Jindal Saw Limited (JINDALSAW) Q4 FY23 Earnings Concall Transcript

Jindal Saw Limited (NSE:JINDALSAW) Q4 FY23 Earnings Concall dated May. 18, 2023.

Corporate Participants:

Vikash Singh — Investor Relations

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Analysts:

Dhananjay Mishra — Sunidhi Securities & Finance — Analyst

Hetal Gada — Max Life Insurance — Analyst

Deepak Poddar — Sapphire Capital — Analyst

Sahil Sanghvi — Monarch Networth Capital Limited — Analyst

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Pratiksha Daftari — Aequitas Investments — Analyst

Aman KR Sonthalia — AK Securities — Analyst

Radha — B&K Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Jindal Saw Q4 FY ’23 Earnings Conference Call hosted by PhillipCapital India Private Limited. As a reminder, all participant lines will be in the listen-only mode. 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 India Private Limited. Thank you and over to you, sir.

Vikash Singh — Investor Relations

Good evening, everyone. A very welcome for the Jindal Saw Limited Q4 FY ’23 earnings call. On the management side, today we have with us Mr. Neeraj Kumar, Group CEO and Whole-Time Director; Mr. Vinay Gupta, President and Head Treasury; Mr. Narendra Mantri, President Head Commercial and CFO; and Mr. Rajeev Goyal, EVP.

Without taking much time, I hand over the call to Mr. Neeraj Kumar for the opening remarks. Over to you, sir.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Good afternoon, friends. I welcome all my stakeholders on this call. I need to thank all of you for your patience, perseverance, and continued interest in us. Yesterday we had our Board meeting, which followed the audit committee meeting. The results have been announced and I’m sure all of you are in receipt of the details of the results. performance and guidelines for future.

We are delighted that all our hard work on many fronts are beginning to now show some results. This process was temporarily kind of disrupted, halted, first by the pandemic then by the extremely volatile commodity prices but we stayed the course, and now I’m happy to tell you that the results are beginning to show. This year ended 31st March ’23 appears to be a watershed year. There is a clear demarcation, if you see the first two quarters and then you’ll see the third quarter performance. Clearly, it shows a breakaway. The fourth quarter performance actually is the first very strong data point towards a trend and coupled with other fundamentals which is shared with you, the corporate structure, the order book position, there is enough confidence that we would be able to sustain this momentum that has been created.

We have always been saying Jindal Saw business model is very well-thought-out. It’s unique. It’s robust. And it is sustainable. We have chosen as a constant management occupancy strategy policy goal to give up the short-term flashes in the band and we have chosen for a very sustained, long-term movement where the momentum carries on. That held us very well during pandemic where our suffering was largely reduced, it was kept within a manageable level. Immediately the — over the pandemic effect. The moment the business environment turned in our favor, there was a tailwind from the government.

On infrastructure spend. Some of their major initiatives gathered more momentum. We were absolutely ready and we are beginning to see the results, the results are in front of all of us. Very quickly, let me just walk you through some of the numbers, and I would suggest all let’s pay, I won’t go into too much of nitty-gritty and details because it’s important to understand on, at what juncture we are at and from here what do we see for our future.

So let me first start with the annual numbers standalone. INR15,703 crores of top-line, which is the first time ever, we crossed INR15,000 crore. EBITDA of INR1827 crores, out of those if you have read the notes, INR197 crore is a just accounting entry. Removing that the EBITDA is INR1,630 crores as opposed to INR1,385 crores last year. So a turnover of INR15,0 — INR157,03 and EBITDA of INR1,630 crores as opposed to a turnover of INR11,243 crores and EBITDA of 1,385 last year. If you look at the financial charges INR369 crores versus INR529 crores. There is a INR50 crore Impact — forex impact which is just change in rupee.

So for a like-to-like comparison. This INR50 crore needs to be removed from the financial expenses of INR529 crores. And then if you see the increased business performance, you will see that the financial charges are on track. PBT of INR924 crore, which again removing the impact of 197, PBT of INR727 crores as opposed to INR637 crores.

So this gives you a happy picture but as I have already said in my opening remarks let’s look at the fourth quarter because that appears to be the trendsetter. Turnover of INR4,676 crores as opposed to INR4,641 crores and EBITDA of INR590 crores and a PBT of 356 crores as opposed to core, which is appearing there. So if we take all of these into account that would give you a sense of what the quarterly performance has been, a turnover of more than INR4,500 crores and EBITDA of close to INR600 crores or INR580 crores and a PBT of close to INR350 crores at the last quarter.

Now if you look at our order book and the way we have created the capacity, the operations. We are very hopeful that we should be able to sustain this. We should be able to carry this momentum forward. A very quick comment on the consolidated numbers, topline INR18,000 crores; INR1,844 crores is your EBITDA. Here, we don’t need to make that impact of INR197 crores because that gets collapsed on consolidation. So this is the real EBITDA, a PBT of INR736.

So as we have been saying these subsidiaries have also started contributing, although this year, Abu Dhabi has been profitable but in terms of its relative performance relative to its last year’s performance, it is on a lower side primarily because of the commodity prices. For the current year, we expect to do far better even may exceed the year before performance for Abu Dhabi. Similar is the case for US. So the subsidiaries are no longer a drain. Financial support is not being given anywhere. They are contributing. This year, in the current year, we expect their contribution to improve from what they did last year.

Very important. Order book position. $1.4 billion, which is a little better, a shade better than our sweet spot. Well, we hope that this momentum will continue. There are enough demand. The Water segment is doing very well in India. Oil and gas prices are sustaining because of the macroeconomic factors and the demand in oil and gas is also looking good. We have bagged some very prestigious export contracts. So, if you really see this year’s performance and if you distributed over export versus import various segments, various industries. It’s a very balanced growth. The order book also gives us a lot of confidence that there are no spikes. It is a very balanced and a robust growth all-around.

More important. All of you keep a watch. Our treasury team keeps us very sharp watch. The debt has reduced. The term loan is now INR1,000 crores, which is, if you really make any comparison with anything, it is well, it’s far superior than any benchmark in the peer group. So the debt position is very good. The bankers position is very good. They are very well disposed towards us and we are hopeful that the banker’s support will continue for — our this year’s increased performance improved performance.

And let me now touch upon some of the other highlights, which I’m sure it would be of interest to you. During the year, we saw the pellets price having some correction primarily because the commodity prices corrected. Most important, the commodity prices, thereby the raw-material prices have corrected and we expect that now for a few years going forward this would indeed remain the case and therefore the next year’s performance. We are very hopeful that we would be able to continue this momentum throughout the year. In fact, from the place where we are looking at, we think and we have a lot of confidence with a high-level of probability that we can see about 15 to 18 months of very good performance. So that is what we have at this point of time, definitely 15 to 18 months, we think, we can definitely have a visibility, we have enough visibility.

On the debt side, no major acquisition has planned up beyond Sathavahana. At Sathavahana, I must say a very good effort by Narendra Mantri, who led the restructuring and the other acquisition, everything and very ably Vinay would arrange all the financing on time. TLT order that we have received is a classic order. Takeover, merger, all in one stroke. As we speak, Sathavahana is a division of Jindal Saw Limited, the South India DI division, which DI capacity has now been enhanced to over 7.5 lakh tonnes. DI Segment is seeing a lot of traction because of the. Water segment, the push of Jal Jeevan Mission this being an election year. So it looks like the timing of this acquisition is very opportune and we would be able to make a good start.

During this intervening period, it was made sure that the plant is in working condition. So, all the equipments have been refurbished and today the plant is in a running condition and we expect our full-year performance off Sathavahana to come into Jindal Saw as well. So that’s one good acquisition, which is going to be a step-function better full-year performance of Sathavahana into Jindal Saw as a division.

I already said, Abu Dhabi, the demand is very good. This year’s performance would definitely return to the previous year started last year but the year before, a very good likelihood that can exceed that as well. US also the same. Others also if you have been following our news very carefully. A few other subsidiaries in related fields like steel disc, large dia which were created, like, have been incubated and now are getting launched. So now Jindal Saw in India, would be one mammoth entity. It would have an American subsidiary and it would have an Abu Dhabi subsidiary, all focused on pipes, absolutely clean corporate structure. That is where, and we wish to continue with this kind of a business model, because all the other subsidiaries, all the other associates, all the other companies in the PR Jindal Group, the good news is that now, each one of them are standalone, viable, and they are all rising to their own potential. So that there is absolutely low pressure within the Group on any capital call, on any of our business. All the businesses have now come out to age and are doing well, rising up to their potential. We are also seeing that the supply chain, the important components of ocean freight, etc are kind of stabilizing and it’s likely to move within a corridor.

So at the end, I must say thank you to all for being with us, for your patience, for your perseverance. We are now, it looks like the early results of all the tough decisions, the difficult part that we have chosen for ourselves, the business model, the corporate structuring all the efforts are now beginning to bear fruit and we have all confidence that it would sustain.

So with that, let me just stop and take some questions. I would definitely be able to take some questions. We have some time. Thank you all. Thank you all once again for being with us.

Questions and Answers:

Operator

Thank you very much. We will begin the question-and-answer session. [Operator Instructions]. The first question is from the line of Dhananjay Mishra from Sunidhi Securities and Finance. Please go ahead.

Dhananjay Mishra — Sunidhi Securities & Finance — Analyst

Yeah, thanks for the opportunity, and congratulations for a very excellent performance and also very strong commentary, especially for last two quarters, we have done very well and also we have been very well in the market, really well in terms of balance sheet debt reduction. So my question is with regard to this domestic opportunity, which we have mentioned in the press release as well, and gas commission and 15,500 kilometers gas pipeline will be added over let’s say three-four years. So what is the kind of opportunity for the industry perspective, we’ll have in terms of pipe in both the segments like the quarter segment as well as the pipelines segment, in terms of if we can some value or whatever for next two to three years for the industry?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Okay, that commentary that probably you are referring to is it reflects the vision of the current government. And again, if you look at the current political scenario in the country, it would be safe to say that there is more than 50% chance that there would be a continuity in the government.

Dhananjay Mishra — Sunidhi Securities & Finance — Analyst

Right.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

And all of these whilst fructify. Also many things, many times, that what we have confidence that the kind of position that now this government has taken the policies or initiatives, or economy. Directionally, to make a huge change may not be possible. Okay, some tweaking of priority because that might happen. So having said that, a, with more than 50% probability of the current government to continue, we believe all this will translate into real demand. Even assuming the other way there would be some increase in the priority but the direction is not going to change. So both oil and gas and water segment will remain very strong. Very important now, we should not miss the track on the industrial sector, the defense sector is going to become very strong and that is a big market for our seamless, stainless segment. We have made inroads into nuclear, defense, space technology. We are getting into instrumentation tubes, higher-grade value-added products. So that is again something that we are very encouraged and that would give us a robust demand on multiple fronts, which would help an organization like ours because we have that robust business model.

Dhananjay Mishra — Sunidhi Securities & Finance — Analyst

Okay. Thanks for the very elaborative answer. My question was with, I mean industry size per se in terms of piping for export market or US market, we have seen volatility in the last two-three years but domestically, we have not seen apart from COVID hiccups, so just want because things have started moving largerly.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Okay. There would not be any volatility that demand would sustain because these are all likely to be in terms of either government initiatives long-term or large projects so that demand would sustain. If you see the Jal Se Nal mission, the water grid in every state would continue to come off one after the other. Likewise, all these oil and gas pipelines are very large projects and they are all likely to continue, They were all certified. Please see all the oil majors, the refiners, and all those companies like GAIL or ONGC, whatever they have to say, they all are pointing towards a sustained growth over a period of time.

Dhananjay Mishra — Sunidhi Securities & Finance — Analyst

Okay. Okay sir, all the best for the future.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Thank you.

Operator

Thank you. We have the next question is from the line of Hetal Gada from Max Life Insurance. Please go ahead.

Hetal Gada — Max Life Insurance — Analyst

Hello. Good evening, sir. Can you hear me?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Yes.

Hetal Gada — Max Life Insurance — Analyst

So, sir, a couple of questions from my side. Firstly, just wanted to understand, how are you planning to ramp up the Sathavahana assets, what are your plans, and any ramp up guidance that you can give us for FY ’24 and ’25.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Okay, ramp-up guidance means, see, Sathavahana.

Hetal Gada — Max Life Insurance — Analyst

New guidance from Sathavahana.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Okay, that’s, I’m saying, Sathavahana is focused on DI, its focused on the gas furnace, focused on battery, and power.

Hetal Gada — Max Life Insurance — Analyst

Correct.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

We already are leaders in all of those. So we are on the curve. We don’t have to learn anything new there. The plant as I already told you, it has been made sure that it is refurbished. It is in absolute good working condition. So, we have a very strong view that for the full year, we should see a good performance in Sathavahana because the order book is already there. If you see the order book, NBI, it covers a lot of orders from South, where we have a freight advantage, and will all come from Sathavahana. So you can take it that Sathavahana is where, it’s a running train, it’s not a train, which is going to leave the station. It’s a running train. So it will gather momentum and it will cover its distance from through the year.

Hetal Gada — Max Life Insurance — Analyst

Okay. Actually, sir what I was trying to understand that since our Gujarat plants are already operating at 100% utilization. So in the DI segment for se, can we see how much incremental volumes can we build in. That was my main question. Hence, wanted to understand, given that South is a very big market in its sense.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

See, Sathavahana has a capacity of two lakh tonnes.

Hetal Gada — Max Life Insurance — Analyst

Yeah.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

And as I told you, it’s a running plant. So we expect a very high level of capacity utilization.

Hetal Gada — Max Life Insurance — Analyst

Fair enough, sir. Fair enough. Secondly, sir, given that the order books that you have and the margins that you have reported for this quarter given, I mean, you have also mentioned that you have received good orders from export market and even in the large-diameter pipe, so any guidance on the margin profile for these pipe orders.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Okay, if you look at my fourth quarter EBITDA without that other income entry, accounting entry income, it is around 12.6%, closer to 13%. So EBITDA, as our topline is 12.6% for the fourth quarter. We expect to improve upon that during the year primarily because the impact of the commodity prices on the raw material would have completely waned up, so we expect to improve on that.

Hetal Gada — Max Life Insurance — Analyst

Okay. And sir, on your order books also, I mean, can we say this kind of slate? This can be maintained because it shows a good healthy revenue stream for us, and given the demand for space that your confidence is on. So, I mean how would you see the demand pockets from international markets as well as from the domestic market? Can you just throw some light on that?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Yeah, we see both staying firm. There could be some volatility in the US, but anyway, our exports to US as our total buy is not that significant, and therefore for us the demand both in the domestic and export market should remain firm because now more or less, if you see the Ukraine and Russia also, things are now settling down and the world is waking up to the new reality. So — and America being too far, which is not one of our prime export market. For us, as I said, we see a very stable export market.

Hetal Gada — Max Life Insurance — Analyst

So, sir, a lot of orders that was, I mean, key pipelines that are being planned in Europe. So any color on that whether we are participating in this order although and anything that we have received from there, if you can comment, sir.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

We don’t typically keep on announcing order-wise. Yeah. But Europe, we have been strong suppliers. We are very strong in MENA region and we would continue to do so.

Hetal Gada — Max Life Insurance — Analyst

And these orders, if I may ask are mainly towards the oil and gas segment.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

No, not water as well.

Hetal Gada — Max Life Insurance — Analyst

Water as well. Okay. Any, if you can give me a rough breakup of what percentage will be towards oil and gas?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

It’s a forward order book. Just one second, let me see if I have that, otherwise you can check with Rajeev, we can give that breakup for you tomorrow.

Hetal Gada — Max Life Insurance — Analyst

Surely, sir. And sir, last question on the capex front, if you.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Okay.

Hetal Gada — Max Life Insurance — Analyst

Sorry

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

It’s around domestic versus export, April ’23, the order book, oil and gas sector. Okay, between oil and water it is like a three-to-one and domestic and export in oil, is one is to one, and water sectors domestic export is two is to one. It is there in the commentary, if you read, there is a table which gives you the breakup, which will answer all your questions.

Hetal Gada — Max Life Insurance — Analyst

Okay, sir. Sir, lastly just on or any guidance on capex for FY ’24 and ’25.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

’24, ’25, no major, no major acquisitions.

Hetal Gada — Max Life Insurance — Analyst

Okay.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Normal capex.

Hetal Gada — Max Life Insurance — Analyst

And what will be the rough maintenance capex and sustenance capex for us?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Normally we do INR300 crores to INR400 crores.

Hetal Gada — Max Life Insurance — Analyst

Okay, INR300 crores to INR400 crores. Thanks very much, sir. Thank you so much, sir. Thank you. All the best, sir.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Thank you.

Operator

Thank you. The next question is from the line of Deepak Poddar from Sapphire Capital. Please go ahead.

Deepak Poddar — Sapphire Capital — Analyst

Hello.

Operator

Yeah, hi, sir, go ahead.

Deepak Poddar — Sapphire Capital — Analyst

Sir, just wanted to check one thing, you mentioned about the commodity. [Technical Issues] No, I have lost you, I can’t hear you.

Operator

Mr. Poddar, you are not audible at the moment.

Deepak Poddar — Sapphire Capital — Analyst

Hello, am I audible? Hello.

Operator

Yes.

Deepak Poddar — Sapphire Capital — Analyst

Yeah, sir, I just wanted to check one thing now media mentioned that commodity prices have corrected, so that will benefit the EBITDA margin over the course of the period, right, over this year. So what sort of delta are we looking at or what sort of improvement in margins, we are talking about here in terms, which will largely be driven by this commodity prices correction?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

See, as I told you. We see improvement in the EBITDA margin over the last few quarters, which is fourth quarter, which is currently at 12.61, we’d definitely see improvement over that but if you ask me to put a number on it, forward-looking, I’m sorry, I’ll not be able to give you an exact number.

Deepak Poddar — Sapphire Capital — Analyst

Understood. That’s fair enough. I understand. And in terms of growth as well, I mean, we have been talking about good demand and good order books scenario, right? So what sort of, I mean growth range you are looking at this year FY ’24?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Good. In terms of, okay, let me just give you sales. [Technical Issues] 11 to 15 is we manage and by [Technical Issues]. Let me just tell you that growth trend, ’22 versus ’23. We are likely to maintain that trend in the coming year as well.

Deepak Poddar — Sapphire Capital — Analyst

In top-line, right?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Yeah.

Deepak Poddar — Sapphire Capital — Analyst

Fair enough. That’s it from my side, sir. All the very best. Thank you so much.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Thank you.

Operator

Thank you. The next question is from the line of Sahil Sanghvi from Monarch Networth Capital. Please go ahead.

Sahil Sanghvi — Monarch Networth Capital Limited — Analyst

Good evening, sir, and congratulations for a very impressive set of numbers. My first question is regarding the Sathavahana assets. So the format and coke land that we have over there, will we be also selling out some portion of the coke volumes and open market, if yes. I mean, what is the incremental capital usage and how much capacity will we be using for external thing.

The coke capacity is in excess. Wow. What can get consumed at the Sathavahana unit but then there is a possibility of getting that coke either to our Abu Dhabi or our some other unit. So at this point of time, do we have a huge plan to sell coke in the open market? The answer is no. We will try and distribute and use it among our units because I think it is better to do that because again, after the correction of commodity prices, selling coke in the open market will not stretch. Right. Right, sir. My second question is, is there any slowdown in terms of line pipe orders coming from oil and gas, especially for transmission of oil and gas, are you seeing any kind of that slowdown, especially from the domestic market?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Let me put the question in perspective. See oil and gas is always a project-based demand.

Sahil Sanghvi — Monarch Networth Capital Limited — Analyst

Okay.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

And therefore there would be a trend, it would never be a quarter-on-quarter growth or a quarter-on-quarter slowdown. There are enough projects in the pipelines, but the tenders are always timed that they don’t have a certain pattern. So to answer your question. Is there a horizon, a lot of on the horizon, are there a lot of oil and gas projects, the answer is yes but can we put our finger on this contract, this tender will come in a particular month. The answer is no. It may be a few months here and there, but very robust demand for strong players like us with a strong order book, [Indecipherable] order books full and they will stay busy that much confidence we have.

Sahil Sanghvi — Monarch Networth Capital Limited — Analyst

Right, sir. Right, sir. Third and last question is regarding Jindal ITF versus MTBC. I mean, what can we expect during the 23rd May 2022-year-end volume, I mean, where are we on those terms? And what can we expect on this year and now?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

I will just read-out one sentence from the court order regarding 23rd May hearing. That now, no adjournment shall be allowed under any circumstances. So the court has finally woke up to the fact. It is a clearly, little longish order where they have captured this and finally concluded the 23rd argument has to begin. No more adjournments would be allowed. So then we hope that it should reach a conclusion pretty soon, because if you really see the merits of the case. It’s an open-and-shut case. Right, sir, right. Very well, sir. Thank you so much and all the best, sir. Thank you.

Operator

Thank you. Ladies and gentlemen, we request you to please restrict your questions to two per participant. For follow-up questions, you may rejoin the queue. The next question is from the line of Abhishek Maheshwari from SkyRidge Wealth Management. Please go ahead.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Yeah, thank you for the opportunity. Am audible?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Yeah.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Yeah, firstly, many, many congratulations on a great set of numbers. All of our clients are very-very happy to see their portfolios today. Sir, two questions. Sir, your volume growth has been good this year in terms of overall volume growth in terms of all. If I may ask, what’s your capacity utilization is at the moment on an overall basis?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

See, earlier also we had, I have answered this question on a few calls. Let me try and make one more attempt. Capacity utilization for different units mean different things. In pellet, we are almost at capacity. In DI, we are almost at capacity. In seamless stainless, we are around 75%, 80% of capacity. In large-dia capacity does not mean much except to suffice, except it will suffice if I say that we have enough capacity to take care of all these foreseeable demands largely because in large dia, the capacity utilization doesn’t mean much because there is so much of variation in the pipe sizes that those statistical benchmarks do not mean much. So to answer your question. I have answered it in a manner where, let me repeat pellet, we are near capacity, seamless, near capacity, No, 75% stainless steel, DI, near capacity, enough capacity to deal with all the large-diameter segments, all the orders that are coming.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Understood, sir. So the fee operating leverage for Jindal Saw has still not being reached, has not been reached, so at 14% EBITDA, you are at, at the moment, I mean, if the demand is good, outlook is good.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

We haven’t reached the peak as yet. We are still to get there. I have answered in one of my previous questions, I’ve already given you guidance that ’22 compared to ’23, we are expecting a similar trend in ’24, so we are nowhere close to the peak. We still have some — a few basis to go.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Very good, sir. Very good.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

We would require a new cycle of capex or capacity expansion or mergers and acquisitions. So before we get into that, that’s a step-function. So we still have enough available potential to go some, a few steps more.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Very good to hear that, sir. Second question, sir, I was surprised to hear your positive commentary in USA because. I mean, we might be wrong, but from what we’re hearing in news and everywhere, there is a recession that should increase price and all that. So we were quite surprised to hear your positive commentary about the US demand. So can you share some thoughts about this just what do you guys see.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

What you are seeing is a global scenario of US economy debt crisis and all that. If you see, we are that way pretty small insignificant operator in US where the subsidiary of Jindal Saw is a job worker, it does take pipe and codes, largely for the oil and gas sector. That sector is doing reasonably, okay, and, therefore we are doing good. The other general companies who appeared in the Group companies have nothing to do with Jindal Saw, and, therefore, this commentary is not relating to them, but this Jindal Saw USA, which is a coating facility, which largely does job work off taking three supply of pipes, coating them and giving it to their customers is doing reasonably well because the oil and gas sector there is sustaining and is maintaining its performance.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Okay. Thank you, sir. Thank you.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

The comment about is the larger American economy there this comment, it doesn’t hold true in that context.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Understood, thank you for that explanation and all the best for the future. Thank you.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Thank you.

Operator

Thank you. We have the next question from the line of Pratiksha Daftari from Aequitas Investments. Please go ahead.

Pratiksha Daftari — Aequitas Investments — Analyst

Thank you for the opportunity. I, my first question is on the seamless division, what kind of volume growth do we expect in this year?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Seamless, this year performance, which is 31st March ’23 was also reasonably good performance. We would improve upon that in the coming year. We have an order book we have and up we should improve upon that.

Pratiksha Daftari — Aequitas Investments — Analyst

Okay. And they’re expecting that commodity price pressure is not going to be too high this year, and our maintenance capex has also, I mean, we don’t have any other major capex plan. What kind of net reduction plan do we have for this year, both long-term as well as short-term?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

See, long-term debt is already 1,000, and as we have said it will follow its repayment trend. We would not try and accelerate it because then the bank start insisting on prepayment and all that premium. So we are not going to — we are going to follow the repayment trend which roughly we have seen in a year, it comes to around INR300 crores. As far as working capital is concerned. There is one positive but now because of the infrastructure push we may see a reduction in our working capital cycle because the government wants a fast implementation, they may start paying us early. But having said that working capital for a business like ours is a trade finance-driven business. So the more business I do, the more trade finance, I’m likely to use, and, therefore, it is difficult to say that. In absolute terms, there would be a reduction in working capital but in percentage terms, in relative terms, in terms of. DSO, days of sales outstanding, in terms of working capital cycle, we would definitely improve upon that as we have done during this year.

Pratiksha Daftari — Aequitas Investments — Analyst

Okay. And what kind of forex impact did we have in our interest expenses this quarter?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Okay, you missed my opening remark about, out of the INR529 crores that we paid, INR50 crores is on account of movement in foreign exchange.

Pratiksha Daftari — Aequitas Investments — Analyst

Okay. All right. And the cost, what would be the effective cost of debt for the company right now?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

My VAT is below 10.

Pratiksha Daftari — Aequitas Investments — Analyst

All right. Okay. Thank you.

Operator

Thank you. The next question is from the line of Aman KR Sonthalia from AK Securities. Please go ahead.

Aman KR Sonthalia — AK Securities — Analyst

Yeah, good evening, sir.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Yeah, hi.

Aman KR Sonthalia — AK Securities — Analyst

Sir, in the console you say that the other income part is not there, INR1 crore rupees.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Yeah, because most of the other income that we have our with our subsidiaries by way of loans and given at interest. So, it all gets collapsed when you consol.

Aman KR Sonthalia — AK Securities — Analyst

And sir, you were talking 15 months to 18 months of visibility, sir, but on a medium-term basis, how do we seek visibility of the business?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Okay. The kind of hard work that we have done in Jindal Saw. The kind of business model that we had been able to build. We are confident that as long as the economy supports we would continue our trend in the medium-term.

Aman KR Sonthalia — AK Securities — Analyst

And sir, what is the scope of business in Hunting and [Indecipherable]? How the business is?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Okay. Yeah, this is one aspect that I have not touched upon. that Jindal Hunting joint-venture is definitely getting commissioned during this calendar year, for sure. That would give a fillip to our seamless market because it is one of the facilities of its kind in this part of the world, which both Hunting and us are classifying as a center of excellence for premium connections in the OCTG market. That’s a very profitable market. It’s a huge market. It’s an import substitute as far as India is concerned and it has a very good potential in the. MENA region and in this part of the world, Africa also.

In fact, one of the things which are giving us confidence is the higher-value add product, which is a 13 chrome to CRA and the higher chrome. We may be able to even start out the global market because of the cost advantage that we have in putting this JV into the country. So a few bullet points for your guidance. Commissioning happening definitely, huge potential in India and abroad, and expect this to be a very profitable venture because of the value-added segment and being the only facility of its kind in this part of the world.

Aman KR Sonthalia — AK Securities — Analyst

Sir, what type of turnover we can expect when it’s run at full capacity?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Yeah, let me answer that for you in the next quarter. It is to be launched and then maybe I will be able to give you some guidance because again it depends on the ONGC tender and all of this. So we have to see our calendar because it has a potential but again since it is going to be a contract operation, it’s better that I give you some guidance in my next quarter call.

Aman KR Sonthalia — AK Securities — Analyst

And sir, how is the margin in the domestic market compared to export market?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

You are talking about what Hunting or Jindal Saw?

Aman KR Sonthalia — AK Securities — Analyst

No, Jindal Saw.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Jindal Saw, at present in balances out. Why I say it balances out because exports are largely very large projects and large projects, some have very good margins, some we take it. They don’t have but if you take on an average export versus domestic

It balances out. We expect now the export market to give us a little more margin because the ocean freight is likely to settlement.

Aman KR Sonthalia — AK Securities — Analyst

And sir, one last question. How is our pellet plant is different to other pellet plants in the country?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Geographical location.

Aman KR Sonthalia — AK Securities — Analyst

Yeah.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Pellets being made from the depreciation of low iron-ore. Very good-quality pellets in terms of we can go up 67 and when I say 67, I mean 67% Fe content and the physical quality of our pellet are far superior to some of the most of the other pellets domestic pellets, and, therefore, we have a very good export potential even in countries like Korea.

Aman KR Sonthalia — AK Securities — Analyst

Sir, is there any scope for expansion in this pellet plant?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Yeah, at 1.7 and we have been through the improvements in our processes, we have gone from 1.5 million to 1.7 million and we hope that we will be able to do that additionally, during the year for which we have got all the environmental clearance and all that.

Aman KR Sonthalia — AK Securities — Analyst

Okay, sir. Thanks so much.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Thanks. Thank you. The next question is from the line of Radha from B&K Securities. Please go ahead.

Radha — B&K Securities — Analyst

Hi, sir, thank you for the opportunity and congratulations on the performance. So firstly, on the tax rate, sir, this year we have moved to new tax rate. So just wanted to understand what the tax rate should we expect for the next few years.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Between 26 to 27.

Radha — B&K Securities — Analyst

Okay, sir. And sir, secondly, you were answering a question for the previous participant on Hunting JV. So as I read in the results that we have invested inr15 crores this year in this JV and previously you have mentioned that we have plans to invest, including working capital around INR400 crores. So till-date, how much have we invested in this JV, and if you say that this is premium product, then, I mean, the margins of this will it be comparable to the stainless steel in-product or even higher than that?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Madam, okay, let’s distinguish a few things. When we say that we have invested INR15 crores into the JV, it is an investment that Jindal Saw has made into the joint venture as an equity contribution. When you say a a project of INR300 crore or INR400 crore total, that means my equity contribution, Hunting equity contribution, term debt for project, on top of it, the working capital that banks would provide for the business. So that 300 or 400 number, I don’t know where you have got it from but that number talks about total exposure, which is, I repeat, my equity or Jindal Saw’s equity, Hunting’s equity, term-loan and working capital, and also, I’ll be happy to tell you that the project is financially closed means all of those have been arranged.

So as far as Jindal Saw is concerned, the contribution is only INR15 crores, which is likely to stay put for the next few years. We are not looking at any more equity investment where I told you, the project has been — is financially closed.

Radha — B&K Securities — Analyst

Yes. And, sir, the margins?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Margin, as far as the margin is concerned and that is where, as I said, I’m saving this detailed explanation for next quarter. Please don’t again get confused. Jindal Saw would be a supplier of raw materials to continue, which is pipes. All the premium connection and the revenue and the margins would come into the joint venture, which is the Jindal Hunting joint venture. Even though it’s a 21% joint venture. So in consolidation, the impact could come but when you are leaving a standalone, Jindal Saw, all you will see in three years the high production and value addition in terms of pipes of a higher-grade like 13 Chrome, 18 Chrome, 91, and all of those. Madam, am I clear?

Radha — B&K Securities — Analyst

Okay, sir. Yes, sir. Sir, one more question on the JISPL and [Indecipherable] trans-shipment business. So, we are merging these two subsidiaries. Sir, just wanted to understand that, I mean, are these subsidiaries operational?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

No. No. No. Now you know but for the NTPC arbitration. We just run those barges, which are again sustaining by itself, we don’t have any major contract and we don’t intend to do any major business in that segment. So, as I told you there the only thing that we are waiting for is this, a few arbitration or litigation that we have.

Radha — B&K Securities — Analyst

So, what is the plan post the litigations are over with NTPC with respect to these two subsidiaries?

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

See with the barge operators we can just continue because again come to a very nice platform where it doesn’t take money, it doesn’t offer anything from outside. And at the same time, it just sustains itself and gives us some, you can say change.

Radha — B&K Securities — Analyst

All right, sir. Yeah, thanks. That’s it from my side. All the best.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Fine. Thank you.

Operator

Thank you. Ladies and gentlemen for paucity of time that would be our last question for today. I would now like to hand the conference over to Mr. Vikash Singh for closing comments. Over to you, sir. Vikash, your line has been unmuted, you may go ahead.

Vikash Singh — Investor Relations

Hi. Sorry, I just wanted to thank Jindal Saw management for giving us the opportunity to host them. And over to you Neeraj, sir for any closing remarks.

Neeraj Kumar — Group Chief Executive Officer and Whole-Time Director

Once again thank you very much. I really appreciate, acknowledge the support that we have got from our stakeholders, friends, and In last few calls, I did express that fundamentally, we are doing everything, okay but somehow market is not seeing those changes. Now I’m happy to see that at least again, there seems to be a little breakaway. Market is slowly but surely beginning to look at our fundamentals. And I assure everybody that we are on the right track. We have done everything and we will continue to do everything to create stakeholders well. And with this, I would like to close with a warm welcome and to give all of you confidence that we will come back with our first quarter results, which would be a buildup on what we are, we have shown so far. So thank you all very much and hope to see you on the first quarter call. Bye.

Operator

[Operator Closing Remarks].