Jindal Steel & Power Limited (JINDALSTEL) Q4 FY23 Earnings Concall Transcript

Jindal Steel & Power Limited (NSE:JINDALSTEL) Q4 FY23 Earnings Concall dated May. 16, 2023.

Corporate Participants:

Vishal Chandak — Head of Investor Relations

Ramkumar Ramaswamy — Jindal Steel & Power Limited

Bimlendra Jha — Managing Director

Analysts:

Amit Murarka — Axis Capital — Analyst

Amit Dixit — ICICI Securities — Analyst

Siddharth Gadekar — Equirus — Analyst

Rajesh Majumdar — B&K Securities — Analyst

Sumangal Nevatia — Kotak Securities — Analyst

Indrajit Agarwal — CLSA — Analyst

Ketan Mehta — BOB Capital Markets — Analyst

Vikas Singh — PhillipCapital — Analyst

Ashish Kejriwal — Nuvama Institutional Equities — Analyst

Ritesh Shah — Investec — Analyst

Arijit DUtta — Kotak Mutual Fund — Analyst

Alok Deora — Motilal Oswal — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Jindal Steel and Power Q4 FY23 Results Conference Call, hosted by Axis Capital Limited. [Operator Instructions]Please note this conference call is being recorded.

I now hand the conference over to Mr. Amit Murarka from Axis Capital. Thank you and over to you, sir.

Amit Murarka — Axis Capital — Analyst

Thank you, Vikram. Good evening, everyone, and welcome to the Q4 FY23 con-call of JSPL. We have with us the senior management team from JSPL, Mr. Bimlendra Jha, the Managing Director; Mr. Ramkumar Ramaswamy, the Whole-time Director and CFO; and Mr. Vishal Chandak, the Head of Investor Relations.

I will now hand over the call to Vishal for his opening comments. Over to you, Vishal.

Vishal Chandak — Head of Investor Relations

Thank you very much, Amit Good evening, everyone, and welcome to the Q4 and FY 23 Earnings Call for Jindal Steel and Power. So before we start the presentation and Q&A, just wanted to remind you that the discussions today will be covered under the Safe-Harbor statement, which is in the second Slide of our presentation. Hope you had the time to read through the same. We will start this presentation with the opening remarks with our CFO, Mr. Ramaswamy, followed by the Q&A. Over to you, sir.

Ramkumar Ramaswamy — Jindal Steel & Power Limited

Thank you, Vishal. Good day, good evening everyone. Let me give a quick overview of the financial and operational performance. Let me start with the sales volume. Volume for the quarter was 2.03 million tons, which is 7% growth Q-o-Q, primarily driven by a strong pickup in our exports and a 1% growth in our domestic volumes too. The share of exports in the quarter improved 11% versus 5% last quarter. The production for the quarter was 2.02 million tons, which is 2% lower Q-o-Q, primarily driven by an unplanned shutdown in our DRI plant in Angul during Jan.

In terms of realization, our realization improved by 3% quarter-on-quarter with improvements both in the domestic and export realization. To give you a sense of what’s happening currently, currently we are seeing a bit of softening in our realizations between 1% to 2% and we will have to see how this plays out during the current quarter. Our SMS cost increased by 2% Q-o-Q, primarily driven by higher iron-ore and pellet prices, which was partially offset by a marginal reduction in coking coal prices. As per our practice, we do not provide any forward guidance on numbers for the subsequent quarters, so I am not sharing any outlook in terms of coking coal and iron-ore prices.

Our adjusted EBITDA for the quarter on a consolidated basis is INR2,240 crores, which is 2% lower Q-o-Q, primarily driven by the factors I mentioned earlier. That has improved volumes, improved MSR, offset by higher SMS costs, driven by higher iron-ore prices. I would also like to highlight that we have taken inventory Write-downs — write-offs of around INR250 crores during the quarter based on the realized — based on our assessment of their realizability, which is captured in the above EBITDA.

Our adjusted EBITDA of overseas subsidiaries, primarily Australia and Mozambique, and South Africa during the quarter was INR63 crores. And our standalone India EBITDA is INR2,178 crores. On a consolidated basis, our PAT for the quarter was rupees INR466 crores, which is 10% lower Q-o-Q. I would also like to highlight exceptional items of INR153 crores during the quarte, which pertains to expenses incurred on old projects which we have decided to write-off. This is captured separately as an exceptional item in our results.

I’ll give a very quick snapshot of our full-year numbers for your reference. Full year volume is 7.68 million tons, which is a 1% growth over last year. Our production is 7.89 million tons which is a 2% decline over last year. Our MSR improved by 5% on a full-year basis and our costs were higher by 4%. Our full-year consolidated adjusted EBITA is INR9,700 crores and PAT is INR3,193 crores after exceptional identified items of INR1,369crores. Out of this, INR8,562 crores swept into India and INR1,138 crores is from our overseas subsidiaries.

I’ll also give a quick overview in terms of our cash-flow and debts. As I said, the cash focus is our primary aim. So we generated operating cash-flow of INR6,351 crores and this is for the standalone entity based on an EBITDA of INR8562 crores. Out of this, we have invested close to INR5,800 crores in CapEx, both in JSP and JSO. And we’ve also used it for our interest and repayment of our loans. Our standalone gross debt was INR11,874 crores and net-debt was INR7,090 crores as of 31st March. I would like to highlight that we have prepaid a further INR1,095 crores in April. And our gross debt in April of INR8,984 crores. So our our continued focus on cash and deleveraging continues as has been highlighted before.

The Board has recommended a dividend of INR2 per share for the financial year. With this, I would like to conclude and hand over for Q&A. Over to you, Vishal.

Vishal Chandak — Head of Investor Relations

Operator, can we please open the session for the Q&A.

Questions and Answers:

Operator

Thank you very much, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] We’ll take our first question from the line of Amit Dixit from ICICI Securities. Please go-ahead.

Amit Dixit — ICICI Securities — Analyst

Yeah, hi. Good evening, everyone, and thanks for taking my question, sir. I have two questions. The first one is, if you could highlight the progress of rationalization of the coal blocks that we have won during bidding as well as the slurry pipeline project. I mean, how much of it remains, when it is expected to be commissioned? That would be very helpful. That is the first question.

The second one is on depreciation which appears to have gone up in this quarter, so is it due to commissioning of some plants of the expansion project or how is it? And what run-rate can we expect going ahead. These are the two questions, sir.

Bimlendra Jha — Managing Director

Okay, thank you, Amit. This is Bimlendra Jha. So, our coal block, in fact before coal block there is already pellet plant which is under commissioning. The commissioning trials are already very successful and we are well on our way to have a full-scale commissioning of the pellet plant. Coal block, most of the clearance are there and mining license stage we still awaiting certain — one of the last clearances and as soon as that is available, we should be in a position to open the coal block. Slurry pipeline is towards the end-of-the current year is what we are seeing because of all the elections and other issues that are there. So that is what. I have to say on that. Ram will answer the question on depreciation.

Ramkumar Ramaswamy — Jindal Steel & Power Limited

Amit, the depreciation, it’s on account of an impairment that was done by our Australia subsidiary to the extent of INR250 crores. So the Australia subsidiary had done an independent assessment of the realizable value. And based on their assessment, we have taken a impairment provision of INR250 crores. That is the reason why you see higher depreciation.

Amit Dixit — ICICI Securities — Analyst

Okay, sir, can you put a timeline to this pellet plant, when can we expect it to the commissioned. I understand that you mentioned that trials are on, but the timeline would be great. And also how much coal can we expect if any in this financial year, FY24.

Bimlendra Jha — Managing Director

The mining plan that has been submitted is for around 3.5 million tons for the year. We are exploring possibilities if we can go up, but that is what is the current mining plan that has been submitted for the year. And nobody knows when the finally clearance comes, but since it is absolutely the last couple of stages of that clearance, it can happen anytime. So that is on the coal block.

You said pellet plant as well. The pellet plant, as I said, that it is under commissioning trials and it is just a question of weeks where we should be having a full fledged commercialization.

Amit Dixit — ICICI Securities — Analyst

Great. Thanks very much for the update and all the best, sir.

Bimlendra Jha — Managing Director

Thank you very much, Amit.

Operator

Thank you. We’ll take our next question from the line of Siddharth Gadeka from Equirus. Please go-ahead.

Siddharth Gadekar — Equirus — Analyst

Hi, sir. Just one on the standalone operations. Now if I look at realizations have increased by INR3,000 almost sequentially. But when I look at the cost, what explains this kind of cost jump because we are looking at — our EBITDA per ton has declined by almost INR1000 on a sequential basis. Is there anything that I’m missing in this?

Ramkumar Ramaswamy — Jindal Steel & Power Limited

So as I mentioned, our realization has gone up by 3% and our HMS costs increased by 2%, primarily driven by higher iron-ore and pellet prices. I also referred to in my overview that we have taken write-downs, write-offs of around INR250 crores of inventory. And that that should probably increase the rest of the difference.

Siddharth Gadekar — Equirus — Analyst

So increase is taken under the cost-of-goods-sold or under other expenses?

Ramkumar Ramaswamy — Jindal Steel & Power Limited

On the cost of goods sold.

Siddharth Gadekar — Equirus — Analyst

So even adjusting for that, a sequential increases is very sharp because normally if I look at the prices, cooking coal prices would have been up by $10 or $15 per ton and iron-ore also would be in a similar range, but that doesn’t explain that, that kind of a cost increase.

Bimlendra Jha — Managing Director

No, I think on iron-ore, OMC prices. If you look at it from November onwards, there has been a very sharp increase in the iron-ore price. In fact. If you look at that, it is around from INR3,550 per ton to around INR5,700 per ton is the kind of rise in prices that has taken place. So if we budget for that as one, so INR3,550 has become INR5,700, which is even if you look at it on NMDC iron-ore finds, which is 64%. These 62%, 0 to 10 mm Odisha Mining Corporation is INR1,700 higher then even 64% iron-ore find.

So this is — actually if you look at it, ideally this should have been at a discount to INR4,000 that NMDC gives. But unfortunately this gap is a bit too much that has opened up, which was not the case until November ’22. November ’22, the prices of iron-ore finds from NMDC were 2760 and Odisha was 3550. So this gap has really, really opened up.

Siddharth Gadekar — Equirus — Analyst

Okay, but now are we carrying any high cost inventory again into the first-quarter or how should we look at it in terms of common coal and in terms of coking coal and iron-ore prices going right now for us and on a consumption basis.

Bimlendra Jha — Managing Director

No, in the first-quarter we are fortunately not carrying high-cost inventory. In fact, if at all there has been some respite from there. But overall you will see that there are — we are in a bit of choppy waters right now with respect to prices. I’m sure that Odisha Mining Corporation will see the light and they will try to adjust the prices downwards now. But nobody knows what to do.

Ramkumar Ramaswamy — Jindal Steel & Power Limited

Yes, and that we mentioned, we don’t give forward guidance on these prices because things change — things have been changing quite a bit. So we did not give any forward guidance on how it is looking for this quarter.

Siddharth Gadekar — Equirus — Analyst

Okay. And in terms of our pellet capacities, we were expecting to commission, I think so almost 12 million tons of pellet capacity this year. So in terms of our utilization, is it fair to assume that we could be at 100% capacity utilization by next year or it will take even more time?

Bimlendra Jha — Managing Director

So our first pellet plant is under commissioning which is 6 million tons, another 6 million tons would be commissioned almost concurrently with our blast furnace when they come up — the second blast furnace if not first. So that is why it is towards the end-of-the year that we are expecting for that. But this one would be sufficient for our requirement right now at 6 million tons because that is what is our current capacity.

Siddharth Gadekar — Equirus — Analyst

Okay, sir. Got it.

Operator

Thank you. We take our next question from the line of Rajesh Majumdar from B&K Securities, please go-ahead.

Rajesh Majumdar — B&K Securities — Analyst

Yeah, hi sir. I just had two questions. You said you had taking the inventory write-off is, is that a correct word use of INR200 odd crores in Q4? what exactly is inventory write-off, I mean I can understand mark-to-market inventory losses which can again come up. What is the inventory write-off exactly we’re talking about.

Ramkumar Ramaswamy — Jindal Steel & Power Limited

These are both write-offs and write-downs. So we’ve been having old inventory of various products. It could be a [Indecipherable]So it’s a combination of FG and RM. So based on our assessment of the realizable value, we have decided to write-down some of them and write-off some of them.

Rajesh Majumdar — B&K Securities — Analyst

The total impact of the write-down is INR200 crores. Is that correct.

Bimlendra Jha — Managing Director

Write-down and write-off put together are INR250 crores approximate.

Ramkumar Ramaswamy — Jindal Steel & Power Limited

Yes, that is right.

Rajesh Majumdar — B&K Securities — Analyst

And the asset impairment of 250 crores is pertaining to the — which of the Australian subsidiary, sir?

Ramkumar Ramaswamy — Jindal Steel & Power Limited

That is Australia.

Rajesh Majumdar — B&K Securities — Analyst

Yeah, but which one.

Bimlendra Jha — Managing Director

Wollongong.

Rajesh Majumdar — B&K Securities — Analyst

On Wollongong as per the auditors’ remarks, is there more payment likely to be taken there?

Ramkumar Ramaswamy — Jindal Steel & Power Limited

This, it’s an ongoing assessment that we will have to do. So we do have ongoing as assessment of the realizable value and the carrying cost. And of course, as you’re aware, the Australia business has not been delivering the value that it is supposed to deliver. So we will reflect these on an ongoing basis. It’s what I would like to say.

Rajesh Majumdar — B&K Securities — Analyst

Okay, thank you. I’ll come back if there is any other question.

Operator

Thank you. We’ll take our next question from the line of Sumangal Nevatia from Kotak Securities, please go-ahead.

Sumangal Nevatia — Kotak Securities — Analyst

Yeah, good evening, and thanks for the opportunity. The first question, just the clarification on what Amit was asking on the coal blocks. We said that the last clearance is pending. I mean, is it across the four mines which we have or are we talking about a particular mine? And if you could just share, I mean the level of approval across the four mines.

Bimlendra Jha — Managing Director

No, we are talking about Utkal C which is our first objective and Utkal C is the main one that gives us almost entirely our requirement of thermal coal, which is for the DRI coal gasification as well as for thermal requirements. We are talking about that.

Sumangal Nevatia — Kotak Securities — Analyst

Okay, sir, if you could just share, I mean, where are we in terms of the commissioning of the approval process for the other mine?

Bimlendra Jha — Managing Director

The moment we get the clearance, our shovels will be in. Everything is lined up.

Sumangal Nevatia — Kotak Securities — Analyst

Okay I mean, broadly, I mean, do we expect these approvals to come in this year for all the four mines or Utkal C ss in advanced stage?

Bimlendra Jha — Managing Director

The Utkal C, we are expecting within this quarter any time. Anytime means it can be anytime from today onwards. But when it will be is only [Indecipherable] they know. The other ones that we are talking about is [Indecipherable] which is also in a very advanced-stage. And again, we are very-very close, but it is not closed till it is not closed.

Sumangal Nevatia — Kotak Securities — Analyst

Got it, got it. Sir, my second question is with respect to our hot strip mill and blast furnace. So I mean, what sort of volume can we expect when we are looking at commissioning towards the second-half in this year?

Bimlendra Jha — Managing Director

You’re talking about blast furnace?

Sumangal Nevatia — Kotak Securities — Analyst

Yeah. So Angul blast furnace and also the hot strip mill.

Bimlendra Jha — Managing Director

Before blast furnace, we will be first starting with our hot strip mill and the blast furnace. So our capacity is, I had explained it, it is the last [Indecipherable] was that we are doing it in a sequence where we make maximum money. So, the very first in the sequence was the pellet plant. The second in the sequence was coming to be coal mine. The third in the sequence was coming to be the slack plaster and HSM which is a combined thing. And then comes the blast furnace and the steel making related to that. And in the meantime, almost in parallel the downstream of the hot strip mill will come up. So this is a sequence. Now, this sequence, one or two months here or there, but we are on-track with respect to the entire sequence.

Sumangal Nevatia — Kotak Securities — Analyst

Okay, so we continue to expect this blast furnace commissioning in third quarter or this financial year.

Bimlendra Jha — Managing Director

That will be towards the end-of-the financial year as far as blast furnace commissioning is concerned because as adherences are coming in, but we have work to do. As far as hot strip mill is concerned, this should be — you can expect in the 3rd-quarter of the current financial year.

Sumangal Nevatia — Kotak Securities — Analyst

Got that. Just one last question. On the volumes, we are 9.6 million tons of capacity on crude steel basis, this year we have done 7.8 tons, so should we expect, I mean, what sort of growth should we expect in FY24?

Bimlendra Jha — Managing Director

So this is forward-looking statement that you are asking as we never give the forward-looking statements.

Sumangal Nevatia — Kotak Securities — Analyst

Alright. Thank you and all the best.

Bimlendra Jha — Managing Director

Thank you, Sumangal.

Operator

Thank you. We take the next question from the line of Indrajit Agarwal from CLSA. Please go-ahead.

Indrajit Agarwal — CLSA — Analyst

Hi, good evening. Two questions. First, can you help us understand how much is the remaining project CapEx on all the expansion projects and how we should see it split between, say ’24, ’25?

Bimlendra Jha — Managing Director

On project CapEx, can you please repeat the question?

Indrajit Agarwal — CLSA — Analyst

How much is the remaining project CapEx in Ankul expansion?

Ramkumar Ramaswamy — Jindal Steel & Power Limited

So we are evaluating the entire slate of projects that we have on our drawing board. We are looking at trying to make some changes to the configuration as well as we speak. And we expect these to get finalized over the next few weeks or so. Then we will be able to — and we would also have to take into account some of the CapEx like mines CapEx that we have not shared before. So maybe over the next few weeks we will be in a position to share a more definitive view of our total CapEx slate and what we expect to see during this year. So I would only request you to wait for the next few weeks, after which we can give you more definitive numbers.

Indrajit Agarwal — CLSA — Analyst

Sure. And my second question is, you talked about revisiting the capital allocation policy during the 4th-quarter earnings. Any update on that?

Ramkumar Ramaswamy — Jindal Steel & Power Limited

Yes. So as I mentioned, the next few weeks the capital allocation policy, including the CapEx, the CapEx program for the next three years. All of that is under finalization and review and we expect to share that with all of you over the next.

Indrajit Agarwal — CLSA — Analyst

Sure. And lastly if I can squeeze one more. When do we decide on the Australian such because this has been a drag for several quarters now and we have been taking the write-offs on that and now there is concern — the growing concern on Wollongong asset as such as well. So what are we thinking on that and what kind of decisions can we expect from that?

Bimlendra Jha — Managing Director

As far as Wollongong resources are concerned, there are — we do see it as a valuable asset. It is not as if it is disappearing. It has had its own challenges. But there are actions being taken on the ground to make sure that the assets starts becoming breakeven and then have a possibility of giving better quality of coal. And as we are focusing our efforts in that direction, we confident that within a couple of quarters we should be seeing positive reports from that site. But that is where we are as of now. We are not able to say with certainty to you that this is the amount of money that will make or anything like that, but it is certainly it has probably seen its quarter.

Ramkumar Ramaswamy — Jindal Steel & Power Limited

I would only like to add that the effect has not been delivering the right per ton. So that’s the main question that you asked. We are also evaluating all of the options to see what do we need to do, but our first effort is always to see how we can make money, and I think that is where our current focus is now from the Australian asset.

Indrajit Agarwal — CLSA — Analyst

What was the cash burn on that asset in FY 23.

Ramkumar Ramaswamy — Jindal Steel & Power Limited

I will ask Vishal and team to share the exact details maybe after the call.

Indrajit Agarwal — CLSA — Analyst

Sure. Thank you so much. That’s all from my side.

Operator

Thank you. We’ll take our next question from the line of Ketan Mehta from BOB Capital Markets. Please go-ahead.

Ketan Mehta — BOB Capital Markets — Analyst

Thank you sir for giving this opportunity. Just a clarification on the coal block again. In terms of — you had indeed have indicated 3.5 million till mining plan. Is it Utkal C and Gare Palma both together for this year or is it related to one particular mine?

Bimlendra Jha — Managing Director

This is for Utkal C only.

Ketan Mehta — BOB Capital Markets — Analyst

Okay. And would you be able to indicate similar mining plan for Gare Palma and the other assets which could also probably come sometime during either this year or the next?

Bimlendra Jha — Managing Director

I’ll intervene in between. I’m just trying to get that number. I don’t have it on the top of my head. I’ll get that number. And during the call I will tell you.

Ketan Mehta — BOB Capital Markets — Analyst

Sure sir. One more question was about you have been reviewing some of the internal practices and we have taken some of the write-off in the overseas mining subsidiaries earlier. We are again taking some more additional area this time as well. We are also reviewing the CapEx plan again for the comprehensiveness as well. So I just wanted to understand from the management side that which are the areas which we have received so-far and feel comfortable about and which are the areas where there is a still review ongoing apart from the CapEx — overall CapEx plan.

Ramkumar Ramaswamy — Jindal Steel & Power Limited

Maybe I’ll I’ll give a few comments and then ask MD for trueness. The review is an ongoing. I think in any business you will have to be constantly reviewing all of this. So some of these write-offs, write-downs, etc., my belief is that we have done most of it so as we speak because if we had anything further to do it, we would have reflected in this quarter’s results itself. So it’s not that we have a much larger slate and we are trying to feed these on an ongoing, that is not what we are doing. Whenever we recognize that there is a potential issue in realizability, we take the the impact in that quarter.

As far as the impairment of our loan was concerned, we have taken a full and final position last quarter itself, where we had done the impairment provision. There is no further addition to that or no further change to that. The INR269 crores of impairment that we saw this year — this quarter is is a provision that has been taken by our Australian subsidiary. So these are not moving pieces. In our view, we have taken a final provision as far as impairment is concerned for the loans that we have given to our subsidiary. And this inventory value write-downs, write-offs of some of the old capital projects, I think as we speak whatever was was timing issues in terms of realizability I believe we have taken the impact in this quarter.

Bimlendra Jha — Managing Director

Yeah, and I think I must complement the analyst community that you your numbers almost entirely right. And if these adjustments were not there, your consensus estimate what would be the expect probably. So we are also not very happy with continuing to require all these things. So we have taken the big provision after due-diligence, which was through the external agencies recommendation and we made a very transparent call on this in the last quarter when we announced the results. So we don’t have any other foreseeable ones but steel market is cyclical. Nobody ever makes definitive statement around that.

Mr. Mehta, I’ll take this opportunity to also answerable about Gare Palma. There also we have taken this mining lease permission in the range of 3.5 ton to 4 million ton per annum.

Ketan Mehta — BOB Capital Markets — Analyst

Thank you, sir.

Amit Dixit — ICICI Securities — Analyst

Thank you. We’ll take the next question from the line of Amit Dixit from ICICI Securities. Please go-ahead. Yeah, hi. Thanks for taking my question again. Couple of questions again from my side. One is that you mentioned in your opening remarks that DRI plant had an unplanned shutdown. So, is it working all right now? I mean, what is the capacity utilization currently at DRI plant?

Bimlendra Jha — Managing Director

The DRI plant had taken a plant shutdown. It had certainly issues with certain heat exchanger, etc., which is — there has been currently some some more work that has been done over there. So I think we should be in a good position now, now that DRI plant has again started well and this is working well now.

Amit Dixit — ICICI Securities — Analyst

Sir, one question on your rail mill. Last time you indicated that [Indecipherable] is going to this plant for setting up another rail mill. Now what we are facing in the country is an acute shortage of wagon wheels also and on the tail have been so-far. So any chance of you entering this particular business?

Bimlendra Jha — Managing Director

See, we don’t have right now the plans, but we would look-forward to very keenly if there was any opportunity. There is already capacity that is there sitting with RINL. And we believe that do a good job of it. Their Lucknow, Rai Bareli facility that is there. It is adequate for India. It is just that they have not been able to so far commission it. We wish them all the luck. If that plant gets going, I don’t think that there will be a shortage.

Amit Dixit — ICICI Securities — Analyst

Okay, a final answer on demand. I mean, we have been hearing about the demand being soft in certain parts of the country, particularly for long. So how do you see demand panning out next couple of quarters? Due to pre-election, do you see some kind of softening of project? I mean, how do we read into it?

Bimlendra Jha — Managing Director

I would say that if you look at the PMI from — there are two countries amongst the major economies in the world that have got a positive trajectory on PMI month-after month from February ’23 to April ’23, and one is US, another is India, In India that PMI has gone up from 55 to 57. In US it has gone up from 47 to 50. Every other major economy it is going down. So as far as purchasing managers Index is concerned, that is already a positive story there that is visible. We have also seen that the wholesale price index has come down to a negative territory now. Okay. There are anti-inflationary pressure in the economy, which means that there should be hopefully some more, thanks to the elections, etc., we do expect the expenditures to go up on the macro economy basis.

What has happened is though that the China story has not unfolded the way the world expected, and as a result there has been some uncertainty around the world as far as steel prices are concerned, particularly the HRT benchmark. Now as is worth of that, people may be holding back, but fortunately customers are not sitting on huge inventories, so they can’t hold back for a long. But it is a good practice anyway to not hold because that creates an artificial demand. We are happy with the demand that is genuine and creates a pull into the economy. We are not seeing any reasons to worry as far as India is concerned.

As far as exports is concerned, there are opportunities that continue to be there across the globe, but more particularly in Europe. So we don’t see it as a matter of concern. But in steel industry nobody has a great crystal ball and we need to always be mindful of the fact that it is a cyclical industry and small queues can result in big changes. Given that caveat, I would say that we have a more positive outlook from an India perspective.

Amit Dixit — ICICI Securities — Analyst

Okay, great, sir. Thanks for the elaborate answer and wish you all.

Bimlendra Jha — Managing Director

Thank you.

Operator

Thank you. We take our next question from the line of Vikas Singh from PhillipCapital. Please go-ahead.

Vikas Singh — PhillipCapital — Analyst

Good evening, sir, and thank you for the opportunity. Hello, am I audible.

Bimlendra Jha — Managing Director

Yes, you are. Please go-ahead.

Vikas Singh — PhillipCapital — Analyst

Sir, just just pertaining to again your inventory Write-downs, given that this quarter we have seen the net realization going up and that in your comments that iron ore cost was also higher. So this is essentially entirely on the coal write-downs or there something else to it?

Ramkumar Ramaswamy — Jindal Steel & Power Limited

Well, as I mentioned, this is a combination of several finished goods and raw materials, they saw were some iron ore finds. I think its a combination of several items which we thought will not have the full realizability and we’ve decided to give a write-downs or write-offs to some of these items.

Vikas Singh — PhillipCapital — Analyst

And sir, just adjacent to this, basically given the coal has been continuously on a downward trajectory, do you think that the more write-downs with respect to coal or something related to that could come in 1Q or we are done with most of the write-downs?

Ramkumar Ramaswamy — Jindal Steel & Power Limited

Again as I mentioned, you have to appreciate this is going to be an ongoing process. Every quarter we will be — we will have to assess the realizability of all our items in the balance sheet, whether it is inventory of fixed assets. As I said, we have good reason to believe that as of today. Wherever we had a view that there is going to be an impact of the realizability, we have reflected that in our financials. That essentially means whatever is there will be fully realizable. That’s our assessment at this point of time.

Bimlendra Jha — Managing Director

As a practice, one shouldn’t be having a book value higher than the realizable value. And that is the ongoing good business students and fiscal discipline that companies need to have. That is all that our CFO is saying.

Vikas Singh — PhillipCapital — Analyst

Yes. Understood, sir. I would just a little bit confused because since if steel prices are going up or even iron-ore prices are up, how can be a certain portion of find has to be right down that is something which was battling us.

Ramkumar Ramaswamy — Jindal Steel & Power Limited

These were not in a usable condition, maybe that’s is how I would put it.

Bimlendra Jha — Managing Director

I’ll explain that to you. If you have seen a steel plant, particularly with the raw material yard. Sometimes what happens is that even though you keep on storing the quantity, at the bottom it becomes almost an unextractable, it becomes part of the ground, okay? So when we do the inventory valuation, we see the usability of these assets and we take a call. It has become almost like the surface on which the material is stored. So these are small calls that have been taken. In the large scheme of things, these are small numbers. So I would say that it is just a prudent assessment, all the audit of stocks that is regularly undertaken and this has taken on that basis.

Ramkumar Ramaswamy — Jindal Steel & Power Limited

And it’s a combination of several items. As I mentioned, it’s not just iron-ore, it is slag inventory, it is iron-ore finds, several items is what I’m saying.

Vikas Singh — PhillipCapital — Analyst

Sure sir. Point taken. Sir, my second question regarding our debt. So given we have an aggressive CapEx plan, do you think that our debt would increase from current levels going forward and what kind of the peak debt levels is acceptable to company?

Ramkumar Ramaswamy — Jindal Steel & Power Limited

As we’ve been maintaining, our policy is to be lesser than net-debt to EBITDA of 1.5 times through the cycles. So I think that is our policy that we’ve been constantly maintaining. We are currently at 5.7. And clearly as we mentioned earlier towards JSO, we have signed-up for around INR15,700 crores of debt. We have not drawn down anything so far. All of this has been funded through our internal accruals. As we see it gets approved and once we are in a position to draw down, we will definitely start drawing down on the sanctioned debt. And I would again like to repeat that we would definitely want to operate in the 1.5 times net-debt to EBITDA through the cycles.

Vikas Singh — PhillipCapital — Analyst

Thank you sir for the elaborated answer.

Bimlendra Jha — Managing Director

Just to clarify it again. It is best that we understand our objective as well as our previously-stated position on zero net-debt. As far as JSP is concerned, we are well on our way to move in that direction. As far as JSO is concerned, it is a new entity that has been created as a fully-owned subsidiary and most of the debt will potentially reside over there. Balance of things up-and-down keep on happening. Working capital will keep on happening. But this is the direction of travel. Now, we have also stated our growth ambition that we will be — we’ll try to be the largest steel producer at a single location in Odisha, etc. So, we will constantly evaluate those investment opportunities, any acquisition opportunities and therefore we want to keep our gun powder dry and we want to remain disciplined about the amount of debt that we would like to tolerate, and that tolerance level has been defined as 1.5 x. Now, obviously with the cyclical industry, that debt can change. But even through the down-cycle we don’t want to violate this 1.5 x. So now you can do your maths on the subject and see where we will go.

Vikas Singh — PhillipCapital — Analyst

Sure sir, sure, sir. Thank you. That’s all from my side.

Operator

Thank you. We take the next question from the line of Ashish Kejriwal from Nuvama Institutional Equities. Please go-ahead.

Ashish Kejriwal — Nuvama Institutional Equities — Analyst

Yeah, hi, good evening, everyone. Thanks for the opportunity. Sir, two quick questions. One is in volume because we already are 9.6 million ton for long, but still unable to achieve that capacity. So is it because of — and last year we have seen lots of issues regarding transportation and other things. So is it demand led or supply led? And if it supply led, when do we expect to reach optimal capacity of this 9.6 million ton?

Bimlendra Jha — Managing Director

Yeah. So first of all, this 9.6 million ton capacity that is there is a upstream capacity. It is not the full capacity as of now in terms of the finished goods. So this is at metallics that we have this capacity. Secondly, there have been challenges in the past about the availability of coal etc., for operating our CBT DRI completely, which is now as you are aware that we will consider opening up. That won’t be a constraint at least. So we would be increasingly utilizing this capacity, but the ability to replace this capacity also is it temporarily from the slab caster coming on-stream, so that has got to come one stream, okay? So there is there is an opportunity where there is metallics will no longer be a constrain. So metallics will eventually become a constraint all over again, simply there will be so much of pull from the the downstream units.

One of the reasons why sometimes we choose not to produce something is because it may not make sense from a commercial angle. Sometimes, of course, there glitz in the supply-chain, particularly transportation, etc. So usually these combination of factors work. But as far as our capability to utilize the metallics is concerned, I think very soon a metallic constraint, which means we may end-up buying metallics.

Ashish Kejriwal — Nuvama Institutional Equities — Analyst

My question remains the same, when we can we expect the optimum capacity utilization of this 9.6 million tons?

Bimlendra Jha — Managing Director

So the optimum capacity utilization should be when we open the hot strip mill and slab caster. That will be most optimal time for capacity utilization at metallics level.

Ashish Kejriwal — Nuvama Institutional Equities — Analyst

Sure, thanks. And second question is you mentioned in the opening remarks that now the CapEx we have done around INR5,800 crore CapEx this year, whereas in presentation or in our cash flows it shows around INR6,448 cores. So I was just wondering are we referring the different CapEx numbers or something which I’m missing?

Ramkumar Ramaswamy — Jindal Steel & Power Limited

Again, I’ll maybe request Vishal and the IR team to give you the — if there is a different set of numbers and clarify this to you.

Bimlendra Jha — Managing Director

I think the reason why you are looking at two different numbers is because of consolidated with the standalone.

Ashish Kejriwal — Nuvama Institutional Equities — Analyst

I doubt sir, because the standalone, it’s INR2,400 crore, INR2,500 crore only. So because in standalone we are not doing much of CapEx, all CapEx is done in the use of 100% subsidiary. So I will check from Vishal then going forward.

Ramkumar Ramaswamy — Jindal Steel & Power Limited

Yeah, pleas. The team will clarify to you, sir.

Ashish Kejriwal — Nuvama Institutional Equities — Analyst

And sir lastly, Australian subsidiary, we have been saying a lot about it for last one-and-half or two years and giving the different guidances every time, but I don’t know whether we are investing a lot in that to ramp-up that capacity or is there any operational issues which we are unable to solve, because 1.5 years we have not reached to not be 50%, 60% of what we promised. So what’s the actual issue which is we are trying to address and that will help us to achieve a million ton run rate.

Ramkumar Ramaswamy — Jindal Steel & Power Limited

So maybe first I’ll I’ll clarify a couple of points and then I’ll ask MD sir to maybe respond to your other questions. Firstly, we have not been giving different guidances on Australia. We’ve been consistently maintaining that it is not realizing the desired returns and that is precisely the reason we have taken off impairment motion in the last quarter. So I’m not sure what you’re referring to different guidances. That is number-one.

Number two, as we mentioned just now, our first priority is also to see how we can turn it around and how we can make it profitable. So towards this, we have also said that we might be making small Capexes to the extent of $10, $15, $20 million, but nothing substantial. So if with this we are still not seeing the desired results, then we will review and look at what are the options available. But I just wanted to clarify a couple of these points. But I’ll request can be before maybe add-on to what are the kind of actions that we are looking at.

Bimlendra Jha — Managing Director

Yeah. So first of all, your question is pertinent that what is it that is happening in Australia. So what is happening in Australia is a combination of factors. There was — one was that there operational aspect where there has been some streamlining done. Even the shift level changes have been made. Some mining phases that we’re not giving returns have been stopped versus some of other pieces we are working on that. There was an issue with the multi bolters that is being resolved. There is a SGX that is being installed. But these are not big CapEx items, these are small CapEx items and in the scheme of things. And we will be very soon, hopefully within a quarter or so we should start seeing the result of all the actions the mine together to start giving better results.

Ashish Kejriwal — Nuvama Institutional Equities — Analyst

Sure. And sir lastly if I heard correctly, you said that we don’t wish to violate 1.5 x net-debt to EBITDA even in the down-cycle or any of the mid year also. That’s right?

Ramkumar Ramaswamy — Jindal Steel & Power Limited

Yes, 1.5 x net-debt to EBITDA through the cycles is what we mentioned. This is what we have been consistently maintaining.

Ashish Kejriwal — Nuvama Institutional Equities — Analyst

Was the downcycle or..

Bimlendra Jha — Managing Director

Even in downcycle, I wouldn’t like to violate 1.5 x, I did say that, okay. And I’m sticking my neck out and saying that yes, we’ll do it.

Ashish Kejriwal — Nuvama Institutional Equities — Analyst

Thank you and all the best.

Operator

Thank you for taking. Next question from the line of Ritesh Shah from Investec. Please go-ahead.

Ritesh Shah — Investec — Analyst

Yeah, hi sir. Thanks for the opportunity, sir. I’m an engineer. Pardon me for a bit of my ignorance. Sir, I just wanted to understand the timeline. So in this quarter we have taken this depreciation thing of around INR269 crores at the Australian sub. In the prior quarter we had an impairment provisioning of nearly INR7,700 crores, that’s some 60% of total investments [Indecipherable] So I just wanted to understand the sequence of timing. How is it that we did the impairment provisioning before it was done by the Australian sub. So one is, why the timing mismatch? And secondly if one had to read-across, we had provided for this quantum. Does it necessarily mean that incrementally we will go and write-off this particular amount? That’s the first question, sir.

Ramkumar Ramaswamy — Jindal Steel & Power Limited

I think you will have to differentiate both of this. The provision that we have made in the previous quarter that you are referring to was for the investments that JSP has made in its subsidiary JSP Mauritius. So, the provision was for that. The impairment that we are talking about this year, this impairment provision that has been done by the Australian entity based on their standalone assessment of the realizability of the value, so they are two different things. Different entities over here and they are two different things. It is important for you to understand and appreciate that.

Ritesh Shah — Investec — Analyst

Okay, so these are two separate entities that you are looking at. I understand the structure JSP ML and then we have the Australian entity. But to my understanding, we are talking about the same underlying asset which could be volatile or something else in Australia. So please correct me if I’m going wrong?

Ramkumar Ramaswamy — Jindal Steel & Power Limited

You’re absolutely right, it is the same underlying asset. The first impairment was in the books of JSP India related to the investment that we made in Mauritius. And what we are talking about now is in the books of the Australian business for reflecting the correct carrying value.

Ritesh Shah — Investec — Analyst

Okay. I have more questions, so I will speak with you. And sir, my second question was, I understand JSPL, the company had a tolling arrangement with Jindal Stainless. They had some spare capacity on hot strip mill. I just wanted to understand how much was the tooling volumes and how much we used to pay Jindal Stainless CMS on a per ton basis? The reason to ask is basically once we have HSM’s in Q3, what you indicated, that would be something which will also incrementally occur to us.

Bimlendra Jha — Managing Director

Currently we are doing nil. It is opportunistic market, opportunistic time when oil prices were going through the roof there was big opportunity. We would do the toll rolling at Jindal Steel. When my slabs can fetch better realization than that, then I sell my slabs because I have got the surplus today. So it has got nothing to do with when I have my hot strip mill. When my hot strip mill is there, it operates full out to the extent that metallics are available.

Ritesh Shah — Investec — Analyst

Right. But on FY23 basis, any numbers on volume stood at how much we paid on a per ton basis to them?

Bimlendra Jha — Managing Director

That would be done on forward-looking statement and I would avoid it.

Ritesh Shah — Investec — Analyst

Sir, I’m saying on a backward-looking actual number — FY23 actuals?

Bimlendra Jha — Managing Director

FY23 actuals, I’m sorry. My reading was that going forward. The question was FY23, what is the question?

Ritesh Shah — Investec — Analyst

How much did we tool via Jindal Stainless HSM, that is the tolling volume and how much will be paid to them on a per ton basis. I’m just trying to understand that this would be an incremental saving which would come to us when we commission our own HSM.

Vishal Chandak — Head of Investor Relations

Ritesh, this is Vishal here. We will take this offline.

Ritesh Shah — Investec — Analyst

Perfect. That’s all. Thank you so much and wish you all the very best. Thank you.

Operator

Thank you. We take the next question from the line of Arijit DUtta from Kotak Mutual Fund. Please go ahead.

Arijit DUtta — Kotak Mutual Fund — Analyst

Hi sir. Thanks for the opportunity. Two questions, starting with the new new capacity that is coming. The last time in Angul Phase one, the number that we’ve struggle to ramp-up the capacity it quite a bit of time and pain to ramp-up. If you can throw some light what are the learnings from that one and how we are expecting that slow ramp-up will not happen?

Bimlendra Jha — Managing Director

Hopefully have improved as much. That is all I can say. Yeah, no, the learning on any ramp-up is that should the readiness is there for the full ramp-up or not. As far as hot strip mill is concerned, we working on full ramp-up. And the plan is in such a manner that when we start, we start with the full capacity to the extent that metallics are available. So to the extent of that mismatch between the metallics availability and the capacity of the mill, obviously the mill capacity is much higher compared to the spare metallics that we have. And therefore we would be ramping it up in proportion to the metallics that we have available.

Arijit DUtta — Kotak Mutual Fund — Analyst

Well, my question was, last that made was from a different supplier, say, signings kind of thing, which we have avoided this time and that’s why we think that this time thigs are bit different.

Bimlendra Jha — Managing Director

What suppliers. I couldn’t understand your question.

Arijit DUtta — Kotak Mutual Fund — Analyst

Last time some supplier issues, some product quality issue which we have not procured from a better supplier kind of thing. Anything from that part which you would like to emphasize this time to have a better surety on the ramp-up.

Bimlendra Jha — Managing Director

You give me your assessment on SMS as a supplier as far as hot strip mill is concerned. We have gone to the best. You give me an assessment of Daniel Lee [Phonetic] as a supplier as far as the caster is concerned. You give me your assessment on Metso as a supplier as far as pellet plant is concerned. We have not gone to the people who do not know their job.

Arijit DUtta — Kotak Mutual Fund — Analyst

Understood. The second question is ore like a feedback that you’re getting from your sales team, particularly how the market is shaping up now, not a forward-looking statement but what is happening currently, especially as the coal prices are moving down, Indonesian coal strips are available at a cheaper price. The secondary DRI-based capacity is ramping-up. At the same point of time, there are liquidity issue. So what are your marketing guys are saying, is there a pressure on the prices and the inventory level is moving up in the system? Any color on that side.

Bimlendra Jha — Managing Director

Arijit, have you met a marketing, who ever says that prices I can get much more [Speech Overlap]

Arijit DUtta — Kotak Mutual Fund — Analyst

On the competition, sir.

Bimlendra Jha — Managing Director

Yeah, so there is definitely a bit of inventory in the system. If you look at all the major steel players inventory, there is inventory in the system. And that is something that we all need to recognize. There is — but elaborate answer I gave you earlier on the basis of the PMI, which is positive. So the outlook is positive. There may be a short-term issue of March inventory still not getting worked out o -the system or some players sitting on inventories and therefore taking a different kind of a pricing action. So those are things that keep happening in the market and it is almost an annual phenomenon. So you can take a call based on what collectively the players are thinking and deciding and this is a bit of a game theory. So let’s leave it at that. But as far as marketing team is concerned, it is far more important to look at procurement managers and mixes as a sign of confidence.

Arijit DUtta — Kotak Mutual Fund — Analyst

Understood. My velocity was bit more on the liquidity side and we are heading towards monsoon at the same point of time inventory is there, DRI players are ramping-up, so how things are shaping up.

Bimlendra Jha — Managing Director

I understand your question and I think we have given you that answers. So it is already 7 o’clock. We would like to take one last question, if at all. Otherwise, we would like to close the call.

Operator

Thank you very much, sir. We’ll take our last question from the line of Alok Deora from Motilal Oswal. Please go-ahead.

Alok Deora — Motilal Oswal — Analyst

Sir, good evening. Sir, just had a couple of questions. One is on the exports, we have seen a pretty decent jump from 5%, its now nearly 11% of the volume. But off late we are seeing the [Technical Issues] sharp correction in prices especially in Global market. So what kind of — so I’m not really asking a very specific number, but do you think the exports could kind of be subdued ahead in FY24, or specially in the first half?

Bimlendra Jha — Managing Director

For me, I have always maintained that export is done for two reasons. One is that we have existing customer relationships that have to be maintained. Now, unfortunately the Government of India decided otherwise at some point this time and those relationships were broken and peoples supply chains got shifted a bit. So there is an effort at reestablishing some of the good customers relationships as a matter of continuity.

The second reason for export when volumes really move in either direction. It is because of a demand-supply gap. Now last year — the last financial year, the consumption in India went up by 12%, whereas the production went up by 5% or 6%, now that tells you that even if people had Opportunities for export, they would have probably supplied in domestic market. Any serious player would have done that. So we do not see exports as the mainstay of our business. We want to maintain continuous but flexible presence in exports and we want to maintain the continuity with those with whom we are having fruitful long-term relationships. That’s our view on exports. Opportunistic exports can always be done, and sometimes just to relieve pressure on the domestic system we use exports as a pressure release valve.

Alok Deora — Motilal Oswal — Analyst

Sure sir, thanks for that elaborate answer. And also — so just coming back to one point on the depreciation side which is much higher on a Q-o-Q basis. You mentioned about that one impediment which you have taken. So going forward, this roughly INR600 crore a quarterly run-rate would kind of continue or any color on that — on the depreciation side, how much that could be going ahead.

Ramkumar Ramaswamy — Jindal Steel & Power Limited

INR600 crores that you’re referring to is our current ongoing run-rate based on what we have in our balance sheet. You would recognize that we are also embarking upon our capital expenses. And so some of these — as the program comes online, some of the asset start getting capitalized, the run-rate will of course change. But otherwise till such time, it is fair to assume that the current run-rate that you mentioned would reach what you see for the next few quarters.

Alok Deora — Motilal Oswal — Analyst

That’s all from my side. Thank you and all the best, sir.

Bimlendra Jha — Managing Director

Thank you.

Operator

Hank you. Ladies and gentlemen, that was the last question. I’d now like to hand the conference back over to Mr. Amit Murarka from Axis Capital for closing comments. Over to you, sir.

Amit Murarka — Axis Capital — Analyst

[Technical Issues]

Bimlendra Jha — Managing Director

Just to give you the closing comments on the subject. I think the world is not in a very stable state, but India is on a growth trajectory. So these are the two opposite forces and we need to be mindful of as we look at the steel industry, but we are quite bullish about the steel industry in India. We do believe that there is apart from small blips here or there, steel industry has a strong future. And it is good to back this industry. Also, we believe that right quarter for improvement from the perspective of demand. However, that demand may have been little subdued due to the pressure of March that we have seen so far or the inventories that may be with some of the players. So other than that, we do not have reasons to worry.

India’s growth trajectory also indicate that this year there is likelihood of — in this calendar year there is a likelihood of 8 million tons of demand at addition, which is also supposed to carry on in the next calendar year. So 16 million tons of demand coming within a period of less than 14 months — sorry, less than 18 months or so is what is expected. So we can we can all take our call based on some of these projects. These are all World Steel Association consensus projections, so we can rely on these. And based on all these numbers I think companies that are engaged in construction activity and also we are seeing better uptick in auto, in yellow goods, in white goods, I think there are a lot of positives to draw on the fundamentals and let’s stay positive as far as steel industry is concerned. Thank you very much for your time.

Operator

[Operator Closing Remarks]