Jindal Steel & Power Limited (JINDALSTEL) Q1 FY23 Earnings Concall Transcript

Jindal Steel & Power Limited (NSE:JINDALSTEL) Q1 FY23 Earnings Concall dated Jul. 15, 2022

Corporate Participants:

Nishant Baranwal — Head, Investor Relations

Ramkumar Ramaswamy — Chief Financial Officer

V. R. Sharma — Managing Director

Analysts:

Vishal Chandak — Motilal Oswal Financial Services Ltd — Analyst

Amit Dixit — Edelweiss — Analyst

Sumangal Nevatia — Kotak Securities — Analyst

Rahul Jain — Systematix — Analyst

Pallav Agarwal — Antique Stock Broking — Analyst

Rajesh Mazumdar — B&K Securities — Analyst

Indrajit Agarwal — CLSA — Analyst

Ashish Kejriwal — Centrum Broking Limited — Analyst

Vikash Singh — Phillip Capital — Analyst

Kamlesh Bagmar — Prabhudas Lilladher Limited — Analyst

Kirtan Mehta — BOB Capital Markets — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q1 FY ’23 Earnings Conference Call of Jindal Steel & Power Limited, hosted by Motilal Oswal Financial Services Limited. [Operator Instructions]

I now hand the conference over to Mr. Vishal Chandak from Motilal Oswal Financial Services. Thank you, and over to you, sir.

Vishal Chandak — Motilal Oswal Financial Services Ltd — Analyst

Thank you very much, Rituja. Good evening ladies and gentlemen, and welcome to the First Quarter FY ’23 Earnings Call of Jindal Steel & Power. I would like to thank the management of JSPL for giving us the opportunity to host the call for this quarter. We have with us the senior management from JSPL, comprising Mr. V. R. Sharma, Managing Director; Mr. Ramkumar Ramaswamy, the CFO; and Mr. Nishant Baranwal, heading the IR.

So, I would hand over the floor to Mr. Nishant for his remarks. Over to you, sir.

Nishant Baranwal — Head, Investor Relations

Thanks, Vishal. Thanks, Rituja. Good day, everyone. We are pleased to welcome you all to this conference call to discuss our first quarter FY ’23 financial results. First of all, I’d like to apologize for the delay, since our results — there was a delay in publishing our results. We thought it’s better that we give a few minutes before starting the call, so that everybody can go through it.

This side, to be able to take more questions and answers and give ample time for it, we decided to dive straight into the financial commentary, which will be given by our CFO, Mr. Ramkumar Ramaswamy, and thereafter we’ll take the Q&A and the entire management, including our MD, Mr. V. R. Sharma and our CFO, Mr. Ramkumar Ramaswamy are there for that.

So over to our CFO.

Ramkumar Ramaswamy — Chief Financial Officer

Thank you Nishant. Good day, and good evening everyone. I would like to take you through the details of the financial performance of JSP for the quarter ended 30th June. Let’s start with the production volumes. Our production during the quarter was 1.99 million tons, this was lower over the previous quarter by around 6 percentage. The primary drivers for this was one, at our Raigarh plant, there was a maintenance shutdown in our placement; and number two, at our Angul plant, we had a lower DRI production due to thermal coal availability.

I’ll talk about sales. Our sales volume during the quarter was 1.74 million tons of steel sales. This was lower by around 16% over the previous quarter. As you know, this quarter we had challenging market conditions, we started off with a soft April, and then during May, we had the imposition of the export duty. Both our domestic and export volumes have been impacted during the quarter. Our domestic volumes were lower by around 12 percentage and that export volumes were lower by around 28 percentage during the quarter.

In terms of realization, our realizations were higher by around 12% over the previous quarter, primarily driven by healthy realizations in April and May. After the imposition of the export duty, we’ve seen a significant softening of both our domestic and export realizations in June and we see that continuing in July also. We see a softening to the extent of 15%, 16% in terms of our realizations in June and July.

In terms of our costs, our costs have gone up by around 10 percentage, primarily driven by coking coal cost increase of around 33 percentage, and thermal coal cost increase of around 27 percentage. As many of you would know, we are seeing a softening of prices currently for all of these, and we expect benefit of this to flow through in the subsequent quarters.

I will now quickly move on to gross total income. Our gross total income during the quarter was INR14,561 crores, this was — this declined by around 7% over the previous quarter for the reasons that I just detailed, in terms of a volume decline offset by higher realization. The GST that we collected during the quarter was around INR1,692 crores and our net income was INR12,869 crores.

Let me quickly move on to EBITDA or adjusted EBITDA. Our adjusted EBITDA during the quarter was INR2,865 crores, this was — this is a 8% increase over the last quarter. Again, the primary drivers for this, as I mentioned, was driven by healthy realization and offset by lower volumes and increased costs, yeah, so EBITDA was INR2,865 crores, adjusted EBITDA. In terms of profit after tax, again, our adjusted profit after tax is INR1,626 crores. This is a 28% growth over the last quarter, again for reasons that I detailed earlier, so INR1,626 crores is our adjusted PAT.

In terms of just a quick overview of our consolidated numbers in our performance of subsidiaries. I think we had a very, very good performance during this quarter of our subsidiaries. Our Mozambique, South African and Australian businesses had positive EBITDA after a very long time, maybe the first time our Mozambique subsidiary had a EBITDA of around INR334 crores. Our South African subsidiary had a EBITDA of INR84 crores and our Australian subsidiary turned positive at INR24 crore EBITDA.

Let me also quickly give a overview in terms of our debt position. Our standalone net debt is INR7,413 crores, which is at 0.54 times EBITDA. Again, very, very healthy trends, this is close to a INR1,000 crore reduction over last quarter, primarily driven by long-term loan repayments and lower short-term debt outstanding. A quick update on our credit rating. Our credit trading stands unchanged at double-A minus and with strong financial performances, we expect that there would be improvements in credit ratings.

This is a quick summary of our financial and operational performance. With this, I hand it over to Nishant.

Nishant Baranwal — Head, Investor Relations

Thank you, sir. Now we’ll dive straight into the Q&A. As always, I would request all of you to kindly ask more strategic questions. We at IR team, including myself, Rajesh and Gaurav are always there to give you the data points.

With that, I probably hand over to the operator.

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 Amit Dixit from Edelweiss. Please go ahead.

Amit Dixit — Edelweiss — Analyst

Yeah, good evening everyone, and thanks for the opportunity. Congratulations for the good performance. I have two questions. The first one is essentially on your maintenance plans for this quarter. So, what kind of maintenance plans you have for this quarter, both at Angul and Raigarh, and particularly, thermal coal availability and prices, both are high. So, can we see some kind of intermittent shutdown at your DRI plant, so that is the first question I have?

V. R. Sharma — Managing Director

Yeah. Thank you very much. I’m V. R. Sharma, Managing Director. So, first of all, we are not taking any long maintenance shutdowns. So, rather we are going for the intermittent shutdowns whenever it is required. So of course there is a shortage of thermal coal, but we are now importing thermal coal and hopefully in the next one week or 10 days time, the situation will been normalized. So, our intention is not to reduce the production. We had a target of 8.2 million, 8.4 million ton in this particular financial year.

And our aim is, say, will be producing more than 8.2 million tons in the current financial year. No longer shutdowns, but in case there is some breakdown, which is unavoidable, like it has happened about two months back, so that is the issue, sometimes it happens. But otherwise, there is no planned shutdown until the last year at 31 March. I hope I have answered you.

Amit Dixit — Edelweiss — Analyst

Yes sir, that was a very elaborate answer. The second one is essentially on the coking coal price and thermal coal price movement over next quarter Q-o-Q, if you can give in dollar terms, that would be great.

V. R. Sharma — Managing Director

Yes. It’s okay. It’s very difficult to predict today’s market, because the world is melting down. We do not know where the world will settle. So the first and foremost issue is, the Russian and Ukrainian. The momentary Russian and Ukrainian war that comes to an end, or it will reduce, then only the world will stabilize, otherwise not. Because you must be seeing nowadays most of the European countries, they already started rationing the usage of gas and they want to store the gas for the winter season. Because Russia has total gas from 100% supplies to 40% supplies only, so 60 percentage reduction in the overall supplies of the gas. And this is the reason there is a overall chaos in shortage of energy worldwide. And let us see, Mr. Joe Biden is visiting Saudi Arabia, I think there will be some conclusion, I get to comp [Phonetic] out more oil or more gas, this may give respect to the world. But today, the whole, the entire world is uncertain.

As for the coking coal prices and the steam coal prices are, today, surprisingly the coking coal prices are lower than the steam coal. So, in international market landed in Europe, the reason being because European power plants, the thermal power plants, they are reignited, restarted, re-fired. So people are using more coal than using gas, where gas-based power plants are almost shut and wherever there is no thermal power plant there only people are using the gas-fueled power plants.

So, the demand for the thermal coal will continue as it is, there won’t be any spike till Russia and Ukraine settle their scores. And if they settle their business, I mean in terms of ending the war, then the whole situation will be comfortable. But we feel in the quarter, which is now going on, quarter two, we think should remain somewhere about approximately and I’m the — I cannot vouch for it, but approximately I feel $230 to $240 level of coking coal and a similar about $200 to $210 on CNS [Phonetic] basis the steam coal into India. But yes of course the steam coal prices will, in Europe, will be more than $300 and also in many other parts of the country. So, I hope it is clear.

Amit Dixit — Edelweiss — Analyst

Yes, sir. The price level is supported here, but I was looking for the movement. I mean from JSP’s perspective on your cost. What kind of cost movement you expect in terms of –?

V. R. Sharma — Managing Director

Mostly it is reducing now, because earlier the cost was — the coking coal was at a level of about $500, $550, now it has come down to $240. So definitely the input cost has reduced and similarly the input cost for the iron ore also reduced. Therefore yesterday NMDC has reduced another INR1,000. International also, the iron ore prices have come down to $99, $98 per ton for yesterday. And I think that is a good sign in terms of input cost reduction. But yes, of course there is always some — a time lag in between the new material comes in the pipeline. So, now at the moment, I guess the old material in the pipeline, that will last about five to six weeks, but finally the results of the low input cost will definitely come within this quarter, maybe second half of this quarter, after say, 15 August, we can see that the new prices of the input cost and the new materials that will be applicable.

Amit Dixit — Edelweiss — Analyst

Okay, sir. Thanks and all the best.

V. R. Sharma — Managing Director

Thanks.

Operator

Thank you. The next question is from the line of Sumangal Nevatia from Kotak Securities, please go ahead.

Sumangal Nevatia — Kotak Securities — Analyst

Yeah, good evening and thank you for the opportunity. My first question, sir, is on the net debt movement. So this quarter, our debt has reduced by around INR1,100 odd crores against a cash profit of around INR2,000 odd crores and also the JPL equity infusion of around INR3,000 odd crores. Is it possible to walk us through the net debt movement during this quarter?

V. R. Sharma — Managing Director

Yes, thank you for that question. So as I said, the net debt for the quarter was INR7,413 crores. We had a structured long-term repayment of around INR400 crores and the rest of it was more a reduction in our short-term debt. We continue to hold cash in our balance sheet of roughly around INR3000 plus crores and we will be, on an ongoing basis, evaluating options to repay, options to pre-pay and options to hold cash.

Sumangal Nevatia — Kotak Securities — Analyst

Sir, I’m looking for some specific details as to what was the working capital build up during the quarter and capex and also what was the tax outgo with respect to the JPL divestment?

Ramkumar Ramaswamy — Chief Financial Officer

Okay. On the working capital buildup, I think we did have a working capital buildup during the quarter, primarily because of the export duty being enforced. And therefore, there was a softening in terms of customer demand. So, we did have a working capital buildup. Maybe, I don’t have the exact numbers, but it will be safe to say that it will be upwards of around INR2,500 crores to INR3,000 crores, yeah, I think that was the kind of working capital buildup that we had.

Sorry, what was your second question?

Sumangal Nevatia — Kotak Securities — Analyst

The capex and the tax outgo on the JPL divestment.

Nishant Baranwal — Head, Investor Relations

It’s Nishant here. So, Sumangal, as far as the tax outgo in the JPL divestment is uncertain, that’s mostly an yearly item, because it is a divestment, we’ve received INR3,015 crores of cash pursuant to the divestment. The entire tax would be on the yearly basis. So, let’s see how it pans out, because as you all know, yes, there would be certain capital gain to it, which can be upsized by some capital losses or any other business also. So that is something that we get to know at the end by the end of the year.

V. R. Sharma — Managing Director

Yes.

Nishant Baranwal — Head, Investor Relations

Hope that answers your question.

Sumangal Nevatia — Kotak Securities — Analyst

All right. I have a second question. So with respect to shy movements, we’ve seen a very sharp correction in prices and also exports are now getting attracted 15% duty. Is it possible to guide how are we seeing the [Indecipherable] for 2Q and coming months?

V. R. Sharma — Managing Director

So I think as you said, the market is quite volatile and challenging, much as we would like to provide some guidance, I think we would like to avoid providing any forward-looking guidance on this quarter, what is the market prices that are going to be there, we will try and make sure that we are able to sell our products at those prices or at slightly higher prices to reflect the premium that we have, but currently we don’t want to provide any forward-looking guidance on our realization.

Sumangal Nevatia — Kotak Securities — Analyst

Understood and got it. Thanks, and all the best.

V. R. Sharma — Managing Director

Thanks.

Operator

Thank you. The next question is from the line of Rahul Jain from Systematix. Please go ahead.

Rahul Jain — Systematix — Analyst

Yeah, hi, thanks for taking my question. Sir, on the raw material side. So how well are we integrated right now on our coking coal requirements and is it likely in the next, say, one or two years?

V. R. Sharma — Managing Director

Yes, thank you. So, raw material side, we are very much comfortable and we are not foreseeing any problem. We have adequate quantity in pipeline as far as the coking coal is concerned or the PCI coal is concerned. And also the — are the — and other point is, iron ore is not in short supply. As you know that Government of India has banned — not banned, I would say, has imposed very heavy export duty on iron ore and pellets. So the — there is a flexibility now and the iron ore and pellets are available in abundance, so there is no shortage of minerals in the country as of today. So, we are thankful to the Government of India for imposing such kind of duties so that raw materials are made available.

Therefore, yesterday. Mr. Amit Shah, he also gave the interview to Economic Times and other financial magazines that our aim is that raw materials should be preserved, conserved, reserved for the local industry. So I think that is a very good statement and we are not finding any difficulty with that. Coking coal is also in abundance, abundance available and our own mines that is in South Africa, Australia and Mozambique, we are working very well. At the moment the coking coal dependence on outside, I would say, is about 40% or 42%, but 58%, we are on coal, then there is no shortage of material, okay.

Rahul Jain — Systematix — Analyst

Right, right. And, sir, on iron ore, what is the number like now? Has the mine that you acquired, has it ramped up and things like that?

V. R. Sharma — Managing Director

The mine, what we have now, what we won in the bid last time, that is Kasia mine, it is working, and we are producing about 500,000 tons per month. And we are also buying on under long-term agreement, long-term lifting agreement LTF, that is Odisha Mining Corporation, OMC, and also from some of the private and merchant miners. So, it’s a good time. The raw material cost has come down, it’s a good situation to today, I would say.

Rahul Jain — Systematix — Analyst

Right. And then, sir, on the export duty, you have any comment, how long it will last and what is the motivation behind adding this kind of ET?

V. R. Sharma — Managing Director

You see, we are with the government, we don’t have any problem in this particular issue, the reason being, because each government takes decision looking to very macro and micro economics. So, I think the government must have thought prior to — before imposing this particular duty. And there is no problem. We are — today, we are seeing that the selling price has come down, but we also found in due course of time the input costs are also receding and that has given us a relief.

As far as the demand is concerned, yes, there is a — and during monsoon season, the construction activities they go down and the demand comes down, and so is the demand in the world market. So, I think Internationally, the world has to stabilize first. We, in India, we have been — and we are self-reliant in steel making and whatever quantity our country needs that we can supply them. Initially we were thinking that the prices were coming down, but finally when we observed that the selling price is vis-a-vis input cost, the ratio is maintained accordingly and the input costs have also come down. So we are all thankful to NMDC for declaring INR1,000 price reduction day before yesterday. So, these area all good sign, things are good and whenever the government feels that the exports to be opened, we’ll welcome that movement and [Speech Overlap].

Rahul Jain — Systematix — Analyst

The export number will remain in this high-20s or you’ll bring down further, how is it going forward?

V. R. Sharma — Managing Director

Sorry.

Rahul Jain — Systematix — Analyst

Your export share of total sale will remain high in the high-20s or you were going to bring it down depending on market?

V. R. Sharma — Managing Director

No, we will maintain the share. We’ll maintain our share, more than 20% of exports out of the total provision.

Rahul Jain — Systematix — Analyst

Great. Thank you so much. Very helpful.

V. R. Sharma — Managing Director

Okay.

Operator

Thank you. The next question is from the line of Pallav Agarwal from Antique Stock Broking. Please go ahead.

Pallav Agarwal — Antique Stock Broking — Analyst

Yeah, good afternoon. Sir, I had a question on the recent reports of price hikes being taken in rebars, so could you just confirm whether these are true and what is the actual quantum of the price hikes that were taken?

V. R. Sharma — Managing Director

You see, we — I think the primary steel mills have not increased the prices, primary steel mills are paying in the band of INR1,000, INR1,500, here and there. But yes, price hike, we have seen in the second stream, the reason being, this is what I observed. There are two reasons, one is, the scrap prices all of a sudden in 15, 20 days time moved from $380 C&F to $470 C&F in India. So, I think that was an impact at that time.

The other is, many of the sponge iron plants, they were closed or they were not functioning properly because of shortage of coal. So that was the major reason. But I think major mills, primary mills in the country, their price band has been in the range of INR1,500 to INR2,000 maximum here and there. But, yes, you’re right, secondary steel in the induction furnace is equal, their base if you see, that has gone up by INR7,000 to INR8,000 as per the media reports. We do not know the actual fact. But this is also we heard from the newspapers that INR8,000 price hike was taken by them, maybe because the delta was too big and now they have recovered it.

Pallav Agarwal — Antique Stock Broking — Analyst

Sure, sir. Sir, just another question on, we do export some higher grade plates, etc. So, I’m assuming all this goes to Europe as well, so when are these quotas going to open again in —

V. R. Sharma — Managing Director

The quota is already open. There is no quota existing now, Europe is starving for material, there weren’t any quantity, any numbers or so, we’ll supply them. So, but the international prices are also under pressure. With 15% export duty, there are certain customers who would be value added great, they still prefer to buy from India and that those material are also not impacting the Indian economy or the Indian customer base, because we have this facility which is [Indecipherable]. And as far as the common man’s requirement in the country is, I think rebars, wire rods for the MSMEs and also because the corrugated — galvanized, corrugated and sheets, for the color coated sheets that we are roofing. I think these three items are not being exported by anybody as far as my knowledge is concerned. But the specialty products, people are exporting and some of the customers are paying for that. So that is an impact.

Pallav Agarwal — Antique Stock Broking — Analyst

Okay. Yeah, thank you.

Operator

Thank you. The next question is from the line of Rajesh Mazumdar from B&K Securities. Please go ahead. Mr. Rajesh Mazumdar, please go ahead with your question.

Rajesh Mazumdar — B&K Securities — Analyst

Yeah, am I audible?

Operator

Yes, you are.

Rajesh Mazumdar — B&K Securities — Analyst

Yeah, thanks for taking my call, sir. Sir, I had a question on the rebar side as well. Chinese rebar prices have come to a new low, a 1.5 year low this week and our domestic rebar prices are still at a significant premium around the Chinese prices. So, given the fact the coking coal prices have fallen now and the demand is going to be seasonally weaker, do you expect the rebar prices to come up from these levels, in which case also our spreads must be reasonably increased.

V. R. Sharma — Managing Director

You see, India was never importing rebars in the country. But yes, we are not insulated from the international scenario. Whenever the rebar prices go down, that means immediately the iron ore and coking coal prices also go down, I mean that is — that is a sort of indirect index. The other is, whenever the rebar prices or the commodity prices, they go down, that means the scrap prices will also go down. So, there is a community factor of scrap, iron ore, coal, and coking coal, all these commodities put together, they decided the prices, but rebar prices in China, the reduction in the rebar price in China is not because of anything else, but because of the poor demand there.

So you might have seen that financially they are also studying today and many of the rural areas banks, they are in trouble. So the overall construction activities in China are little down or I would say the sentiments are down, this is what as per my knowledge. But in India the things have changed, because here the people — the customers are quite bullish and we are seeing in the last 10, 15 days time, there is a good demand coming from the market because earlier the people, they were not buying and they exhausted their stocks, now the traders have come back in the market, they want to buy more material. So, but one thing is for sure, if the input costs, they do — they go down, then definitely the prices will be corrected accordingly, okay.

Rajesh Mazumdar — B&K Securities — Analyst

Right, sir. So depending the spread will be maintained after that?

V. R. Sharma — Managing Director

Yeah, because, first of all, the entire world is one. Our first aim is if somebody gives an authority today or somebody says that, what is the one thing you want to do? So, the first one thing what I will do if it is in my hands, I will ask Russia and Ukraine to stop this war. Anybody in the — on the hierarchy, if you can do something in concluding the deals in between these two countries, I think whether it is stock market, bond market, rate of inflation, in next two to three months time everything will be settled. It is more a geopolitical issues today in the world, the entire Europe or the Western world, including America, they are supporting Ukraine and they are giving them all sorts of help in terms of arms and ammunition.

And Russia is bent upon in asking them to surrender. So this is a big tussle, right. Who is going to win? But I believe in Mr. Modi, he say that in war nobody wins. So, I think in this war, in between these two countries neither they will win and nor the entire world will win. The whole world has lost trillions of dollars, trillions of dollars, so let pray to god that good sense prevails in between these two people Mr. Putin and Zelensky and they stop this war. The moment the war is stopped, the entire world will come up like a flower once again in the next three to four months I think.

Rajesh Mazumdar — B&K Securities — Analyst

And sir, my last question is that, how long will it take for the current inventory situation in the system to normalize, [Speech Overlap] 50% drop in the export.

Operator

Sorry to interrupt, but Mr. Mazumdar, there is lot of disturbance from your background.

Rajesh Mazumdar — B&K Securities — Analyst

Yeah. Am I audible now.

Operator

Yes.

Nishant Baranwal — Head, Investor Relations

Yes, yes, please. Yes, Mr. Mazumdar, please.

V. R. Sharma — Managing Director

What was your question, sorry?

Rajesh Mazumdar — B&K Securities — Analyst

My last question is that, how long do you think it will take for the inventory in the system to get cleared, assuming that the export taxes is billing and the current demand wane. Because you seen a halving of the exports in June, so if we assume that the export taxes are there for some more time, how much — how many months will it take for the inventories in the system to normalize?

V. R. Sharma — Managing Director

You see the inventory, we do not manufacture anything to keep the inventory, actually the stock and sale is not our business. And we don’t produce anything other than the rebars in anticipation. So all of our products are tailor-made and whenever we get the order we produce, otherwise we don’t get, we don’t produce. We are not in the commodity business, neither we produce hot rolled coil, nor galvanized coils, color coated coils, we are not in that business.

Our businesses is, if we get order we produce. If we don’t get order, then we will not produce, but fortunately our order book is good, we are booked for next 45 days without any problem and every day we are booking orders and we are getting good orders. So, thanks to domestic plate consuming industry and there is in fact there is a shortage of plate steel in the country. So we don’t need to export plates today, because there’s a shortage.

Some of the major steel mills, they’ve gone for shutdown or breakdown. So the, I would say, JSPL stands good chance to cater that market. So there are no issues. So we will maintain our volume around 2 million ton per quarter, 2.1 million ton per quarter and reaching to a level above, 8.2 million, maybe 8.4 million ton by the end of the year, we will maintain it and we will sell also, there is no problem.

At INR14,500 crores of sales turnover in the first quarter, we’ll will maintain the numbers so that last year we did about INR56,000 crores of sales turnover and this year also we will be touching more than INR55,000 crores, so there are no issues. So we made our plan accordingly. We have entered and moved into more and more value-added grade steel where we get higher margins and where the competition is very low. So our team, the research and development team, our production team, they are already on that job. So I’m not foreseeing any problem, okay.

Rajesh Mazumdar — B&K Securities — Analyst

Thank you, sir. Thank you.

Operator

Thank you. The next question is from the line of Indrajit Agarwal from CLSA. Please go ahead.

Indrajit Agarwal — CLSA — Analyst

Hi, good evening, thank you for the opportunity. Two questions. First, given that we are in volatile times, so is there any change in our capex intensity or project timelines or we stick to our capex plan. And with that win, what has been the capex in first quarter and what could we envisage for the year as a whole?

V. R. Sharma — Managing Director

Yeah, very good question. First of all, I tell you, there is no volatile time. A volatile time is when you produce something which cannot be sold. The volatility in terms of going — prices going down one sidedly is not volatile, because prices are not going up, like for example, the coking coal prices, if you see, it has gone up to $670, came down to $450, sorry $550, came down to $380 and then again went up to $520, that was volatility.

But today, what we are seeing, you can see the graph in the indexes, for the last three weeks continuously the coking coal prices are falling and continuously the iron ore prices are falling. So, I would say it’s not volatile situation, it is a down sliding and that is good for reduction in the input costs and that is good for the industry as a whole and good for the customers also. So, but industry is maintaining the margins, so we are. So, we are also maintaining our margins. I think there should be any pressure on the margins and this should not be any — any price, not sorry price, a quantity reductions. So, this is one.

We will be maintaining a good cash flow in times to come also. And as you’ve seen the results, we have done a wonderful job during this phase also and with the kind of PAT of INR1,626 crores that we have generated, it some speaks that company is doing extremely well, and the gross margins are somewhere about 19%. So there is also that is EBITDA margin. So that is also a good number as far as the company is concerned, I think I’m very much hopeful that we’ll be in a position to maintain these numbers throughout the year.

The next question was capex, no, there is no shortage of funds first of all, and there’s no u-turn in taking — in completing the projects. So we will complete the process, capex will be additive. As we decided in the beginning of the year that will continue. So all the provisions, statutory requirements, approvals, consent to operate, consent to construction, everything is in place and our people, our team is working day in and day night. And we are going to spend about INR18,000 plus crores in the next 2 years, 2.5 years time. And the aim is that we will not be spending more than INR6,000 crore or INR7,000 crore per year, whatever we earn, we will invest.

So our — Mr. Naveen Jindal, our Chairman and our entire Board has taken the decision that of course we need the banking support always to be opening up Letter of Credits and getting the limits. But we will be spending only that amount which we can afford to accrue from our existing business and that is the accruals are going to be somewhere about net GST will be about INR7,000 crore plus, and last year also it was close to INR8,000 crore and last to last year was INR7,000 crores. So if you see continuously for the last three years, we are giving the projection, INR7,000 crores to INR8,000 crores of which itself shows a very, very solid performance of the company and we won’t be under debt burden once again and we want to be.

So there is no u-turn in the capex. We will continue the capex entity. There is no problem. The situation, today’s situation, what we are seeing, that will, I would say, that will be utilized in the best of the best manner in the interest of our company. Thank you.

Indrajit Agarwal — CLSA — Analyst

Thank you for the detailed answer. My second question actually is a follow-up to the same question. So there has been news flows that you’re looking to raise about INR15,000 crore by way of debt from several banks. So, given the cash flows you are generating, what could be the use of these funds? Are we looking at any large inorganic opportunities that may arise?

V. R. Sharma — Managing Director

So the point here is, this INR15,000 crores, that was the approval given by the lenders. So, but as I told you that we will be working only on online investment policy. But of course we need the banking system, banking channel, banking scroll, because you have to open the Letter of Credit for the imported goods and equipments and also for the domestic ones. And that is very much clear. So we are not facing any difficulty there in terms of getting the money whenever it is needed. But today we don’t need it. Whenever we will need it, this disbursement will be taken.

Ramkumar Ramaswamy — Chief Financial Officer

Maybe just to add, maybe just add, I think the INR15,000 crores that you’re referring to is maybe the — is the term sheet that we would have signed for our Raigarh Mansion project, yeah, I think that’s what you are referring to, but as MD Sir mentioned, our objective would be to maintain a very prudent leverage of between 1 to 1.5 through the cycle. This is of course an approval that we’ve got for our expansion project.

Indrajit Agarwal — CLSA — Analyst

Sure. Thank you very much.

Operator

Thank you. The next question is from the line of Ashish Kejriwal from Centrum. Please go ahead.

Ashish Kejriwal — Centrum Broking Limited — Analyst

Hi, good evening, everyone. Thanks for the opportunity. Sir, my simple question is on capex. We have one already, the coal block. So is it possible to share when can we expect some production from there?

V. R. Sharma — Managing Director

Ashish, if you repeat your question please.

Nishant Baranwal — Head, Investor Relations

Actually your voice was too loud. May I request you to please speak little slowly and little away from the mic.

Ashish Kejriwal — Centrum Broking Limited — Analyst

My question was, in terms of capex which we are doing for operational of our coal blocks. So, when can we expect production from coal blocks coming in, and if possible, if you can guide that in FY ’23 how much captive thermal coal we can generate from our coal blocks which we [Speech Overlap]?

V. R. Sharma — Managing Director

Yes, I’ll tell you. We are planning that before 31 March, 2023 we’ll be in a portion to open at least one mine. So we have four mines, so one of the four mines will be opened.

Ashish Kejriwal — Centrum Broking Limited — Analyst

So any volume number, which you can give, sir?

V. R. Sharma — Managing Director

The clearances are in place. Most of the rehabilitation work is already done, and I think maybe some INR50 crore to INR100 crore will be spend of first opening of the mine and some of the equipment, machinery and all these things. So I think by March we should open one mine and not a big amount maybe INR100 crore, not more than that.

Ashish Kejriwal — Centrum Broking Limited — Analyst

To which mine we can open by March?

V. R. Sharma — Managing Director

This be in Odisha, Utkal.

Ashish Kejriwal — Centrum Broking Limited — Analyst

Okay, okay. And secondly, sir, the forex gain, which we have reported in this quarter, say, INR46 crores, this is on account of what and in which line item this is mentioned?

V. R. Sharma — Managing Director

Yeah. Mr Ramkumar will mention it.

Ramkumar Ramaswamy — Chief Financial Officer

This would be on account of the OST [Phonetic] zone that we had, that we have provided to our subsidiary. I think the loan value is close to $1.6 billion and this FX gain, this is of course unrealized, you have to understand that is on account of that.

Ashish Kejriwal — Centrum Broking Limited — Analyst

And this is reported in our top line or raw materials?

Ramkumar Ramaswamy — Chief Financial Officer

Sorry.

Ashish Kejriwal — Centrum Broking Limited — Analyst

In P&L, in which line items, these are included here?

Ramkumar Ramaswamy — Chief Financial Officer

This would be under the other expenses line item. But we would have called out for this separately, so that you have — we have recognized this unrealized gain separately. So we’ve called it out separately, but you’ll find it under the other expenses item. Okay, thank you so much.

Operator

Thank you. The next question is from the line of Vikash Singh from Phillip Capital. Please go ahead.

Vikash Singh — Phillip Capital — Analyst

Good evening, sir.

Ramkumar Ramaswamy — Chief Financial Officer

Good evening, please go ahead.

Vikash Singh — Phillip Capital — Analyst

Yeah. Sir, I just wanted to understand, have we taken any inventory write-downs in this quarter because after May the export duty information would have bring down the overall value of the inventories significantly?

V. R. Sharma — Managing Director

No, we have not kept anything at hold. We have paid about INR113 crores of duty, export duty and we cleared all the inventory of plates and whatever the other products are. And after that, we are working on a very structured business that is making goods, only those goods where we get the value addition, where we can recover major part of the export duty, this is one. Secondly, our first purpose is to meet our the domestic demand and whatever is not sellable in India that much of quantity for export, but there are no inventories now.

Ramkumar Ramaswamy — Chief Financial Officer

There are no [Speech Overlap], no.

Vikash Singh — Phillip Capital — Analyst

No, because basically this question that I get from the stock adjustment, which was roughly about INR1,700 crore and if I just look at the difference between production and sales, it was just 2 — 2.5 — quarter million ton. So effectively, that is coming somewhere around 69,000. So I was wondering that’s why this figure is so high on pattern basis.

V. R. Sharma — Managing Director

This is may be because of the known dispatch or known availability of rigs, but not because of any commercial reasons.

Vikash Singh — Phillip Capital — Analyst

Understood, sir. And then —

Ramkumar Ramaswamy — Chief Financial Officer

[Speech Overlap] maybe some of the details you can take it offline with our investor relations team. And we are not sure on the question, maybe you can just take it offline.

Vikash Singh — Phillip Capital — Analyst

Understood, sir. And sir, just secondly, in terms of our now export strategy, so can you just tell us that, now how we see the mix of export going forward and at present, our export versus domestic realization gap is, how much?

V. R. Sharma — Managing Director

You see, I’ll tell you, and very frankly, we are now aiming only for the much more value-added products for exports and these products are especially a tailor-made products where the customer doesn’t mind paying $100, $150 extra. We recover most of our duty part. And that is what’s going on now. And as I told earlier, we will be maintaining our exports 20% plus, because whatever we can sell in India at a price available in India that is okay, and whatever we cannot sell in India, where we feel that there are no customers for those products, we will export it, we will not reduce our production.

Vikash Singh — Phillip Capital — Analyst

And the price difference, sir, right now?

V. R. Sharma — Managing Director

You see, there are no declines because the price is — because it is not apple-to-apple, like we are now entering into very specialized fields in Europe, especially for the specialty blooms, specialty blades, specialty beams. Those markets, so those products are not sold in here. So these are Europe specific products. Like we are in pile beams, like for Hong Kong and Southeast Asia, and also for Mexico, these products are not used in India. So what we have done, it’s very difficult to explain technically each and everything, but yes offline we can.

So we are now entering into niche markets where the products are sold in terms of thousands of tons, not in lakhs of tons. And right from Australia to Southeast Asia, Hong Kong, Vietnam, Taiwan, Philippines and on the west side it’s Mexico, Costa Rica, Guatemala, Suriname, Colombia, these are the markets where we have the niche market, and also to United States and Canada.

So Canada, for example, we are on the largest supplier of specialty beams for the high-rise buildings. So those items are not sellable in India. So we are — we have developed all those items, where the country-specific requirements are met out and we have found a great market as a vacuum, because all of these products are being supplied by either Ukraine or by Russia. So, since they are under war, so we have the opportunity and we export it and we are not compromising on the domestic demand.

So whatever our customers, they want to buy, so that’s our first choice and wherever we feel that we have surplus capacities available and which we assume contemplates about 20% total production to exports, and that will be particularly evaluated products. We cannot compare those projects with the Indian products, because in India these products are not sellable, okay.

Vikash Singh — Phillip Capital — Analyst

Understood, sir. Thank you for elaborated answer and all the best.

V. R. Sharma — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Kamlesh Bagmar from Prabhudas Lilladher Limited. Please go ahead.

Kamlesh Bagmar — Prabhudas Lilladher Limited — Analyst

Yeah, thanks for the opportunity, sir. Sir, one on the part of, like sir, the gap between consol EBITDA and standalone EBITDA, actually it’s around INR300 odd crore and this question is specifically for the CFO. And why this — why such a big gap, like INR300 odd crore, but it has not been there for last eight, 12 quarters. So why such a big gap, why consol EBITDA is lesser by INR300 odd crore compared to the standalone EBITDA?

Ramkumar Ramaswamy — Chief Financial Officer

No, this is for purely your intercompany transaction eliminations, in compliance with the accounting standards.

Kamlesh Bagmar — Prabhudas Lilladher Limited — Analyst

Okay. And like, just harping on the debt numbers. So, like we would have done roughly around INR2,000 odd crores of cash profit in this quarter. And on top of that we had roughly around INR3,000 odd crore from the sale of JPL. So, cumulative both around INR5,000 odd crore, and even if we do a capex of INR1,000 crores, which you have not yet quantified. So, like the debt is down hardly around INR1,000 — around INR1,100 odd crores. So where is the gap on that part? And like on the side of — like working capital and even in the last quarter we had incurred working capital.

Ramkumar Ramaswamy — Chief Financial Officer

So I think this question came up earlier as well. And as I said, our working capital during the quarter has gone up by around INR2,500 crores to INR3,000 crores, and our current objective is to make sure that we are able to realize that working capital during this quarter.

Kamlesh Bagmar — Prabhudas Lilladher Limited — Analyst

And how much was the capex in this quarter, sir?

Ramkumar Ramaswamy — Chief Financial Officer

Capex was nothing significant, nothing significant, around INR700 odd crores.

Kamlesh Bagmar — Prabhudas Lilladher Limited — Analyst

Okay. Okay, thanks a lot.

Operator

Thank you. The next question is from the line of Kirtan Mehta from BOB Capital Markets. Please go ahead.

Kirtan Mehta — BOB Capital Markets — Analyst

Thank you, sir, for giving me this opportunity. I have a couple of follow-up questions. First follow-up question is on the project finance term sheet for INR15,000 crores that you have signed. On the balance sheet of I think the Odisha subsidiary. I wanted to — I do understand that you don’t have a plan to leverage it, but I wanted to understand the covenants of it, what kind of capital expenditures is allowed to be financed under that loan and also what kind of capital expenditures cannot be financed under that loan, because it’s a project finance?

And related to that, the another question was, why it has been taken on the books of the subsidiary where the cost of loans would be higher than you would have taken it on the parent. If you can clarify on these two aspects, that would help.

Ramkumar Ramaswamy — Chief Financial Officer

Sure. Let me try and answer. So first is — first is, I think this INR15,000 crores, is — the term sheet is for the project that we have in — the expansion project that we’re doing in Jindal Steel Odisha. Given that this expansion project is happening in Jindal Steel Odisha, the term loan and the term sheets have been taken for that entity, yeah, I think that would be a simple, straightforward answer to your question.

Kirtan Mehta — BOB Capital Markets — Analyst

So basic — in fact apart from the current capex which has been around for around INR18,000 crore, only that can be financed, and if you are planning to add any of the secondary expansions to that project, can that also be financed under the same loans, because they don’t really plan to drawdown either this year or the next, the way I understand it, you plan to actually do it from your own pocket or whatever the cash flow is afforded by the company. So in that scenario, are you aiming to sort of use this project alone for the further capital expenditure that you would be doing after completion of this projects?

Ramkumar Ramaswamy — Chief Financial Officer

No, no, no, this term loan is for a specific project, the details have been submitted to the bankers and it has been given for this specific project, we cannot use it for any other purpose. As mentioned, our objective is to fund as much of the project through internal accruals and maintain a very healthy gearing. Yeah, so we cannot use it for any other purposes.

Kirtan Mehta — BOB Capital Markets — Analyst

Right. Can you also clarify on the reasons for taking it on a subsidiary balance sheet rather than a parent balance sheet, because the cost of loan would be higher on the subsidiary balance sheet.

Ramkumar Ramaswamy — Chief Financial Officer

The project is happening in the subsidiary, isn’t it. So the loan has been taken in the subsidiary for that purpose.

Kirtan Mehta — BOB Capital Markets — Analyst

Right, sir. Second question was about, I think, sir, going back to the export mix that our MD clarified. I wanted to understand what was the export mix in the FY ’22, we believe we have exported around 2 million ton of product. Could you give us a breakdown of the category of products that was exported in FY ’22 and how would this category change in FY ’23 as per your current plan?

V. R. Sharma — Managing Director

I think I’ve already answered this, we will be doing about more than 20% of the total produce — total exports, but I cannot give the breakup that what will be — how much quantity will be beams, channels, angles or specialty rounds of the — other steel rounds or the plates. So that will be difficult to tell today, but we have made —

Kirtan Mehta — BOB Capital Markets — Analyst

The historical break up at least for FY ’22 where have already completed writing?

V. R. Sharma — Managing Director

I can share with you, because offhand I will not remember, but I can share this. I mean, Nishant will share this.

Kirtan Mehta — BOB Capital Markets — Analyst

Sure, sir. Sir, one more question if I could, let’s think about the core project that you are developing, could you also clarify on the model of development? Are you involving the MBO or are you doing it on your own balance sheet and does it also evolve the complete capex on setting up the mines and all the related equipment or it’s probably sort of this payment would go primarily MBO operators?

V. R. Sharma — Managing Director

Yes, obviously doing coal mining by ourselves, we have the entire team available. You know we have been maintaining our coal mines for so many years in Raigarh and now also the coal mining by our sister company JPL is done by themselves. So we have the expertise available and we’ll do it ourselves.

Kirtan Mehta — BOB Capital Markets — Analyst

In that case, your capex of INR18,000 crores would go up by another INR1,800 crores to INR2,000 crores for additional capex on the coal mine, because the initial INR18,000 crores plan did not include the capex on coal mine.

Ramkumar Ramaswamy — Chief Financial Officer

See, that I think you have to take it differently. First of all, INR18,000 crore is for the extension, the next extension that we are taking, that includes blast furnace, includes drilling and first strip mill, cold rolling mill and many more areas. So, the coal requirement, so today we are buying coal. So if you see buying coal versus your own coal, so we’ll be saving at least 60% to 70% of the input costs or the expenses. So when we save those expenses 60% to 70% that is the money which is going to be clawed back to the mining, so that is from the existing operations.

So the net expansion what we are seeing are, there will be hardly any use of coal in the next extension. So — but the company which is now running, whether it is Raigarh or it is Angul, there we are buying coal from the market, and we are buying coal in — that are worth crores of rupees and the difference will be, when your own mines, the difference would be about 60% to 70% of the total cost savings.

So there will be no capex impact or no financial impact, because whatever we are saving, because today we are passing it on to either Coal India or to the importers or to the foreign companies, so that money will go to a development of mine in stages. So, hope I answered you.

Kirtan Mehta — BOB Capital Markets — Analyst

Right, sir. Thanks for this elaborate answer. Thank you.

Operator

Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Vishal Chandak for closing comments.

Vishal Chandak — Motilal Oswal Financial Services Ltd — Analyst

Thanks Rituja. Thank you everyone for joining the — for this conference call and I would once again thank the management for this opportunity. So, I would hand over the floor to Nishant for closing remarks. Over to you, sir.

Nishant Baranwal — Head, Investor Relations

We’d like to thank both Motilal Oswal, Vishal, as well as the operator. It was — and all of you for joining the call. Thanks a lot for your support as always. Have a great day.

V. R. Sharma — Managing Director

Thank you very much. [Indecipherable] and let us pray to god that all these international geopolitical issues should be resolved as fast as possible to avoid the meltdown of the economy worldwide. So let us hope for a good future tomorrow. Thank you.

Ramkumar Ramaswamy — Chief Financial Officer

Thank you everyone.

Nishant Baranwal — Head, Investor Relations

Thank you.

Operator

[Operator Closing Remarks]