Jindal Saw Limited (JINDALSAW) Q2 FY23 Earnings Concall Transcript

Jindal Saw Limited (NSE:JINDALSAW) Q2 FY23 Earnings Concall dated Nov. 14, 2022

Corporate Participants:

Neeraj Kumar — Group CEO and Whole-Time Director

Unidentified Speaker —

Analysts:

Pratiksha Daftari — Aequitas Investment — Analyst

Saket Kapoor — Kapoor & Company — Analyst

Anand Jhanwer — Phillip Capital — Analyst

Neha Jain — Bricksworks Ratings — Analyst

Nikhil Chandak — JM Financial — Analyst

Vikash Singh — PhillipCapital India Pvt. Ltd — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Jindal Saw Limited Q2 FY ’23 Earnings Conference Call, hosted by PhillipCapital India Private Limited. 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]. Please note that this conference is being recorded.

I now hand the conference over to Mr. Vikash Singh from PhillipCapital. Thank you and over to you Mr. Singh.

Neeraj Kumar — Group CEO and Whole-Time Director

Good evening, everyone. I welcome you on behalf of PhillipCapital and Jindal Saw, for Jindal Saw’s Q2 FY ’23 conference call. From management side, today we have with us Mr. Neeraj Kumar, Group CEO and Whole-Time Director; Mr. Vinay Gupta, President and Head Treasury and Mr. Narendra Mantri, President, at Commercial and CFO. Without taking any much time, I would hand over the call to Mr. Neeraj Kumar for opening remarks. Over to you, sir. Good afternoon, friends. On Friday, we finished our Board meeting for the half yearly results. As all of you would have seen on the numbers, just to reiterate some of the high-level numbers. Top-line for the, quarter INR3367 crores. As compared to INR3019 crores in the Q1 and INR2571 crores in the Q2 last year, which is essentially a 12% growth on trailing and 31% growth on a year-to-year. EBITDA, INR301 crores as opposed INR2255 crores for Q1 and INR380 crores for Q2 last year. Going down, PBT INR81 crores as opposed to INR37 crores which was INR196 crores for Q2 last year. Let me just also give you some highlights of the consolidated numbers. Q2 consolidated numbers INR4067 crores as, compared to INR3510 crores in Q1, INR3005 crores last year Q2. EBITDA, INR355 crores as compared to INR271 crores as compared INR410 crores Q2 last year. PBT INR89 crores as compared to INR1 crores for Q1 and one INR179 crore for Q2. Now, if you just look at these numbers, I’ll just hold-on their — If you look at just these numbers what does this indicate? A: Topline has begun to grow and it looks like we are entering a phase of very good busines, which gets corroborated by the order book which is at all-time high of $1.3 billion. So the business is now growing. If you now analyze the way the EBITDA is, where raw material consumption is, then the high-cost inventory that we had on our books has, more or less finished. So now we have the benefit of good business and my inventory would be more moderately priced. And therefore we are entering phase where my H2 should be better than H1. And based on the visibility that we have on our order book, the geopolitics, the demand/supply, probably the next 12 months to 18 months should be. Very-very good for us. Looking at one or two other numbers, finance cost INR126 crores as opposed to INR131 crores Q1 and INR89 crores last year Q2. Out of this INR126 crores. The contribution of the foreign-exchange fluctuation, as you know of late the Rupee has become very volatile and at one point of time it even touched INR83 to $1. The impact is almost INR25 crores – INR26 crores, out of this INR126 crores is only on account of foreign-exchange fluctuation. Part of it is crystallized and the part of it, I would say is more of a mark-to-market and therefore, as now Rupee is recovering. We may have an opportunity to recoup some of these losses that we have presented in that INR126 crores. The second important thing that, I would like you to look at is my consolidated numbers. As we have been saying that the company is very focused, the group is focused on our realignment, restructuring plan, where now it is Jindal Saw Limited, at present we have one subsidiary JITF, which we want to see how we can take that forward and then we have the stream of Abu Dhabi plus a stream for U.S. But those two also have started contributing positively. Primarily, I would request your attention on the Abu Dhabi facility, which has started contributing to a positive EBITDA. You all know, now it is 100% subsidiary and therefore is fully consolidated and the contribution is good, the outlook is encouraging. So this year result, we are hopeful in terms of tonnage would be better than last year. Maybe on the EBITDA, there would be a slight here and there because of the raw material price fluctuations. But otherwise, going forward we have a very healthy order book. And therefore, the consolidated results as well gives a very good trend and a good trajectory looking-forward 18 months to 24 months. Let’s now look at the other important factor, which has been a concern for many — for many years, our debt position. On our turnover, a profit of all that we have indicated, our long-term debt today stands at a little less or around INR1,200 crores. Working capital, INR3,000 crores, so the total debt on the books of Jindal Saw is INR4,100 crores. Looking at consolidated debt, it comes to about INR5,500 crores. Now if you look at all performance parameters and look at these debt numbers, it would very clearly tell you how well the treasury is managing our debt position. And let me reiterate, working capital or trade finance is very much ingrained in my business cycle and therefore, sometimes the working capital seems a little high, but it just tracks business. You will see always my working capital good track the top line, It would also track, if there is a fluctuation in the raw material prices. So, we would see the working capital as a percentage or as a parameter towards the end-of-the year should be far superior to what it was at the beginning of the year and what it is indicated even during this result of half year H1. Because going-forward we expect, the raw material prices to be stable and therefore the usage of raw material to get my topline should improve. So that’s about the debt position. An important indication on my order book INR1.3 billion, as we have always been saying we had deliberately kept it down in a very volatile per raw material price market, now it has almost doubled. Another important aspect, almost 40% of my order book today is exports, which is a good news from a overall demand/supply perspective and in a scenario where Rupee is continuously weakening, there is, again something that we can expect in terms of getting some more for every dollar that we earn into our top line. The treasury is active, it is looking at all of these very carefully and they are evolving our hedging mechanism so that with the fluctuation in Rupee – dollar, wherever we can gain something we will. Let me reiterate, as a policy we do not take speculative positions. But wherever there is an underlying trade, then the treasury does look at foreign-exchange, does look at how it’s behaving and then uses simple statements, simple Instruments to try and gain something wherever we can. So the numbers are very healthy, the pipeline is very healthy and the Group companies all over the place if you see, it looks like after a gap of maybe two years – 2.5 years, where we have managed to keep our head low and survive through without any major disruption without any major issues. Now, it appears we have a good time ahead in terms of the next 18 months to 24 months. Now let me turn my attention on a few other important aspects. Let’s look at the outlook. The oil and gas, even though there seems to be some uncertainty on account of the geopolitics, on account of the looming recession, but still our assessment is that, International oil prices would stay, at least at a level that it would justify investments in pipelines. In Europe, even if there is a recession, we believe there is likely to be investment because now Europe is firmly moving in the direction of becoming self-reliant or becoming reliant on sources of energy other than Russia. And therefore, it is necessary that they would need pipelines because so far they were so heavily reliant on the Russian gas through Russian pipeline, that even for the alternate sources whether it is for oil or for gas or for LNG terminals, they will have to do some pipeline and therefore, we are very bullish that Europe, the investment in pipelines would increase even if there is a recessionary situation. Because it appears that Europe would follow the policy of not now falling back on Russia on any gas or any oil even if things improve. The other business which is showing a lot of traction, is the seamless and stainless business, primarily because both Russia and Ukraine, where suppliers to a very large extent on these two pipes and tubes. Now, with the war, the entire Ukraine supply chain has been disrupted and going forward the way Russia has isolated itself, even if the war were to end, unlikely that any of those market would ever go to Russia anytime soon. And therefore, what we are seeing in our stainless and seamless business, that the demand is becoming very healthy. On the supply side or on the internal side, we have moved now these stainless business into a very stable environment and we are entering into value added segments like we are beginning to manufacture now higher grades of stainless steel, we are beginning to manufacture the instrumentation tubes which are very high value. Obviously, in terms of tonnage, in terms of volume, they are low, but they would give this business a very strong fillip. So, the seamless, stainless business because of Russia – Ukraine, overall demand is likely to give a very good fillip. The topping on the ice for this is the JV. We are now coming very close to the soft launch of the Jindal joint venture is likely to happen definitely in the second half. If everything goes well, maybe by December, January, the soft launch would happen and we would be servicing the market with premium brand as already indicated, we have also been able to rope OSI, another U.S. major who have agreed to transfer the technology for connectors. That again is going to make this joint venture a center of excellence only of its kind in this part of the world with a size range starting from 2, 7, 8 inches going right up to 36. This would be the only facility of this nature and this kind in this part of the world. So, by and large, this would give the stainless and seamless business a good outlook in the near-term. Jal Jeevan Mission is now in its very mature state. General elections are around the corner. So the next 18 months – 24-months, we believe would see a lot of emphasis on Jal Jeevan Mission on the water grid, and that’s good news for DI business. So, most of the business segments that we are looking at is showing us a very healthy demand and we are absolutely ready to take benefit out of that. On pellet, definitely, we are showing that as raw material prices stabilize, the margins, the top line everything from last year has moderated a little bit, but that’s absolutely fine by us, because that has been more than compensated by the improvement in the pipe business which is a larger pie for us in the whole scenario. Turning our attention, all of you would have seen, it has also been reported in the newspaper, we are the highest bidder for Sathavahana. We have been talking about this that we are likely a contender, we are a very serious player. We are now awaiting the final nod from NCLT which we hope is a few weeks away and then Sathavahana would become a part of Jindal Saw. Once that happens, the South India business of DI market, the Jal Jeevan Mission, would give us a very, very strong positioning and a good pricing to add that. We definitely expect that in the second half before the year end, there should be a contribution that the Sathavahana business should make to Jindal Saw in the second half that is what our expectations are. With all of these happening, we expect that the margins that we had pre-COVID and pre this economic turmoil and all of those, I think we should be returning to that by last quarter of this year or definitely in first quarter of next year, the margins should go back to those old days prior to all of these, and maybe even higher because now we would be entering a lot more value added segments. If you would have seen our consolidated results, you would have seen an exceptional item of INR25 crores as an expense. Now, that is the last shift that we had which was the transloader used for this. We sold that the moment we got an opportunity because now the NTPC contract period is over. So, even though we are under litigation, as you all know, in the high court for the arbitration award, but since the contract period is over, we are under no obligation to maintain those assets and therefore we have sold that asset where we had to book a loss of INR25 crores, because that was the difference between the WDV and what we received, but it definitely added to the liquidity of the company, and therefore, it was — the company thought or we thought it was a sensible thing to do rather than spending money maintaining on it and again, we are very clear that going forward, this is not what our business model would include. And therefore, we have sold it and we have booked the loss, which is a one-time loss of INR25 crores is showing in that account. It appears that I have covered all — I must make a mention that in Saudi Arabia, we have a very significant win. We have got a water project contract for the new city that the prince of Saudi Arabia is building. We would be the supplier of the entire water pipeline. It’s a very large project which will be more than $300 million. We would be supplying the pipes over the next 18 months -24-months. So, it’s a very short contract, high value contract, is going to help our large diameter pipe business in a major way, because it would give us a continuous campaign and we are building a very robust supply chain, raw material purchase, so that should be one good news which is going to stabilize our large diameter market as well. So, with these, let me stop here and take some questions.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]. The first question is from the line of Pratiksha Daftari from Aequitas investments. Please go ahead.

Pratiksha Daftari — Aequitas Investment — Analyst

Thank you for the opportunity. My first question is regarding the order book. If you could give us the visibility in terms of execution period for each of the segments?

Neeraj Kumar — Group CEO and Whole-Time Director

Okay. $1.3 billion of order book. Large — as I told you, is largely because of the Saudi Arabia project, we will executive it over the next 18 months – 24 months. Seamless pipes typically 12 weeks to 16 weeks, ductile iron pipes typically 9 months to 12 months. [Speech Overlap] Pellets is always on cash basis, means, hardly 15 days.

Pratiksha Daftari — Aequitas Investment — Analyst

Okay. Okay. How do we see the profitability going ahead in the DI segment considering that we have no supply — incremental supply coming in both west and east region, how do we expect the margins going ahead and also volume growth?

Neeraj Kumar — Group CEO and Whole-Time Director

No, you have to — please ask, which has DI margins should improve because the raw material prices are becoming very stable in terms of coal in terms of iron-ore. So the margin should definitely improve. But I missed out, you put a caveat in your question about DI. Would you please repeat your question?

Pratiksha Daftari — Aequitas Investment — Analyst

No. No. I just wanted to understand that since we will have incremental supply in the industry because new capacity has come in for both west and eastern region, so, how would that impact us?

Neeraj Kumar — Group CEO and Whole-Time Director

No, the demand completely outweighs the incremental supply and therefore, the prices would remain largely stable, in fact, we expect the prices to in fact go up a little bit.

Pratiksha Daftari — Aequitas Investment — Analyst

Okay. And how much of our current order book would have price escalation clauses?

Neeraj Kumar — Group CEO and Whole-Time Director

Most of the orders now coming out of the major states have a price variation clause. So, still we have some way to go, but now as a matter of policy, with private sector, all the EPCs, we sign contract with the PVC, which is the price variation clause and most of the major states have also accepted now PVC as a norm, because we wanted to make sure that going forward, we don’t get into a situation that we were a few years back.

Pratiksha Daftari — Aequitas Investment — Analyst

Okay. And regarding this you mentioned something in the press release about import duty in Saudi Arabia for goods from UAE. So, if you could elaborate on that?

Neeraj Kumar — Group CEO and Whole-Time Director

So basically that business got impacted Saudi Arabia. Okay that was that, they have come up Law –Emirati Law. If you do not appoint a certain number of Emiratis, then they levy a tax in Saudi Arabia for one form or the other. That we have taken care of, now, we have created a manpower supply company where most of the manpower would be stationed and there, we would be employing that minimum number of Emirati people of the relevant category so that they become useful to us, and we would have that sorted out. So, that issue which we told you last time about our Abu Dhabi business, that would get sorted out.

Pratiksha Daftari — Aequitas Investment — Analyst

And when do we — so on demand front in UAE and Abu Dhabi, do we expect to come back to see 60,000 tons kind of volume trajectory sometime soon?

Neeraj Kumar — Group CEO and Whole-Time Director

[Speech Overlap] Hello, when you say 60 means, quarterly 60?

Pratiksha Daftari — Aequitas Investment — Analyst

Yes, yes, quarterly?

Neeraj Kumar — Group CEO and Whole-Time Director

[Foreign Speech].

Pratiksha Daftari — Aequitas Investment — Analyst

Okay. Okay. All, right.

Neeraj Kumar — Group CEO and Whole-Time Director

[Foreign Speech] In under any circumstances [Foreign Speech] But we are adding some new capacity some large-dia pipes are beginning [Foreign Speech]. We would be in that vicinity only.

Pratiksha Daftari — Aequitas Investment — Analyst

Okay. Okay. All right. Thank you.

Neeraj Kumar — Group CEO and Whole-Time Director

Thank you.

Operator

Thank you. [Operator Instructions]. The next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead. Yeah. Namashkar sir, and congratulations on the intake of this big order, in the GCC region of $335 million, what is the tonnage corresponding to this order of $335 million?

Neeraj Kumar — Group CEO and Whole-Time Director

[Foreign Speech]

Saket Kapoor — Kapoor & Company — Analyst

Yeah. The big order which we have got and this will be shipped entirely from the Saudi Arabian unit under.

Neeraj Kumar — Group CEO and Whole-Time Director

Just one second, I’ll try and get you the tonnage. What — is this Saudi what?

Saket Kapoor — Kapoor & Company — Analyst

[Foreign Speech] Saudi Arabia [Foreign Speech] execute [Foreign Speech] order?

Neeraj Kumar — Group CEO and Whole-Time Director

[Foreign Speech].it is over 2 lakh tonnes.

Saket Kapoor — Kapoor & Company — Analyst

Over 2 lakh tonnes, right. Sir, we have also seen that there is a significant fall in the ocean freight prices, so how is that going to impact us. I think so earlier that had a negative impact. So the margins would be boosted because of this, how is that going to shape up?

Neeraj Kumar — Group CEO and Whole-Time Director

No, the ocean freight has fallen, but again it is likely to stabilize. What is going to happen that Americans are now making distinction that you can import Russian oil, but don’t use western services, means don’t use western maritime, don’t use western insurance. The impact of that is the sharp fall we have seen in shipping prices that would stabilize don’t take that benefit as a huge benefit for a company like Jindal Saw. We definitely are in a stable position whatever our order book is on export front, we would not have a negative impact because of the sea freight. But, will it give us a major fillip? Maybe a few basis points or a half per cent, not beyond that at an EBITDA level.

Saket Kapoor — Kapoor & Company — Analyst

When you are mentioning that our H2 would be better than H1 in terms of the PBT numbers and also the EBITDA post the second wave impact, our H2 EBITDA numbers were in the vicinity of Rs.690-700 crores. So, taking into account the deliverables which we are planning to shift for H2, what should be the likely trajectory of the EBITDA for H2?

Neeraj Kumar — Group CEO and Whole-Time Director

No, I am prevented from giving you a number guidelines for future. It’s definitely will be better. See we will do more tonnage, raw material has been stabilized and I have a very healthy order book. Beyond that, these guys say, I can’t give you any more number guidelines.

Saket Kapoor — Kapoor & Company — Analyst

Coming to this consolidation part, sir, today commendable that, earlier in consolidation we used to bleed, and now it has started reporting positively, but if you could share the mix of the consolidated revenue, that of the Rs.727 crores, what is net-net mix between USA and the other parts out of this Rs.700 crores increase in revenue when we look from standalone to consolidated?

Neeraj Kumar — Group CEO and Whole-Time Director

See, major contributor is the gulf now. So, all the incremental number on EBITDA, you are talking about top-line or EBITDA?

Saket Kapoor — Kapoor & Company — Analyst

Sir I am talking about top-line from our top-line increase from INR700 crores, it is going from INR3316 crores to INR4443 crores, it is increasing from INR727 crores so what is the major component of INR27 crores.

Neeraj Kumar — Group CEO and Whole-Time Director

Major component be again gulf; more than 50% or 60% comes from gulf, the balance gets distributed to USA, UP and all that. So, the major component is gulf, even in the EBITDA more than 50% of the incremental EBITDA comes from Abu Dhabi, which is likely to stay and which may improve, because we have taken some additional land also in our Abu Dhabi facility. So there is a scope that we may expand. Geopolitical situation in Iraq seem to be stable. Now, suddenly, it appears to be unstable. Otherwise, in Iraq, we were eyeing some very good business. Abu Dhabi, now with the Emirati problem solved, looks like a good business. In Europe, again, we are beginning to see some traction. There is a little bit problem on the geopolitical side, but we have taken some additional land and we are very bullish now on our Abu Dhabi facility.

Saket Kapoor — Kapoor & Company — Analyst

But, when we look at the bottom line, 1% margin is there. Why is the cost structure problem that even posting revenues of Rs.700 crores, the bottom-line impact for PBT is only to the tune of Rs.8-9 crores? What steps are taken to correct this or..?

Neeraj Kumar — Group CEO and Whole-Time Director

This first half because of the raw material prices and again the foreign exchange fluctuation, interest cost, this and that, whatever, is giving you a very skewed figure. That’s why when you reach to the PBT level, it doesn’t really give you a very stable picture or it doesn’t give you a very-very representative figure because it is when you are coming out of a valley. So, second half your results will be stable to the right at the bottom level.

Saket Kapoor — Kapoor & Company — Analyst

Last two points. On the sale of ship, what is the gross amount we have received? Where will we approve loss of this INR25 crores?

Neeraj Kumar — Group CEO and Whole-Time Director

We have received more than INR75 crores.

Saket Kapoor — Kapoor & Company — Analyst

Lastly, when did we receive this order of $335 million, after–on the board meeting date?

Neeraj Kumar — Group CEO and Whole-Time Director

No, no, everything has been finalized. We have received the signed contract in the last one week.

Saket Kapoor — Kapoor & Company — Analyst

In customary, what we find is company is giving orders whether it is in the LODR norms or not, I am completely privy to it -?

Neeraj Kumar — Group CEO and Whole-Time Director

It is not the norm and we do not have this policy of selective announcing, because some companies announce the wins, but they never announce the losses. So, we don’t have this selective reporting which we believe is in a way doesn’t give the holistic picture and therefore we do it on a quarter-to-quarter basis, because that’s a part of our business, getting a big order, losing a big order, both of them are a part of our normal business. So, we don’t do that and therefore you would not see such announcements from the PR Jindal group in the stock exchange as a general practice. So unless, there is a significant or extraordinary information that we must share with our stakeholders, something which is routine, something which is a part of my everyday business, we do not do it as a matter of practice.

Saket Kapoor — Kapoor & Company — Analyst

Fine sir. Thank you.

Operator

[Operator Instructions] The next question is from the line of Anand from PhillipCapital. Please go ahead.

Anand Jhanwer — Phillip Capital — Analyst

Hi thank you for taking my question wonderful set of numbers. One question in the next second half..

Operator

I’m sorry sir maybe you’re sounding a little distant. May I request you to speak to the handset.

Anand Jhanwer — Phillip Capital — Analyst

Yes can you hear me now.

Operator

Yes.

Anand Jhanwer — Phillip Capital — Analyst

Yes,. In the second-half how much or what is the sense you’re getting from the Indian government’s point-of-view given that our product portfolio caters to the fives which are. Very much focus towards [Foreign Speech] The Mission, the pet project of the government. So any color on that front what is that is there any traction you’re seeing.

Neeraj Kumar — Group CEO and Whole-Time Director

Jal Jivan mission is now running for this term of the government the last two years, there is a major emphasis. So on the demand-side so we are very bullish. with hopefully [Indecipherable] now. We are just one-step away coming into our fold. We would enhance our supply side both in terms of capacity, it will significantly go up and our reach, because now we would have a very strong foothold in South India where there is very little competition and there is very large demand. So DI business in fact in the next six to 24 months should be a major contributor to us in terms of topline profitability everything. So DI business is actually a significant business for us now. With now this acquisition coming our way where I just said, we are one-step away NCLT has to give its final nod.

Unidentified Speaker —

And any timeline that you are expecting in the coming quarter itself or you are in…

Neeraj Kumar — Group CEO and Whole-Time Director

I can’t second guess. The court process but, what we are confident that once it is with us all preparatory work has been done we should be in the market once we have the NCLT order in our favor we should be in the market in the next maximum 30 to, 45 days.

Unidentified Speaker —

Thank you. That’d be all from my side.

Neeraj Kumar — Group CEO and Whole-Time Director

Thank you.

Operator

Thank you. The next question is from the line of Neha Jain from Brickworks Ratings. Please go ahead.

Neha Jain — Bricksworks Ratings — Analyst

Yes. Good evening all. Sir, I would like to know that you said you’re in raising costs would be coming down. Now as on September 30, 2022, we still have an odd inventory holding of INR3017, 59 odd crores. So how much of this would be might be the raw material cost and other things. If you can give a breakup of that.

Neeraj Kumar — Group CEO and Whole-Time Director

I would not have the exact breakup in front of me, but even if the raw materials are there. The high cost raw material, which we had purchase during those very volatile coke and iron ore prices, they have mostly been consumed. So we would have raw material, but they would be moderately valued and therefore going forward my EBITDA margin would get restored.

Neha Jain — Bricksworks Ratings — Analyst

Can you– if you can please quantify in terms of price movement for cooking [Indecipherable].

Neeraj Kumar — Group CEO and Whole-Time Director

See Rajeev is here. Since I don’t have the exact number in front of me, I would not like to second guess. Rajeev is taking notes. So Neha from Brickworks right.

Neha Jain — Bricksworks Ratings — Analyst

Right sir.

Neeraj Kumar — Group CEO and Whole-Time Director

He will reach out to you and we’ll give you a complete breakup of the inventory.

Neha Jain — Bricksworks Ratings — Analyst

Not an issue sir. My third question would be with respect to the Sathavahana project congratulations for being the highest bidder. So far as per my knowledge on the public domain, we have bided for INR530 crores right, sir.

Neeraj Kumar — Group CEO and Whole-Time Director

Let the entire order to come back again, let’s not talk numbers because since it is in NCLT and NCLT has a few questions about government dues that whatever the final number may change a little bit, but whatever has been reported in the economic times is as a ballpark figure. I think you should be taking it for the purpose of investment, et-cetera, et.

Neha Jain — Bricksworks Ratings — Analyst

Right and what would be the sources of finance, Justin I mean, I understand there is no concrete figure with us as of now.

Neeraj Kumar — Group CEO and Whole-Time Director

Over finance would be we have enough lines today you will see the long-term debt on balance sheet of Jindal Saw is INR1200 crores. The net worth of over INR6,000 crores and on our topline of INR3,000 crores in one quarter. So we’ve borrowing capacity of Jindal Saw balance sheet is huge the internal accruals is huge. So to fund our acquisition like this it’s not very difficult, just mirror on the basis of Jindal Saw balance sheet.

Neha Jain — Bricksworks Ratings — Analyst

Right. Thank you sir. That will be all from my end.

Neeraj Kumar — Group CEO and Whole-Time Director

Thank you.

Operator

Thank you. The next question is from the line of Nikhil Chandak from JM Financial. Please go ahead.

Nikhil Chandak — JM Financial — Analyst

Yes. Hi, my question was actually on the debt profile of the company while you see the long term debt is, so whatever I see the long term debt is roughly INR1600 crores as on September 30, the total consolidated debt relative to the scale of the operations. How do you as management intend to bring this down. So this number is now close to INR4,836 crores is there any reasonable scope to bring the consolidated debt number of the company down, that is the first question. Second is, how much portion of this is foreign currency debt because as long as you have foreign currency debt. These quarterly fluctuations on gain or loss on foreign currency loan will keep continuing someday you may have a loss, someday you may have gain that is fair, but this is a recurring travel point so to say for the company, which will keep continuing as long as there is a large amount of foreign currency debt on the books. So how do you see these two points playing out on the debt side.

Neeraj Kumar — Group CEO and Whole-Time Director

Okay. Let’s look at now the total debt that you talked about 1639 out of which 1195 is the net debt on JSR balance sheet. This has got 0 foreign currency debt. The balance INR4045 crores again if you go to the respective countries and currencies then all of them are domestic, but In terms of if you look at1639 and look at how much is Indian rupee denominated and foreign currency denominated 4445 would be the foreign currency denominated debt, but please note in their respective countries like US or UA they are all domestic currency debt. So in a manner of speaking practical speaking there is 0 foreign currency debt in 1639. Now let’s turn our attention to 3197, which is the working capital debt 2911 is the domestic debt. That has a component of backing credit foreign currency credit, some LC and some money to finance the foreign currency receivables. The exact breakup again it’s a dynamic situation. To the extent that you have a domestic versus export business this would fluctuate. And it’s a very very dynamic situation. Now to answer your overall question that do we have any plans to bring this down. Please appreciate as I have been reiterating out of which. 3197 is actually a which is the working capital debt is actually an indicator of my business activity. If I try to bring down this 3197 it will be contract or it will be opposite to my trade finance support to my business and therefore that’s unlikely. Second, the 1639 in our opinion is already a very reasonable level of debt looking at my other business parameters, but they would get repaid as and when they are due because if you recall there was a lot of effort from the Treasury team to correct the maturity profile of my long-term debt to conserve cash. And we continue to follow that policy. We do not want to accelerate these debt payments because we believe conserving cash also is an important aspect of business. So debt profile do we want to accelerate any prepayments, the answer is no. We believe it’s well managed is reasonable and it should stay that way the treasury also works very minutely to manage our working capital cost. And that’s why this mix of foreign currency versus domestic working capital loan use of LC et-cetera comes into play because we always like to keep the weighted average cost of-capital as low as possible. So that even on this kind of high utilization you can see if you remove the foreign currency fluctuation of INR26 crores, the financial expenses for the company. Would be in the vicinity of 100 crores on a standalone basis.

Nikhil Chandak — JM Financial — Analyst

Understood. So there won’t be any scope even on the working capital debt to reduce this number of broadly INR3,200 crores on a consolidated level. In fact as the scale of operations of the company go up as you see in the next, next whatever couple of years. This number should only increase then, the working capital debt. Is that right.

Neeraj Kumar — Group CEO and Whole-Time Director

No are you talking about aggregate or are you adopting what as the percentage.

Nikhil Chandak — JM Financial — Analyst

No, as an aggregate, so as an [Indecipherable], the INR3,200 crores.

Neeraj Kumar — Group CEO and Whole-Time Director

As an aggregate, I don’t understand as an aggregate if I’m telling you that my business is going to grow, then as an aggregate there could be minor correction because now I would be paying a little less for every ton of raw material. But, but that’s a percentage improvement.

Nikhil Chandak — JM Financial — Analyst

Right.

Neeraj Kumar — Group CEO and Whole-Time Director

But if you are looking at is my raw-material consumption going to go up, the answer is yes. Though it’s completely linked. So therefore as a percentage, to my top-line as a percentage to weightage there would definitely be improvement as there is an improvement in the raw-material prices. But if you are asking me that my turnover will touch INR15,000 crores, but good my aggregate debt come below INR4,100 or INR4,400 or whatever that it is. The answer is unlikely because then it becomes counterproductive to use of trade finance to support my business.

Nikhil Chandak — JM Financial — Analyst

Sure so maybe I I need to compare this number with your peers how, how efficient or inefficient is this number, so maybe I need to do that actually to compare it with your peers on their scale of operation, how much of that is getting funded through [Multiple speakers].

Neeraj Kumar — Group CEO and Whole-Time Director

Please do so and I would encourage you share the numbers because If there is any learning for us. We will definitely take it.

Nikhil Chandak — JM Financial — Analyst

Perfect.

Neeraj Kumar — Group CEO and Whole-Time Director

So Rajeev Goyal would be very happy to engage with you on this.

Nikhil Chandak — JM Financial — Analyst

Perfect great, thank you so much thank you.

Operator

Thank you. Ladies and, gentlemen due to time constraint we’ll take the last question from the line of Pankaj Bhawari [Phonetic] [Indecipherable]. Please go ahead.

Unidentified Speaker —

Hello, audible.

Neeraj Kumar — Group CEO and Whole-Time Director

Yes please go ahead.

Unidentified Speaker —

Sir, since we are a pipe maker and the the whole world is going towards green energy, that especially the hydrogen energy. Is there any scope for us to come up with some value-added products which would both benefit us the product maker and also would would be, where will we be participating in this green revolution, green energy revolution.

Neeraj Kumar — Group CEO and Whole-Time Director

Okay. Two things. Value-added product as I told you, that is our constant endeavor. In every business segment we want to. To answer your specific question. Hydrogen, we are working on making sure that our seamless pipes or stainless pipes are capable of. Transporting hydrogen. So that in the short-term it can be used on those hydrogen containers for the ships. And long-term it can actually be. Used for transportation of hydrogen so hydrogen is one, transportation is one thing that is very much on our radar and we are working to develop that product in our portfolio asap.

Unidentified Speaker —

So. I mean. Can we have any, sorry no not can we, given that the there are lot many players in this sunrise industry. So, by when can we see any such products launch from our side.

Neeraj Kumar — Group CEO and Whole-Time Director

Very hard to put a number because we yet do not have even a good handle on well actually the hydrogen transportation would become a need on a commercial basis. Because at this point of time hydrogen being used only in, cards et-cetera or more like a experimental and yet so hydrogen especially green and gray hydrogen to become absolutely commercial commodity we still are a little further away. But we are developing those products, very difficult to put a — give you a precise quarter or a month on it, but it should happen soon.

Unidentified Speaker —

Sure sir, thank you, thanks a lot.

Operator

Thank you. I now hand the conference over to Mr Vikash Singh for closing comments.

Vikash Singh — PhillipCapital India Pvt. Ltd — Analyst

Thanks everyone. On behalf of Phillip Capital I would like to thank Jindal Saw management for giving us the opportunity to host them for the con-call. Over to you sir for any closing comment.

Neeraj Kumar — Group CEO and Whole-Time Director

I need to thank everybody, thank my investors as we have been saying on the last few quarterly calls that please be patient. Our time is likely to come. It looks like now we are on the cusp and from here on we have a visibility where the next 18, 24 months for us should be good and it should put us into a different pedestal because by then there are other activities which are taking place in terms of corporate reorganization, M&A activity, capacity expansion, product developments, value addition. So now, for the next 18 months-to 24 months we will get the traction of good market and we believe that we would transition into a different era for Jindal Saw. On terms of all of those or a combined positive impact of all the other activities that we have just listed. So I need to thank my investors. I really appreciate they have been patient. The market cap Is not reflecting our fundamentals, but we also have a firm belief that it may take some time. But now market should start looking at us in a different manner. Hopefully we should get this NTPC out of our way soon, because we also understand that that is putting a lot of weight on our market cap and hopefully we should get that soon. Get our, get out of our way soon. And then I’m sure there would be a lot to cheer about we as a company, investors and all stakeholders around. So with that hope, thank you very much and see you next quarter, bye.

Operator

Thank you very much. On behalf of Phillip Capital India Private Limited that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.