company Secretary

Almost 20,000, 25,000, we sold during — on spot basis during that quarter — in the last quarter.

Saket Kapoor — Kapoor & Company — Analyst

Although marked for export, but they were sold for export price.

Prem Khandelwal — Chief Financial Officer and Company Secretary

No, if you’re telling, Posco 21,000, naturally around that 20,000 tonnes we have sold in the spot. We have not reduced any sales because of that thing, but had to be sold in the spot market which is — which was said lower level at that point in time.

Saket Kapoor — Kapoor & Company — Analyst

Yes sir, my point was that — yes, the realizations were lower, I think the contract for POSCO did not happen. Had POSCO honored the realizations would have been different, because of the contracted — the price for the quarter was higher than what the spot prices was.

Deepak Mohanty — Head, Ferro Alloys Business Unit

We cannot say that, because normally we decide quarterly pricing just before the quarter, after the benchmark is declared. So these are revealing situation normally texture, and of course, on the overall YTD basis our — the overall to three — four quarters it averages out. So we cannot say whether at this point in time — in the point of time when we are supposed to finalize the price that point in time would have got a higher price than the spot our lowest — not really fair to — that at this juncture.

Saket Kapoor — Kapoor & Company — Analyst

Correct sir. And sir, what are the benchmarks currently for the Jan to March quarter? And the difference between the December and the March?

Deepak Mohanty — Head, Ferro Alloys Business Unit

In fact the benchmark for the Q3 — our Q3, which is Q4 of calendar year, it was $1.49, [Phonetic] it has come down by $0.31 from the previous quarter in the third quarter, which is October to December. And spend has been rolled over for the January to March quarter. So if you say at that point it would have come down by $0.31, so that’s why I was telling, you should not be — because spot price is based on the spot in China. But while the long-term is always discussed based on that benchmark price, as well as the prevailing situation, even considering the China because they are the biggest player.

Saket Kapoor — Kapoor & Company — Analyst

And sir, what are the current spot prices?

Deepak Mohanty — Head, Ferro Alloys Business Unit

It is already $1.05, $1.06 at the moment.

Saket Kapoor — Kapoor & Company — Analyst

Okay, sir. So whatever that gains we will have will only be on account of lower raw material prices, because other than that the pricing has remained the same for even to Jan to March quarters?

Prem Khandelwal — Chief Financial Officer and Company Secretary

No. Now, the prices are around INR1.10 lakhs compared to INR93,000 average in the last quarter. There is a sharp improvement in the price also.

Saket Kapoor — Kapoor & Company — Analyst

Okay. And this we are witnessing for demands from February onward, not for January.

Prem Khandelwal — Chief Financial Officer and Company Secretary

January onwards.

Saket Kapoor — Kapoor & Company — Analyst

From the month of January or…

Prem Khandelwal — Chief Financial Officer and Company Secretary

From the month of January itself it has started improving.

Deepak Mohanty — Head, Ferro Alloys Business Unit

Sir, January it started improving, and now it is at this level.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Now it is at INR1.10 lakh.

Deepak Mohanty — Head, Ferro Alloys Business Unit

We are expecting — yes, expecting again to go for that, in the next quarter.

Saket Kapoor — Kapoor & Company — Analyst

Right, sir. Sir, okay, sir. And in the other expense line item, sir, what should — what are the key constituent? I think the shipping charges are used to be one of the large component. So how are the shipping charges currently — I think the freight charges have come down significantly. So we will be reaping any more benefits in the coming quarters out of that, sir?

Prem Khandelwal — Chief Financial Officer and Company Secretary

Deepak?

Deepak Mohanty — Head, Ferro Alloys Business Unit

Yes. Actually last quarter you had seen that it has also come down compared to the previous quarter, because POSCO shipments was not there, because that’s the break bulk and break bulk headstart always two, three times more than container freight. So that is why it have come down. But now, again, we are starting with POSCO, it will go up. But generally the prices have stabilized and come down to a level of it previously one year before whatever it was there, one and 1.5 years before in similar level. So we are not expecting any increase in the component side basically. So there probably we’ll gain little bit, our realization will basically go up, because of that large freight also.

Saket Kapoor — Kapoor & Company — Analyst

Correct sir. And sir, — okay, I’ll join again in the queue, sir. That would be better.

Operator

Thank you. [Operator Instructions] The next question is from the line of Shubham Agarwal with Aequitas Investments. Please go ahead.

Shubham Agarwal — Aequitas Investments — Analyst

Yes. Thank you for the opportunity. Sir, I have just two question. So firstly, on the volume side, yes. So firstly, on the volume side, so have we completed all the maintenance part? And can we expect normalization in production this quarter?

Prem Khandelwal — Chief Financial Officer and Company Secretary

Deepak?

Deepak Mohanty — Head, Ferro Alloys Business Unit

Yes. Let me tell you. So considering the depressed market scenario we have taken up all those things — and business ahead. So accordingly, we have taken in the last quarter major thing, and this quarter also we are doing certain things, particularly, when they were little bit. So with that, actually, our plan is to — basically this quarter volume will be more or less similar to the Q3. So which is little lower than our budgeted class, slightly lower than that.

Shubham Agarwal — Aequitas Investments — Analyst

Okay. So INR65,000 alone we are expecting for Q4.

Deepak Mohanty — Head, Ferro Alloys Business Unit

No. INR65,000 is our self, our products from that [Indecipherable] production for this quarter was INR58,000. So we are expecting INR59,000 production in this quarter.

Shubham Agarwal — Aequitas Investments — Analyst

Okay. So that’s then less for Q4.

Deepak Mohanty — Head, Ferro Alloys Business Unit

Yes.

Shubham Agarwal — Aequitas Investments — Analyst

Okay. And secondly, on the cost side. So given what we have already told regarding the coke and coal prices, what is our expected reduction per ton for 4Q in cost?

Prem Khandelwal — Chief Financial Officer and Company Secretary

As far as coal and coke is concerned, I think there should be some reduction, but difficult to give any number right now, because it depends on the consumption. We’ll come to know…

Shubham Agarwal — Aequitas Investments — Analyst

Yes, but again average per ton, how much can we expect it to be down?

Deepak Mohanty — Head, Ferro Alloys Business Unit

Actually, if you wanted to know about powerplant coal or on this coal.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Like, both he is asking. How much reduction we are expecting, Binoy.

Binoy Agarwalla — Head, Power Business Unit

In Q3, the average coal cost was INR2,850, and we are expecting INR2,700 in Q4.

Shubham Agarwal — Aequitas Investments — Analyst

Okay. But is it possible to give per ton our cost reduction expected for next for compared to Q3?

Prem Khandelwal — Chief Financial Officer and Company Secretary

No, that would be difficult.

Deepak Mohanty — Head, Ferro Alloys Business Unit

No, it will be in the similar line mostly, because coke prices — average coke prices still not — have not come down so far, so because the shipments — because the many Colombian coke, that price has not come down drastically. Of course, it has come down from the previous level. But not to the extent it will make difference for this quarter. So like I told in this particular quarter, last Q3 also our coke cost in the production has gone up. So we have got the little lower fee, because we have also certain coal at very — coke at very high waste. So we are consuming that along with the lower cost, but the average cost, that still not come down to a level will makes some difference at this point in time.

Prem Khandelwal — Chief Financial Officer and Company Secretary

So Shubham, as far as coal concerned, there will be some reduction. But coke, very difficult to predict at the moment.

Shubham Agarwal — Aequitas Investments — Analyst

Right.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Maybe it will be at the same level or little lower. But giving number would be very difficult. But coal, definitely, yes, there will be a saving of around INR100, INR200 saving in the — yes, INR150 saving.

Shubham Agarwal — Aequitas Investments — Analyst

Got it. Sir, and lastly in the press release, it was mentioned that South Africa, there has been sharp increase in electricity prices. So can you give a bit of — broadly, what is the current scenario and how it is expected to impact us?

Prem Khandelwal — Chief Financial Officer and Company Secretary

Deepak?

Deepak Mohanty — Head, Ferro Alloys Business Unit

Yes. Actually, South Africa, it has been already declared from the past of April. From price power tariffs will be increased by 18.65%. And thereafter, also is from May, June, it is there with the [Indecipherable] where there is extra tariffs. And the power situation, it’s going in Phase 3, Phase 7, so which is although so far it is affecting bids. With all those things, we are expecting the silicon, that is why I told in the reply. We are expecting still further increase in the first quarter of FY ’24, that’s mainly because South Africans are always relevant for ferrochrome prices. And considering this price increase in the power tariffs and all. So we are expecting higher prices in the market. Of course, everything depends on demand supplies and how things are panning out, how China is working, suppose there is again COVID or negative things may change.

They come to zero of COVID policy and all. So we don’t — and also other major factories that I explain was, how it is panning out, it depends on that because [Indecipherable] Ukraine war, the coke price from Colombia is not coming down, and entered the crisis in Europe, it’s not coming down. So that is and we will at the moment it is winter is going on in Europe, service their products and everything is subdued. So depends on many factors. But hopefully, things will go right and it will improve during the first quarters, then this current quarter.

Shubham Agarwal — Aequitas Investments — Analyst

Okay. Sir, and on the coke price as you mentioned that the prices from Colombia is not going down, so is it possible for us to find coke from alternative sources? Because, given my understanding is, over the last six months, there has been correction in coke prices across the globe. Obviously, there was a increase recently, but given that our cost is not coming down from Colombia. I wanted to know whether we can procure from alternate source?

Deepak Mohanty — Head, Ferro Alloys Business Unit

No, actually considering our chrome, the chemical companies are not chrome — we require 006, 007 phosphorus level or 010 max phosphorus level in the chrome. Because the phosphorus output in the Ferro Alloys comes 85% to 90% from the work, so balance 10% we managed through only the scope you have with the reductant within coke. So for that consolidation that low-cost coke is not available in China, or Australia, they don’t make coke and domestic coke though they say some time, but they don’t produce 010 phosphorus in India even. That’s why we have the limited cash, and considering the Colombian all go into Europe for Power Generator from at this juncture, the prices are not coming down.

Shubham Agarwal — Aequitas Investments — Analyst

Got it. Sir, fair enough. Thank you for answering all my questions. And best of luck.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Thank you, Shubham.

Operator

Thank you. [Operator Instructions] The next follow-up question is from the line of Joe Shah from Seven Seas. Please go ahead.

Joe Shah — Seven Seas Enterprise — Analyst

Deepak, regarding South African electricity scenario, I understand that 18.65% hike will be from 1 April, 2023. Apart from this high electricity charge, did availability of power brought to an issue because off take prior [Indecipherable] power situation? So there are two issues, one is availability issue, and also power cost is also issue. So that two way miss, right?

Deepak Mohanty — Head, Ferro Alloys Business Unit

Yes. Absolutely.

Joe Shah — Seven Seas Enterprise — Analyst

Yes. Okay, good. Now, Prem, one more issue — one more that electricity matter, electricity duty matter with you. Now government of India is giving — for other products it is giving MEIS and JSPL, to refund the duty paid on electricity — etc. So are we getting the refund of electricity duty on exports of ferrochrome?

Prem Khandelwal — Chief Financial Officer and Company Secretary

No, we are not getting different. We are not eligible for that, right.

Joe Shah — Seven Seas Enterprise — Analyst

Okay. And Deepak, one more question for you.

Deepak Mohanty — Head, Ferro Alloys Business Unit

Yes.

Joe Shah — Seven Seas Enterprise — Analyst

Yes. For February ’23 tender price — Chinese tender price…

Deepak Mohanty — Head, Ferro Alloys Business Unit

Yes. It has gone up by RMB450.

Operator

As the participant have left the queue. Shall we move on to the next participant? Give me a moment. We move on to the next participant, and the question is from the line of Arshad Patel. Please go ahead.

Unidentified Participant — — Analyst

Sir, given that we are dependent on Colombia for our coke requirement. Sir, can we set up a coke oven to reduce the dependency from Colombia and produce our coke requirement in-house.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Deepak?

Deepak Mohanty — Head, Ferro Alloys Business Unit

Yes. So actually, you see the coke we use, which is 10 mm to 30 mm, 10 mm to 25 mm. So this is always a byproduct. So if you’re making a coke oven and it need to be viable, yours almost 75% to 80% need to be of our size which you need to sell. As per the requirement you — the type of requirement, the quantity requirement for us, whatever was done, doesn’t justify with that 20% and other things to be selling that as such will be different division and working outage where they pickup. So we have thought about it in several times, but dropped the program plan for making cookeries, coke ovens and others, several times cost effectiveness.

Unidentified Participant — — Analyst

Sure, sir. Got it. And, sir currently as you’ve mentioned in past as well that long-terms we don’t have any debt, but what would be our debt in short-term right now?

Prem Khandelwal — Chief Financial Officer and Company Secretary

We don’t have any long-term basis, we have repaid entire money last year. So we don’t have any long-term debt, as on debt on the books.

Unidentified Participant — — Analyst

And short-term?

Prem Khandelwal — Chief Financial Officer and Company Secretary

Short-term working capital debt is there, that is 300 and just a moment, that is around INR360 crore.

Unidentified Participant — — Analyst

INR360 crores. So, sir, as and when we get funds from Utkal Coal, do we plan to repay the short-term debt as well or then we want to consult a resources for our…

Prem Khandelwal — Chief Financial Officer and Company Secretary

Short-term debt is working capital loan, so that is going to be there.

Unidentified Participant — — Analyst

Sure. Got it sir. That is all from…

Prem Khandelwal — Chief Financial Officer and Company Secretary

Procuring raw materials, so that is, I mean that is — it is coterminous with the life of the company.

Unidentified Participant — — Analyst

Got it sir. Sure. Thank you, sir. All the best.

Operator

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

Saket Kapoor — Kapoor & Company — Analyst

Yes, sir. Sir, when we look at the finance cost line item, there are two components to it. First is the interest on borrowing. And then is the foreign exchange gain and loss. So for the nine months, we have a gain of INR35.69 crore on foreign exchange and interest cost is INR23 crore. So we had a net-net gain on the finance cost part. There is no — this line item has contributed rather than being a deduction.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Just a moment, let me see, you’re talking about — nine months period you’re talking about.

Saket Kapoor — Kapoor & Company — Analyst

Yes. For nine months period line item D, finance cost. When we look at the interest on borrowing, it is INR23.06 crores. And whereas the second line, it is a gain on foreign exchange to the tune of INR35.69 crore. So that means on a finance account as a totally finance cost, we have a credit of — INR12 crore, INR13 crore. So there is no outgo in account of the finance cost line item.

Prem Khandelwal — Chief Financial Officer and Company Secretary

No. I am not seeing a credit here, the INR36 crore is also outgo.

Saket Kapoor — Kapoor & Company — Analyst

Okay, sir. Okay, so just what explains oh, yes, it is in a bracket, I’m sorry, sir, my wrong. And sir, how does — what is this or how does this line item get affected? And the reason — is it only the short-term borrowing that we have in dollar-denominated that has resulted in…

Prem Khandelwal — Chief Financial Officer and Company Secretary

Yes. It is purely the working capital which we are taking in dollar terms, because we have dollar earning also, so it gets knock down. The gain on our turnover is getting reflecting to turnover, that is not getting the — separately here. That’s what you are seeing outflow here, but we are not seeing the inflow. Inflow is clubbed into cells.

Saket Kapoor — Kapoor & Company — Analyst

Correct, sir. Sir, you have the nine month EBITDA number for us?

Prem Khandelwal — Chief Financial Officer and Company Secretary

Yes, nine months EBITDA number is there. Nine months our EBITDA just a moment, it’s INR371 crore.

Saket Kapoor — Kapoor & Company — Analyst

Nine months EBITDA is INR371 crore. And sir, the nine months production and sales number?

Prem Khandelwal — Chief Financial Officer and Company Secretary

Nine months production is INR1,83,000, and the sales is INR1,90,000.

Saket Kapoor — Kapoor & Company — Analyst

Okay. And sir, we will be in the vicinity of INR260 crore [Phonetic] to INR265 crore [Phonetic] for the year as a sale.

Prem Khandelwal — Chief Financial Officer and Company Secretary

No. We’ll be in the vicinity of INR243 crore [Phonetic] to INR244 crore. [Phonetic]

Saket Kapoor — Kapoor & Company — Analyst

INR243 crore, INR244 crore should be the year target.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Yes.

Saket Kapoor — Kapoor & Company — Analyst

And sir, as we have told that the margins will be — we will be moving up the margins gain from 8% to 10% to 20%. Historically sir, evening out these exaggeration, what should be the margin profile for us going ahead?

Prem Khandelwal — Chief Financial Officer and Company Secretary

As I said, the EBITDA margins will be INR15,000, INR20,000 per ton on the long-term basis.

Saket Kapoor — Kapoor & Company — Analyst

Okay. And sir, that’s an absolute number, but sir, that margin expansion which you spoke on 8% to 20%, on a consistent basis, this 20% is the number we should factor in over a consistent basis or this is also depending much more on the wage fees of the banking.

Prem Khandelwal — Chief Financial Officer and Company Secretary

No, we can expect around 20%.

Saket Kapoor — Kapoor & Company — Analyst

20% is a consistent number.

Prem Khandelwal — Chief Financial Officer and Company Secretary

Yes. 20% we can expect on average.

Saket Kapoor — Kapoor & Company — Analyst

Right, sir. And sir going ahead sir, next year also do we see any uptick in volume part in the type of extraction of…

Prem Khandelwal — Chief Financial Officer and Company Secretary

No, next year also volume will be around the same level 2,50,000. Because the capacity expansion will come into picture in FY ’26 only, not before that.

Saket Kapoor — Kapoor & Company — Analyst

Okay. But I think there’s some work we were doing sir to just improve the tonnage I think the chrome ore tonnage because of some work that has gone into the underground mining. So when will that start coming into play?

Prem Khandelwal — Chief Financial Officer and Company Secretary

That is coming in FY ’26.

Saket Kapoor — Kapoor & Company — Analyst

Okay. And the greenfield will take much longer time.

Prem Khandelwal — Chief Financial Officer and Company Secretary

No. FY ’26, our new furnaces are coming into production, and that year also we’re expecting more tonnage from our mines also. So both we have planned in a manner that whenever we get extra ore the furnace will also become operational by that time.

Saket Kapoor — Kapoor & Company — Analyst

Okay. Right. Okay sir, thank you for all the elaborate answers sir. All the best, sir. Thank you.

Operator

Thank you. The next follow-up question is from the line of Joe Shah from Seven Seas. Please go ahead.

Joe Shah — Seven Seas Enterprise — Analyst

Well, Deepak, yesterday, this tender price for February ’23 Chinese tender price RMB450 RMB, yesterday, we were expecting about RMB900 to RMB1,000 price hike. So, do you think for this Q1 ’23-’24, long-term tender price would be quite high because of power scenario demand in China. So it may go up to plus — above $1.80, any idea or we cannot say now?

Deepak Mohanty — Head, Ferro Alloys Business Unit

Very difficult to predict any price. Nobody can predict.

Joe Shah — Seven Seas Enterprise — Analyst

Because Chinese holidays — the holidays are also very much successful there were some $300 million [Phonetic], so it seems that China is getting back to normal fee. So it will follow the ferrochrome demand will also increase and plus when we compare it with South African problems, South African UG2 price of $270, price has to go up the ferrochrome price, long-term ferrochrome context price has to go up. Okay, let us wait and see.

Now, Deepak, one more thing about today’s budget, there is a very huge capital expense outlay of about INR10,00,000 crore, will it impact stainless steel demand and ferrochrome demand in India. What is your take on this capital outlet? This…

Deepak Mohanty — Head, Ferro Alloys Business Unit

If you see, this stainless steel has to go up, and maybe things were pushed back because of the COVID and other things. Now things coming forward, and we want products and everything to go up logistical support and other things. There is — the demand is going to pick-up, and it has already started picking-up for which ferrochrome prices in the domestic market also has come beyond INR1 lakh [Phonetic]. So it will keep moving up. We don’t see any negative sentiment in this, particularly, in India.

Joe Shah — Seven Seas Enterprise — Analyst

Particularly in capex spending is so high, in fact, spending and capex spending budget, the demand should increase very much in the coming year, stainless steel demand. What is your idea?

Deepak Mohanty — Head, Ferro Alloys Business Unit

It should go up, it should go. Why it should come down, because with infrastructure development and naturally things needs to move, when requirement of stainless steel will come.

Joe Shah — Seven Seas Enterprise — Analyst

Right. Okay, thank you.

Operator

[Operator Closing Remarks]