Kirloskar Ferrous Industries Ltd (KIRLFER) Q3 FY23 Earnings Concall Transcript

Kirloskar Ferrous Industries Ltd (NSE:KIRLFER) Q3 FY23 Earnings Concall dated Feb. 08, 2023.

Corporate Participants:

R. V. Gumaste — Managing Director

Analysts:

Pallav Agarwal — Antique Stock Broking Limited — Analyst

Ashutosh Somani — JM Financial — Analyst

Aashav Patel — Molecule Ventures PMS — Analyst

Unidentified Participant — — Analyst

Sagar Parekh — One Up Financial Consultants — Analyst

Bharat Sheth — Quest Investment Advisors Private Limited — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Kirloskar Ferrous Industries Limited Q3 FY’23 Results Call, hosted by Antique Stock Broking Limited. [Operator Instructions].

I now hand the conference over to Mr. Pallav Agarwal from Antique Stock Broking. Thank you. Over to you, sir.

Pallav Agarwal — Antique Stock Broking Limited — Analyst

Yeah. Yes. Thank you, Gordon and a very warm welcome to all of you to the third quarter FY Kirloskar Ferrous Industries. We are joined today by the senior management team consisting of Mr. R. V. Gumaste, Managing Director and Mr. R. S. Srivatsan, Executive Director, Finance and the CFO.

So, I would now like to hand over the call to Mr. Gumaste for his opening comments. Over to you, sir.

R. V. Gumaste — Managing Director

Yeah. Thank you very much. Good evening to all who have joined this call, the quarter three result call of Kirloskar Ferrous Industries Limited. Let me start with be quantitative detail. For the quarter, we had a very good, both in Pig Iron and Foundry, though the external market conditions were little subdued, little to pressure on the market demand in certain segments, but we could still maintain our growth. For the Pig Iron, we could produce 1,50,000-plus Pig Iron and which is growth of 5.3% towards the last year third quarter. And to Casting, we also reduced 35,501 compared to last year’s 31,000 plus, a growth of about 14%. And Pig Iron sale, we could sell 1,39,000 which is growth of 7.9%, and on the Casting, the casting sales is 32,522 slide 22, which is a growth of 13.2%. Compared to the last quarter, you will find some dip in the sales of castings, which is, one of the reasons being product mix difference. We had more Auto sales rather than tractor. Tractor castings are typically heavy in nature and move to the tonnage. So compared to that, you will find some small drop in the sales, coming out from the reduced demand from the tractor industry.

On the sales front, we have sale of — total sales of INR1075 crores against INR933 crores, so a growth of 15.2%, and out of this, 631 tons coming from Pig Iron and 417 tons from Casting. Almost 25% growth in case of Casting over the last year, but compared to quarter two, there is small drop in it. Whereas, the sales realization for Pig Iron has dropped from INR50,000 to INR45,000, a drop of almost 10% has to be there. Sales realization has also dropped from INR1,31,000 to INR1,28,000, which is INR3 per kg, which is about 2.32%. Reduced or lesser drop is because of the product mix. We produced more of Auto components compared to the tractor components. So, typically the pricing also better in Auto, more complicated, much thinner casting, so we could improve on the realization. We have, during the quarter, given the rice reduction to the casting customers, which was in-line with the the raw-material reduction mechanism. So, after that also, the drop-in the casting price realization is down by 2.32%, INR3 per kg against figure, which is almost 10%.

Coming to overall company level, we had implemented the RNSP [Phonetic], which is slightly improved because of the reduced pressure of commodity pricing. We have done well on employee-related expenses as a percentage of sales. And overall, if you look at compared to the last quarters, last year, third quarter we have improved on the EBITDA. It stands at 17.1% now, against last year’s 14.7%. PBT stands at INR138 crores. INR138.5 crores, against last year’s INR110 crores, an improvement of 25%. And PAT at INR103 crores against INR81 crores, which is an improvement of 26.5%. Return on capital continues to be good. Receivables under control. Number of base wise almost similar to earlier quarters. Inventories under control. Sales to gross current assets under control, and overall debt at INR838 crores, about INR500 crores more than last year, which is basically because of the investments and also acquisition of Indian Seamless Metal Tubes or ISMT which is now part of our Group and you have earlier seen the results of ISMT, which are very encouraging. Have we improved in all aspects of the business in terms of cost, sales, realizations, sales turnover and we could achieve the turnaround in ISMT and could bring the company into profit compared to the earlier, last year’s scenario. Major improvement in ISMT. ISMT is no more a burden. Rather, it is bringing in the good revenue and also profitability.

And with these comments, it is better I open it up for the question-answer, so that I can answer more queries, rather than continuing with more explanation. Just before I conclude, let me cover in short, the progress on our major projects. We are continuing with all the projects as per schedule. We have come to commissioning stage for the Coke oven and power plant Phase-II at Koppal, and we have already started pushing the coke from the new batteries and by the end of this year, all the batteries will be operational and our coke production capacity will go to 4 lakh metric ton per annum. We have started getting some production already, but it will become fully operational by end of March. And by that time, we’ll also commission the power plant, which generally take some more time to heat up and take the commissioning trials, and right now, we are in that process. Expect by end-of-the year, even power plant will be operational.

As regards, as we have earlier updated, we have already completed the upgrading of Blast Furnace II, which is working very well, because we did not only upgrading, increasing the size to 300 metric cube, and also installed the [Indecipherable] on top of the blast furnace. With all these upgrades, Blast Furnace II have given intended results, that means we have started producing more than 20,000 tons of liquid metal from Blast Furnace II at reduced coke consumption level. So, the Furnace II upgrade has gone on schedule as per expected lines of returns.

And Solapur Line II or Foundry is ready for commercial production. In the last month, we did the try pouring. The trial pouring and trial production for submission of casting samples, for verification of the product by the customers is going on. By the end of this year, the commercial production from line II will start and we look forward that Line II Solapur will contribute for the continued growth in casting production and sales of KFIL.

And with regard to Pulverized Coal Injection, both in MBF-I and MBF-II at Koppal, the project has been kickstarted and we expect by quarter three/ quarter four, the pulverized coal injection and oxygen enrichment would be ready for use in both the blast furnaces. We also continue to take up further improvement programs at Hiriyur and currently, we are working out technological upgradation and possibility of furnace upgradation, including, upgradation of the stoves [Phonetic] to completely get the benefit of, both, scale and cost savings, what has been done in Koppal Blast Furnace-I and II to be achieved in Hiriyur as well. And we will be in a position to give more details as we take up the projects. And with respect to all the debottlenecking projects and facility improvement projects, both, in Pig Iron and Foundry, they are going as per schedule and they should help us in increasing the production from Line I, Line-II and Line-III of Foundry. All the three Foundry lines currently are producing — till date, they have produced the highest in the history of their life.

So with this, I will now request to open the question-and-answer, so that any queries, I can address them. Thank you very much.

Questions and Answers:

Operator

Thank you. We will now begin with the question-and-answer session.[Operator Instructions]. The first question is from the line of Ashutosh Somani from JM Financial. Please go ahead.

Ashutosh Somani — JM Financial — Analyst

Thanks for taking my question, sir. Congratulations on a good set of numbers. Sir, going into 4Q, what is the kind of the demand that you are looking at from customers, both from the Auto and from the tractor side? If you could give us some color there, and what it does to our realization and margins for the fourth quarter, starting January? Thanks.

R. V. Gumaste — Managing Director

Yeah. Thank you very much, Ashutosh. The demand continues to be quite strong, both for Pig Iron as well as Foundry. As you know in between, Government of India had imposed export tax on Pig Iron to the extent of 15% value, which had put complete stoppage to export of Pig Iron out of India. But now, that has been withdrawn and the export of Pig Iron from India has once again started. That definitely will ease out the situation and at the same time, demand-supply is quite balanced and stable pricing on Pig Iron and the demand to continue.

On the Casting front, our deemed export business as well as Auto business, especially, the commercial vehicles are doing well. Customers need more than most products out of Kirloskar Ferrous Industries Limited and we are stretching ourselves to ensure that we increase the output and sales. I expect that demand to continue. Hopefully, even tractor demand should pick-up from February and March for the season, tractor season. So, I definitely look forward to continued strong demand for our products.

Ashutosh Somani — JM Financial — Analyst

And sir, what it does to our margins? If you could give us some sense on how the costs are escalating with the rising coal prices?

R. V. Gumaste — Managing Director

Right now, one is coking coal prices, which have shown substantial increase for the last four weeks or one month. But I think it has become part of the game plan and it has right now pressure on the Pig Iron costing. Let us — I’m hopeful that we should be able to pass on the cost effect to the customer. But right now, I don’t see immediate price increase opportunities, but we keep our fingers crossed, that maybe we have a chance to pass it on. I would say that the margins right now are more balanced. I don’t see any serious threats on the downside, and I also don’t see any big opportunity on the upside.

Ashutosh Somani — JM Financial — Analyst

Thank you for the detailed answer, sir. Thanks.

Operator

Thank you. The next question is from the line of Aashav Patel from Molecule Ventures PMS. Please go ahead.

Aashav Patel — Molecule Ventures PMS — Analyst

Sir, congratulations on excellent set of numbers. My question is regarding the expected plant stoppages at Koppal and Hiriyur. So, can you please give expected timeline of the same, as in which quarter we would be seeing volume losses on account of those expected stoppages?

R. V. Gumaste — Managing Director

On shutdowns?

Aashav Patel — Molecule Ventures PMS — Analyst

Yes, sir.

R. V. Gumaste — Managing Director

Yeah. Yeah, yeah. Thank you very much. I think that I should have covered this point. I think I missed that. See, we are taking up, realizing shutdown for Hiriyur which is middle of February to end of March. So around 40 days stoppage and we have some Pig Iron stock to take care, but we have Blast Furnace I and II producing very robust quantity. I think we will be able to take care of our customer requirements and not have major issue with respect to customer supply position. But with respect to sales, it will be, March maybe down. I don’t see big effect coming to the bottom line, but marginal effect will come. And we have also planned Blast Furnace-I stoppage for close to 90 days in quarter one of coming year and that’s a big one, but that becomes the part of 2023-24 plans. 2023-24, so as of now, we plan to produce more Pig Iron, more hot material compared to this year, and we expect to achieve substantial growth in spite of 90 days stoppage and that remains intact, though, there would be a small downward production in quarter one.

Aashav Patel — Molecule Ventures PMS — Analyst

Sure.

R. V. Gumaste — Managing Director

That completes all the shutdowns and after that we have planned to keep all the blast furnaces to completely full operations till the end-of-the year.

Aashav Patel — Molecule Ventures PMS — Analyst

Sure. So sir, despite this planned shutdown, our annual target of 5 lakh MTPA and next year 5.5 lakh MTPA to 6 lakh MTPA remains intact. That is correct understanding?

R. V. Gumaste — Managing Director

I think we should be able to produce and sell close to or production of very close to 6 lakh tons. So still working more details, but very close to 6 lakh tons is what we plan to produce. That has been our plan, as you know it.

Aashav Patel — Molecule Ventures PMS — Analyst

Sure. Sure. And sir, next question is that in this quarter, the blended coking coal cost has reduced from $352 to $250. So roughly 30% lower-cost, but realizations led only by, fell only by 10% from INR50,000 to INR45,000 as you rightly mentioned. So we saw EBITDA increase and operating margin increase. But now, as you mentioned, coking coal is back to close to three $370 and iron-ore is also at annual high at around INR6,000 metric ton. So but Pig Iron prices have not increased on those lines. Have only marginally increased from INR45,000 to INR48,000. So, how do you see Q4 profitability vis-a-vis Q3 profitability?

R. V. Gumaste — Managing Director

Typically, as you know, a sudden impact won’t come with today’s coking coal price increase because we typically work with three months inventory in hand. So, it also gives us an opportunity to gradually increase the coking coal prices. By that time, if they come down, we can average it out, as well as if it is possible to also reduced further. But what I see is, that one-side, these are the the kind of market pressures. On the other side, we have been very strongly planning and executing projects which are essential. As I tell you that by the end of this quarter, we are commissioning Coke oven Phase-II and power plant. It’s going to bring us some benefit. We will feed the coke directly by belt conveyor to the furnaces. Will have reduced time. Will have reduced consumption. We will generate more power. We will consume, as well as we will export and sell power. So we are also looking-forward to increased casting production and sales. So there’s going to be mixed basket. It’s part of the mix AOP plan, annual operating plan, and we will definitely look forward for better next year than this year.

Aashav Patel — Molecule Ventures PMS — Analyst

Sure. Sure. Got it, sir. And then sir, one question regarding our mines. So forest, as per the forest clearance website, looks like we are on the verge of getting clearance at our Reddy mine, but there is no status change of our Bharat mine since 2020. So close to two years now. So can you explain what are the compliance issues, if any, faced by the Bharat mine?

R. V. Gumaste — Managing Director

No. I think there are number of steps in getting the clearance. For example, we are supposed to give some compensatory land for using these forest area. So then, it has to be registered to forest department, but after that, the forest department have to declare it as reserved forest within the government. So these are the steps. They need some approvals. Senior Government leadership approval. They take time and that’s how we are learning that every month, every quarter, there is a progress, but the number of steps are not linked.

Aashav Patel — Molecule Ventures PMS — Analyst

But can we expect Reddy mine’s approval at least in FY’24?

R. V. Gumaste — Managing Director

Yeah. That is one year where my commitments have repeatedly failed. So…

Aashav Patel — Molecule Ventures PMS — Analyst

Sure. Sure.

R. V. Gumaste — Managing Director

So, this positions is not much in our hand and lot in the government machinery and approval. So we are putting our efforts to do are everything possible to progress, but we are still not able to start the mines. We are quite hopeful that we will finish the remaining steps and mines will be operational. There is no major issue or hurdle, but there are still some more steps.

Aashav Patel — Molecule Ventures PMS — Analyst

Sure.

R. V. Gumaste — Managing Director

I am hopeful, government is also trying to help us, but within government also there are lot of departments and they have procedures and it is taking more time. So, hopefully it will get completed, both the mine become operational shortly.

Aashav Patel — Molecule Ventures PMS — Analyst

Sure, sir. Got it. My last question, I’ll come back then again in the queue. After the commissioning of Phase-II power plant, which we expect in this quarter itself, is there any — is there enough captive power demand at our Koppal plant to use it at the optimal level or it would be used towards the optimal utilization only after once we shift our for furnace to steel?

R. V. Gumaste — Managing Director

You are perfectly right. We have some more power consumption opportunities, some more requirement which right now we are taking from the grid, which is not full 20 MW or 17 MW. Some power will be surplus for some time, next two, three years, mostly or maybe one or two years, which we will been export to the grid and sell it or consume in our lines in Maharashtra. So it is not very optimal. So we get less benefit. As steel plant comes, then once again, we will start consuming full generation and will be continuing to consume the grid power. So this little bit up and down will happen over the next two, three years. You are right. Everything won’t be consumed when we commission.

Aashav Patel — Molecule Ventures PMS — Analyst

Okay, sir. Got it. Thank you. Thank you for all the detailed answers. I’ll come back in the queue.

R. V. Gumaste — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Preet Jain from Finacle. Please go ahead. Preet Jain, line for you has been unmuted. Please check if your line has been muted from your end.

Unidentified Participant — — Analyst

My question has been answered, sir.

R. V. Gumaste — Managing Director

Okay, Preet. Thank you very much.

Operator

Thank you. The next question is from the line of V. Rangan, an Individual Investor. Please go ahead.

Unidentified Participant — — Analyst

Good evening, sir. Excellent numbers. And regarding the price reduction you are giving to the customers, it is on the basis of three months average or six months average? How is that and what are the items, major items, which you give price reduction? Would like to know that.

And as I can see that, the lower the turnover, the profitability is more. And what the reason and what are the reasons for this current year? This quarter is good, but, I would like to know what will be backward integration going? Regarding the power, it will be, there is no point in giving to the government and getting money. It’s a very difficult process and whatever the expansion you are making, at least for the next two years, at least after that, it should be fully be used by us actually, and what is the total megawatt you have got?

And regarding the ISMT, whatever you had planned, it is going on as per schedule, as per the internal, I mean projections. It is going on well. I would like to know that. Thanks.

R. V. Gumaste — Managing Director

Yeah. With respect to power, as I’ve mentioned already, but we will be giving it to the government. We have the necessary permission to sell the power at IEX. So we don’t depend. We get advanced payment for whatever the power we send. Still, it won’t be as efficient as consuming ourselves. That is the only difference. And we also have the plan of making steel in MOSFET, after that we will fully consume ourselves. With respect to ISMT, we have been doing very well. We have turned around the company very quickly. We have improved the sales realizations. We have improved the production, productivity and sales. We have achieved the cost reductions and that we are ahead of our own projection.

Unidentified Participant — — Analyst

By which time you will be coming out, in the sense, ISMT will come within another at least two years, it will take? I mean conservatively this is. It will come out of the…

R. V. Gumaste — Managing Director

For what?

Unidentified Participant — — Analyst

ISMT.

R. V. Gumaste — Managing Director

Yeah, ISMT, coming up, see — okay, Similar productivity and profitability like KFIL, if we are looking for that, the major challenge is the power and fuel cost. We are still at 15%, and we have to come to a level of 5%, 6% and I think that will take about two to three years and we are going green there. We will have more than more solar to support the power requirement of ISMT. We will be doing lot of energy audits conservation to cut-down the power consumption. So both will take about two, three years. And then we can expect ISMT to be as competitive as any other competitor in line with ISMT.

Unidentified Participant — — Analyst

The cost-reduction, what you’re are giving to the customers, you have not answered that point. See, what are the major items you give that?

R. V. Gumaste — Managing Director

Yeah. Yeah. See, in case of the prices increase, we call it the price escalation clause. It’s not exactly the same targeted customers. If there are more elements considered for the price increase, then more elements will be considered price reduction. If there are less elements considered for price increase, same will be less number for the….But typically, all the important elements are considered for the price escalation. It’s like Pig Iron, steel scrap, Ferro alloys, power, fuel and resins. Like that many customers, we have about 15, 16 elements which go into price increase, decrease, mechanism.

Unidentified Participant — — Analyst

What would be the current capital gross block will be increasing likelihood and what would be the next two years. Can you just give me that? Any that we have conservatively. Next…

R. V. Gumaste — Managing Director

No, I think within the acquisition investment, basically, last year it was ISMT and year before that was [Indecipherable]. And so leaving those, I think the last two years we have been investing at the rate of about INR400 crores. And with ISMT coming in and also increased and expanded business, I expect projects to increase and our cash flows will support us for a stronger expansion. We are ready to come with more specifics as we move ahead in the next quarter. I will be in a better position to tell you which projects we are going to take up and I don’t expect that the projects will come down. So we still have lot of ideas and we want to continue with our growth story and we will have good quality projects which have been short payback periods to come into KFIL’s program and we will update you as and when we are ready to update. Thank you very much, Mr. Rangan.

Unidentified Participant — — Analyst

Thanks, sir. Thanks. Thanks.

Operator

Thank you. The next question…

R. V. Gumaste — Managing Director

Thank you.

Operator

Sorry. Thank you. The next question is from the line of Sagar Parekh from One Up Financial Consultants. Please go ahead.

Sagar Parekh — One Up Financial Consultants — Analyst

Yeah. Thank you and congratulations for good set of numbers. So, just first question was on the capex only actually. So, you partly answered it, but just wanted to get some sense. So, next year’s capex would be more than INR400 crores is what you’re saying?

R. V. Gumaste — Managing Director

Yes. Yes. You are right.

Sagar Parekh — One Up Financial Consultants — Analyst

And this INR400 crores would be including, this is only KFIL standalone or it’s including ISMT as well, because ISMT I believe the solar plant itself will be taking up a lot of capex, right?

R. V. Gumaste — Managing Director

Yeah. Solar, we have already ordered and that is very important for project. In addition to that, we will have capex, both in KFIL and ISMT separately, till we merge.

Sagar Parekh — One Up Financial Consultants — Analyst

So both put —- so INR400 crores would be KFIL standalone, if I understood correctly and then…

R. V. Gumaste — Managing Director

No, INR400 crores per year has been the capex for last two years, means this year and last year. But I expect capex to go up. I don’t have full ready because we are still working on the annual operating plan and long-range plan. Once I am ready, I will definitely. Maybe in next quarter call, I should be in a much better position to tell you, how much we are likely to invest in coming two years.

Sagar Parekh — One Up Financial Consultants — Analyst

That is fair enough.

R. V. Gumaste — Managing Director

But my assessment is that it would be higher than INR400 crores, because we have very good projects which are low payback, grid projects and which help us in progressing well on our journey of growth.

Sagar Parekh — One Up Financial Consultants — Analyst

Sure. Understood. So basically then, if, I have to look at your debt number, will it start like probably coming down, so that the cash flows of the business will be calibrated, like the capex will be calibrated based on the cash flows or you think that overall debt should inch up from here?

R. V. Gumaste — Managing Director

No., all our borrowings have been very short-term in nature. Two years, three years, not exceeding four years, because all our cash flow indicate very strong cash flow. So, then that helps quickly. But if we can make cross like acquisition opportunity like ISMT, if we come across good projects, for example the power, the solar power project and the ISMT are very attractive, very, very attractive self-consumption. What is a disadvantage in having high cost of power in Maharashtra becomes advantage, if we are setting up our own solar power plant. So we are looking at these opportunities and we are low leverage. We will continue to be low leverage. I think our cash flows will continue to support us in remaining at lower leverage.

Sagar Parekh — One Up Financial Consultants — Analyst

Got it.

R. V. Gumaste — Managing Director

But if there are good projects, we can always take the opportunity to increase capex.

Sagar Parekh — One Up Financial Consultants — Analyst

Sure. My second question is on the Casting’s volume. So, nine-month is about 98,000 tons, 99,000 tons. We are doing about 30,000 tons, 32,000 tons per quarter. So basically we are looking at ending FY’23 at around 1.3, 1.35 broadly. Next year, can we — I mean, can we assume about 15% to 20% kind of growth given that the line, I mean, second line in Solapur will also be operational or you think the growth would be higher?

R. V. Gumaste — Managing Director

No. I think we will attempt to achieve anywhere between 15% to 20%. As we mentioned, we have a new line. One of the goal is, how we can load the lines faster and quicker, but typically you can take that my experience of casting production and announcement shows some more like 15% growth year-on year than what we expect higher. I think I would bet more on achieving 15% for volume growth, which actually is good thing think and if it goes well, we have to keep maintaining the quality performance table. [Indecipherable] from that is very, very key customer requirement.

Sagar Parekh — One Up Financial Consultants — Analyst

Sure. Got it. That’s it from my side and all the best.

R. V. Gumaste — Managing Director

Thank you very much, Mr. Parekh.

Operator

Thank you. The next question is from the line of Bharat Sheth from Quest Investment Advisors Private Limited. Please go ahead.

Bharat Sheth — Quest Investment Advisors Private Limited — Analyst

Hi, congratulation, Mr. Gumaste and team for stellar performance in challenging time. Sir, I have three, four questions. First is on, what is our net-debt in both Kirloskar Ferrous as well as ISMT? And consolidated also? And what is the cost of borrowing? That is first.

Sir, second, Now, if we look at, I mean, the Solapur Foundry plant, so our different customer different than existing customer or we are targeting some more high-value added?

And third on the Casting only. Sir, you were discussing going for a heavy casting 10,000 ton plant. So what is status of that?

R. V. Gumaste — Managing Director

Okay. Okay. Okay. Yeah, let me and answer your first question. As far as the debt is concerned, total debt around INR800 crores, around that. Mainly in KFIL and all the debt in ISMT is basically working capital arranges and not any term-loan. And if at all we have to take, that would be for the solar power plant investment and as you also know that we could the high-walk the unused power plant. We have cash-flow coming out of that. helping improved cash-flow. ISMT’s cash flows are quite good, stable, without any term loan and they have also paid their loan completely, INR194 crores, plus to interest. So definitely got working, is well worked there and no major debt as such there and there was consolidated, as well as KFIL remains the same. I think this is my understanding. If I’m not right, my CFO can correct me.

And coming to the customer-base, all the casting customers are handled centrally, all the inquiries are handled centrally, based on the kind of casting, where and how well it sits. The casting and the and customer goes into one of the three line, now four line, and we are adding customers regularly. last year also in this nine months, we have added two customers and one happens to be for the new line. But I can very safely that, more customers have interest. We are adding customers and we are also adding the existing customers new casting, as customers have interest to develop new parts and [Technical Issues] and from the existing customers, the existing casting. So, many folds, three-folds opportunities to increase and that’s why we feel confident we can continue to grow volumetrically, 15% growth on castings.

As far as the two-part Foundry is concerned, we have made small arrangement of producing up to 100 tons, castings per month. We are just producing 10 tons, 15 tons, 20 tons out of that. Actual new foundry, we are taking up now and should be ready in about 12 to 15 months forward and that would be for producing up to, say, 1,000 tons per month. It’s fairly large casting, fairly large foundry and it’s two-part foundry and for very big castings and we expect that to become operational about a year from now.

Bharat Sheth — Quest Investment Advisors Private Limited — Analyst

Okay.

R. V. Gumaste — Managing Director

I hope I answered all your questions.

Bharat Sheth — Quest Investment Advisors Private Limited — Analyst

Yeah, largely because I don’t want to take much time. Second sir, whatever, I mean this cost-improvement in efficiency side we have taken in the Hospet about Coal pulverization, as well as these Coke oven II plant because third-party processing will come down. So how much in absolute we expect, as well as selling off the power to either through exchange or grid, whatever we do decide, can add to the, I mean, our overall cost-saving in absolute term?

And second, once in FY’24 and then going ahead with ’25 because there also we are taking up lot of cost improvement project in Hiriyur. So how much total saving that in FY’24 as well as ’25 do we expect? Absolute? Factoring all the price remain at current levels.

R. V. Gumaste — Managing Director

Yeah. Markets and commodity prices are not static. They are quite dynamic, so don’t hold me for the absolute figures. cabinet. I don’t have meeting done through.

Bharat Sheth — Quest Investment Advisors Private Limited — Analyst

But my question is, all these remain at current level prices.

R. V. Gumaste — Managing Director

Yeah. Unfortunately, it will not remain at current level, but, I will just explain. Our immediate project which is getting commissioned, Coke Oven Phase II, we expect that even we are investing close to INR280 crores on that, and we expect that even Coke oven Phase II would be less than three years, about three years to get the project. And Pulverized Coal Injection, which will some after of nine months, would be, on going well, it’s like one year, one and a half year payback project. And we are investing close to INR90 crores or you can say INR100 crores on that project, including oxygen plant. And Hiriyur, as we see, we are envisaging, tall put together close to, for the furnace upgrade, 300 meter cube and also, stove upgrade to achieve 1250 degree centigrade, instead of 800 degree centigrade, 900 degree centigrade. Same on coke consumption. It also has been opportunity of one and a half to full-year payback opportunities on about INR100 crores of investment. So, very attractive in terms of payback and hence, urgency to do them as quickly as possible.

Bharat Sheth — Quest Investment Advisors Private Limited — Analyst

Yes, sir. Now coming back to ISMT, how do we see now with solar plant commissioning and say H2, so cost-saving and as well as I mean with the, there is a good demand from oil industry, which is a very high price product and high profitability. So how do we see is the we have done wonderful work in all these nine months for ISMT, but going ahead, how much improvement then further can we expect, as well as increase in the volume also?

R. V. Gumaste — Managing Director

We are still working on that. One is definite that. We have grown faster than our own plans and destination. In terms of turnaround and normalizing the operations, we have lot of work to do there. But, I would like to just mention here that, from the business of Casting and Pig Iron, we are now adding alloy steel and seamless tubes our main business interests and main business vertical.

Bharat Sheth — Quest Investment Advisors Private Limited — Analyst

Correct.

R. V. Gumaste — Managing Director

And I see, I personally see higher opportunities in alloy steel and seamless tube, growth opportunities and the value addition opportunities over the next few years. We’ll give you even more taking the opportunities in Pig Iron and Casting. So, we are quite optimistic that we will succeed in creating a good business model, good value opportunities. As you know, with alloy steel, we are very strong with our OEMs, in our commitment to performance, in our commitment to create value for our customers and our products in the steel and seamless tubes would be like by our customers and our share of businesses should go up and we should be able to add more customers. It’s a very interesting field and we are definitely going to see. We will pursue that line to give, once again, a great experience to our customers in those sectors.

Bharat Sheth — Quest Investment Advisors Private Limited — Analyst

And last question sir, on alloy steel, what I understand bearing people are largely. [Ends Abruptly]