NMDC Limited (NMDC) Q3 FY22 Earnings Concall Transcript

NMDC Limited  (NSE: NMDC) Q3 FY22 Earnings Concall Feb. 09, 2022,

Corporate Participants:

Amitava Mukherjee — Director of Finance & Director

Shri Somnath Nandi — Director

Sumit Deb — Managing Director & Chairman of the Board

Analysts:

Abhijit Mitra — ICICI Securities — Analyst

Rahul Jain — Systematix — Analyst

Pinakin — JPMorgan — Analyst

Prashanth Kumar — Dolat Capital — Analyst

Vishal Chandak — Motilal Oswal Financial Services — Analyst

Rahul Jain — Systematix Shares — Analyst

Ashish Gautam — an investor — Analyst

Saket Kapoor — Kapoor Company — Analyst

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

Prasenjit Bhattacharya — IHS Markit — Analyst

Sumangal Nevatia — Kotak Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to NMDC Q3 FY ’22 Earnings Conference Call, hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhijit Mitra from ICICI Securities. Thank you, and over to you, sir.

Abhijit Mitra — ICICI Securities — Analyst

Yes. Thanks, operator, and good afternoon — good evening to all the participants who are joining in here to discuss the Q3 FY ’22 results conference call of NMDC. We have, from the management, with us Mr. Amitava Mukherjee, Director of Finance; and Mr. Somnath Nandi, Director Technical to take us through the results and take questions after that. So over to you, Mr. Mukherjee, for your opening remarks.

Amitava Mukherjee — Director of Finance & Director

Good afternoon, everybody. So it’s been a pleasure to present another set of very encouraging numbers for this quarter. For the nine months ended 31st December, we have broken all records for the last 60 years, be it our production, our sales, especially the revenue from operations, which has grown by more than 125% as compared to last year, and all the other parameters like profit before tax and profit after tax. Even on a three-month — stand-alone three-month basis for the last — for the quarter alone, our sales have grown by 35%, as you are aware. And because of the 22.5% additional royalty, of course, the profitability could not show equivalent growth. The company is poised to make the highest ever production in its history. And we are going to build on this, and in the coming years, the production is likely to go up very substantially. On the other front, the steel plant is on the verge of commissioning. The commissioning process has been kickstarted with the heating of the coke oven battery, which is the first. And it is a nonreversible process now, so it’s a one-way street. And we are on the path of commissioning the steel plant. The demerger of the steel plant is also on schedule and the proposal has been filed with the MCA after obtaining the clearance of SEBI and the stock exchanges. So, all in all, we are working on the path of our targets, and we expect that this entire fiscal year would be the best ever for NMDC. And in the coming years, we will be building further on the momentum that has been gained over the last 12 months. So with that, I would like to open the floor for questioning. Thank you.

Questions and Answers:

Operator

Ladies and gentlemen we will now begin for the question-and-answer session [Operator Instructions] The first question is from the line of Rahul Jain from Systematix. Please go ahead.

Rahul Jain — Systematix — Analyst

Yes. Good evening, sir. Rahul, here. So just wanted to check on the timelines. Now you said that your commissioning has started. So when can we see actual production coming in? And on the demerger, you said you have filed with SEBI and things like that. So when should we expect the actual listing or when will you come to know that we are now ready for listing? And I think both these things are parallel events, right? So how should we see — when do these things happen?

Amitava Mukherjee — Director of Finance & Director

I’ll talk about the demerger, and I’ll ask — I’ll request Mr. Nandi, who is the Director in charge of the steel plan to speak about the commissioning. So first, regarding the demerger, as you know, there is a well laid out process, and the major milestones of obtaining clearances from the stock exchange and the SEBI for — the draft scheme has already been obtained. And along with the Rx of acquisitive extent there it has been filed with MCA. Now we have requested for waiver of creditors meeting.

So if that request is acceded, so I think somewhere around late March or early May or maybe end of April, we’ll be able to complete the procedure. If, of course, the MCA directs us that no, we should hold the creditors meeting. And as you know, we have very less creditors, almost only 2. So we have only two instruments. So if MCA were not to exempt us then the procedure will extend by one month, 1.5 months because we’ll have to give at least a 21-day notice for the creditors meeting, then have a creditors meeting then get it filed all over again. So that will extend the process by about two months. Regarding the commissioning schedule, I would request Mr. Nandi to give you the details. Over to you, Mr. Nandi.

Shri Somnath Nandi — Director

Yes. Are you getting my voice?

Rahul Jain — Systematix — Analyst

Yes, yes, we can hear you.

Shri Somnath Nandi — Director

We have started the coke oven heating process, and we are expecting production from coke oven maybe in the end of March or beginning of April. So after that, the production of the iron and steel, whatever finish, it’s maybe middle of this month — middle of this next financial — sorry, next year, next calendar year.

Amitava Mukherjee — Director of Finance & Director

That is around July, I understood.

Shri Somnath Nandi — Director

Correct.

Amitava Mukherjee — Director of Finance & Director

Because of the process, after the coke oven, the next will be Sinter Plant and then the blast furnace, then the SMS, and then the finally Mill. So

Rahul Jain — Systematix — Analyst

What’s that? Yes, so, I think, July, you said, right? July, right? Hello

Amitava Mukherjee — Director of Finance & Director

Yes.

Rahul Jain — Systematix — Analyst

So you said July, we should commission the steel plant. Is that right?

Amitava Mukherjee — Director of Finance & Director

No, we will roll out the finished product expected in July. But if you see the blast furnace, we’ll be making the hot metal earlier than that.

Shri Somnath Nandi — Director

May or June

Amitava Mukherjee — Director of Finance & Director

Three months and then one month of stop.

Rahul Jain — Systematix — Analyst

Right, right. And sir, on the disinvestment, so this will happen finally or once only after you are commissioned with the government? Or you — it is a government prerogative. Any idea you have on that?

Amitava Mukherjee — Director of Finance & Director

Investment is being run by DIPAM. So it will not be proper for me to comment on the time line because that is the government prerogative, which is being run by government ministry. And I’m not privy to the exact details of transactions. So I will not be in a position to comment.

Shri Somnath Nandi — Director

But that will run independently along with the [Indecipherable].

Rahul Jain — Systematix — Analyst

Right. Right. And sir, can you give some sense on volumes? What kind of internal plans do we have for, say, FY ’23 and ’24? I mean, you had a great year. And so picking up from a high base, where do you see growth coming on from next?

Amitava Mukherjee — Director of Finance & Director

You see, we are planning at least 47 to 50 in the next financial year. This year, we could end around, I think, 44, 45.

Rahul Jain — Systematix — Analyst

44, okay. I was thinking more like 41, 42, right, no? 44, you said, yes.

Amitava Mukherjee — Director of Finance & Director

Around — if things go well, we can end up — anything between 43 to 45.

Rahul Jain — Systematix — Analyst

Right. And sir, next year, where do you see growth coming from? Mostly from Chhattisgarh because Karnataka, I think, you have already exhausted, right?

Amitava Mukherjee — Director of Finance & Director

We have a 2.5 million tonne upgradation in the plants in Bacheli. That is going to come up. So that will mostly commissioned from around mid-next year. It’s a 2.5 million tonne fifth line in Bacheli steeling plant, along with the upgradation of downhill conveyor. And then we have applied for EC for 10 million tonne at Kumaraswamy. If the approvals come in, some growth would be seen there also. So we expect on FY ’23, ’24, in fact, around 50-plus — 50 to 50-plus.

Rahul Jain — Systematix — Analyst

Right, right. And sir, lastly, sir, on your pricing, still it is looking a bit with a lot of lag in terms of how the international prices are doing and how we — because we have just hardly taken a INR350 price increase. Whereas we have seen almost a 30% price increase in the ex-China prices. So why are we seeing so much of a disconnect between the domestic and the international price? Because I was thinking that with the cost for us also going up, we would be more proactive in raising prices.

Amitava Mukherjee — Director of Finance & Director

See, I have been always explaining this in all my investor calls that international prices and domestic prices are not linked. Domestic prices have always worked at anything between 30% to 60% discount to the international prices, simply because export is not a viable option for high-grade ore because it has a 30% export duty. As a result, the Indian market is fairly isolated when the international prices are roughly high. So naturally, there is no direct bearing. It does — it is one of the pricing parameters. But it is not an — it does not have a direct bearing on the domestic prices. Domestic prices always are, in the East Coast, somewhere around 40% to 50% discount of international prices. In the West, it has been around 20% to 30% historically also. And so — but now things have been looking up. For the last one month, we have been able to take a price hike.

And we are keeping a very close watch on the domestic parameters. There are several parameters that we take into account, be it the finished steel prices, the — how the pellets are behaving and what is the domestic production, the demand-supply position. So there’s a multitude of variables that go into pricing. International prices is only one of them and a marginal one at that. So we are keeping a close watch on the market regularly, and we’ll take a call as, and when it is feasible for us to do so. Even we are obviously keen that the revenues that is possible to generate from the market should be generated. But we cannot speculate on the pricing as of now.

Operator

Thank you. [Operator Instructions] The next question is from the line of Pinakin from JPMorgan.

Pinakin — JPMorgan — Analyst

First of all, apologies, sir, if you have already answered this question. I joined the call 10 minutes late. Sir, can you give us an update on the steel plant demerger and the scheme of arrangement, has it been filed? Where is it? What is the status on the approval process?

Amitava Mukherjee — Director of Finance & Director

I mentioned in the previous question, somebody asked that. The approvals from SEBI and stock exchanges have been obtained. And along with the election it has been filed with the Ministry of Corporate Affairs with the request to waive off the meeting for creditors. If that meeting is waived off by MCA, then we should be able to complete the process of demerger from around end of March or end of April. If, however, the MCA directs we should nonetheless hold a creditors meeting, then what will happen is that it — the entire process will get further delayed by anything between a month or two because it will take 21 days to at least convene a meeting of creditors. Any other question on this?

Pinakin — JPMorgan — Analyst

Yes, sir. And just one more question, a follow-up, sir. Given that you have filed the demerger scheme document, is it publicly — can we understand what is the level of debt that has been transferred and whether NMDC, will there be — NMDC, the existing company, will there be any investments that it will own in terms of intercompany loan to the new steel company? Or how will that transfer of assets takes place?

Amitava Mukherjee — Director of Finance & Director

No, no. What happens is that you see this entire scheme was available in the stock market. It was available in the public domain when we had filed it because if somebody has objections, they could have raised that. The amount of loans that will be transferred on NMDC count is actually zero, because after the date of the — after the appointed date, that has been fixed as 1/4/2021 the capex of NMDC is being met through two debt instruments. One is the nonconvertible debentures of INR543 crores that we raised. And another is a loan of around INR4,400 crores that we have negotiated with SBI. And all the capex is being financed through these two loan instruments. So the demerger take place, because the SBI and the — that will sit on the balance — their balance sheet as creditors and not as NMDC. NMDC is just around INR17,000 crores. It will be the only thing that would appear in the demerger balance sheet. And of course, that will be extinguished by issue of similar amount of equity to the existing shareholders including them.

Pinakin — JPMorgan — Analyst

Sure, sir. And lastly, just on the — to close the loop on the steel plant. There were media reports that MECON has been given the contract to start it. So the blast furnace commissioning process will start at some point of time. And where will the steel plant source the iron ore? Or is NMDC entering into an agreement of selling the iron ore to the steel plant?

Amitava Mukherjee — Director of Finance & Director

Yes. The iron ore will be sourced from Bailadila itself, our existing mines and our future mines that will come up under the banner of NMDC-CMDC Limited, or NCL, which deposit 13 and deposit four. So there is plenty of iron ore which is available for supply to the steel plant. So that is not a problem. We have also assured that — we have given an assurance as I think that we will be willing to enter into at least a 10-year agreement — long-term agreement for supply of iron ore. Of course, like any other long-term agreement, this will be unpriced. So the prices will be on the date of the fact. But the assurance will be for at least a decade. So we have given that undertaking, both for the demerger process and the disinvestment process that NMDC will give a steadier long-term agreement with the demerged entity.

Pinakin — JPMorgan — Analyst

Understood. Sir, just to clarify the pricing of that iron ore, will it be the same that you have in Chhattisgarh your other ores that you sell to other customers?

Amitava Mukherjee — Director of Finance & Director

Prices will be as of the date of discussion.

Pinakin — JPMorgan — Analyst

Date of discussion. There won’t be any differential pricing for this particular contract?

Amitava Mukherjee — Director of Finance & Director

Absolutely no. We do not have any differential pricing for any of our customers, be it big or small.

Pinakin — JPMorgan — Analyst

Okay. Okay. Understood. Thank you very much, sir.

Operator

Thank you. The next question is from the line of Prashanth Kumar from Dolat Capital. Please go ahead.

Prashanth Kumar — Dolat Capital — Analyst

Good evening, sir. Thanks for the opportunity. Sir, my question is regarding iron ore. Sir, the current prices are not export-potential. The current prices, even after paying 30% export duty, is it not a slightly more beneficial to export some quality? I’m not only the preferential — the fixed contract with Japan and Korea, that works correct. And what was that? General exports to China and some other countries, is it — will it be at par with pricing war, we’ll get a slight premium? Or what is your calculation this, sir?

Amitava Mukherjee — Director of Finance & Director

Yes. In fines, we’ll definitely not get it. In fine, we will definitely not get it. But in — I have not had the latest — today, the pricing was around, I think $148 for 62% and around $179 or something for the 65%. So at that rate, it still doesn’t make a major substantial increment over the domestic prices so as to trigger any export option from our end. Apart from 30% duty it was also realized that in export, the freight from the ex-mines to Vizag is our, the entire 20% that is royalty and DMF and NMET is also on our account. So when you arrive at a net back, it is not only 30% — you deduct not only 30%, but then you deduct the royalty, which in domestic sale is paid by the customer or the rearing charges, which is a very substantial, having INR50 per tonne, which is paid by the customer. When exports it will be paid by us. So when you deduct all these prices and you arrive at the mine head, it is not necessarily a very lucrative proposition to export, even at around $180 or 65%.

Prashanth Kumar — Dolat Capital — Analyst

Sure, sir. Completely appreciate that pricing methodology. Sir, in case in any particular month or in a couple of quarters, if at all there is a window that opens up, there is — you know what I mean, when you say iron ore will globally spiked. And at the same time, there is a lag in Indian market — it seems like lag in the Indian market for the prices to catch up. And if there is an opportunity that arises whether electric would it making INR INR1,000 or INR1,500 more realization, was it realistic after the – netback. Would it be okay export, sir? Or that’s completely off the table?

Amitava Mukherjee — Director of Finance & Director

Yes. No, there’s absolutely, no, in principle — sorry, decision that we will never export and there’s a market that we will never look at. Obviously, we’ll look at it. But it depends on various factors of domestic demand and other things as well. And as and when we ramp up to 70 million tonnes or maybe 80 million tonnes and 70 million tonnes by 2025 and 100 million tonne by 2030, exports might be one of the options that will be — compulsorily we’ll have to look at. You might not have such consumption from major steel players because all of them are adding substantial amount of captive mining to their kitty. So what will happen then is a different thing. But as of now, the immediate math — mathematics don’t work out. But in future, of course, it’s open. Even in the short term, it’s an option that is always open before us. And we always take a look how profitable or not profitable it is at any given point of time.

Prashanth Kumar — Dolat Capital — Analyst

Sure, sir. So just finally, I understand but slightly different. Sir, do we have some plans — or why not think about having a substantial pellet capacity so that we can front-load some of the iron utilization — iron reserve utilization so that pellets is kind of even exportable? And is that an option and would you shed some thoughts on that, would happen.

Amitava Mukherjee — Director of Finance & Director

Export is more — it makes more economic sense to make it into a pellet and then export because of the duty structure in pellets is completely different from the duty structure in high-grade iron ore. And we are making a two million tonne pellet plant at Nagarnar as a part of the slurry pipeline project. And as and when the Phase two comes, which will be another 12 million pipeline from our Nagarnar to Vizag, there is an option of making a six million-tonne pellet plant at the Vizag end also. But that is an option that has been kept deliberately. We will have the option of selling only the — what do you call, the concentrate or then if we can choose to make another pellet plant there. But as of now, the two million tonne pellet plant tender has already been awarded to L&T, I think last month only — this month only, I think. And it has a completion period of 30 months I understand, 30 months or 36 months. So in around three years’ time, we’ll have a pellet plant of two million-tonne capacity in Nagarnar, next to the steel plant, which will be NMDC property as a part of the slurry pipeline project.

Prashanth Kumar — Dolat Capital — Analyst

Understood sir. Thanks for the clarification. Understood. Thank you. And all the best.

Operator

Thank you. The next question is from the line of Vishal Chandak from Motilal Oswal Financial Services. Please go ahead.

Vishal Chandak — Motilal Oswal Financial Services — Analyst

Yes. Thank you for the opportunity. Sir, I just wanted to understand we are commissioning the steel plant and we are appointing Mecon as the MDO [phonetic]. Given the fact that Mecon really does not have that kind of an expertise and they will be pulling on the expertise and finally the steel plant would be sold off. I just wanted to understand what is the rush at this point in time to really commission the steel plant when we do not have the actual slurry pipeline or the iron ore deposit, which was earmarked for the steel plant also in our hands? So just a thought on that.

Amitava Mukherjee — Director of Finance & Director

Before I answer the question, I ask Mr. Nandi to join in. Two clarifications, number one, the slurry pipeline has nothing to do with the MISC plant. It’s only that there will be a two million tonne pellet plant at Nagarnar, of which one million tonne will be consumed by the steel plant. Otherwise, it is something that we’ll have to sell in the market. And even if one million-tonne is consumed by the steel plant, we still have one million tonnes to sell in the market. So the slurry pipeline has no generic link with the steel plant. Second is that there was never a captive mine attached to the steel plant. It was always a result that our Bailadila mine would cater to the steel plant. And accordingly, it is still in a position to cater. Although the new mines under the NCL plant, that is deposit four and deposit 13, it will take some couple of years to come. Number three, why commission it now? Please understand that unless we commission, the vendors will run away. You have a plant ready, and 12% of the contract is on commissioning and testing and other things.

So they are not going to wait for you for three years for somebody to come — one year to somebody to come and then commissioning it because they have — once they have built the structure, they are in a hurry to prove that their plant works, take their money and go and you would also not like a very, very expensive structure to be there and having nothing. So now comes the question of Mecon. Obviously, if you run a steel plant, we need skilled people. Now the option from us was that, obviously, the question of permanent treatment was absolutely ruled out because it has been demerged. Now the other option was to get in these experienced people from the market. NMDC could have personally done it, could have done it by itself by going to the market and hiring such people on short-term contracts for three to five years. But it was thought that Mecon would be in a better position to talk to other experts, get a team of experts and monitor the overall commissioning of the plant and operation of the plant and the hire skilled people from the market on three year to five year contracts and then run the client as well. So it is — Mecon is basically working as an agency to get the skilled manpower and the super skilled manpower who can monitor the plant. And on this, I would like Deb, Technical also to enlighten you on this aspect.

Sumit Deb — Managing Director & Chairman of the Board

Yes. because Mecon handles — they are actually consultant for the steel plant, there was a long history of commissioning and as well whether getting ready the steel plant as a consultant. So they have the knowledge of people who are in this line since long. So their experience will be useful for getting the people. That’s why they are engaged. Nothing like that, that Mecon — of course, they don’t have the experience of running a plant, definitely. But

Amitava Mukherjee — Director of Finance & Director

They’re not running it like an MDO.

Sumit Deb — Managing Director & Chairman of the Board

They are not running it like MDO. They are pulling in people. And our people, whatever minimum people, they will also be there in pandemic.

Vishal Chandak — Motilal Oswal Financial Services — Analyst

Thank you, sir for elaborate answer here. That was quite helpful. Sir, my second question was with regard to the status of the KK line. I think there has been partly commissioned, partly it’s working through — struggling but one of the last part of that line is still under the — work in progress. So what would be the latest update on that, sir?

Amitava Mukherjee — Director of Finance & Director

KK line is actually, as you know, 131 kilometers. So out of the 131 kilometers, almost 85% has already been commissioned in various batches. And another 15 will be commissioned, I think — another 15, 20 will be commissioned in the coming two months. So that is around 30 kilometers, which will — which the railways has promised us that it will be completing by December 2022. So that is the last part between Kirandul to Gidam. That is the last part. Rest of it is already working, commissioned and working. And substantial part will be commissioned in a couple of months and it will be working. Railway lines, as you know, even a patch doubling gives you benefit. So it is not necessarily that once the end-to-end completion has to be done to take the benefits. So whatever has been commissioned, we are already taking benefit of that. There was — the estimates have gone up as was envisaged by around INR300 crores to INR400 crores. And that is why it required a renegotiation of our MOU with railways, which actually now has completed. And we have entered into a revised agreement with the railways MOU. And accordingly, the work is progressing. There, I understand they have awarded tenders and promised us that by December 2022, the entire 131 kilometers would be commissioned.

Vishal Chandak — Motilal Oswal Financial Services — Analyst

Sir, just a follow-up on this. If the entire 131 kilometers of line commissioned, so what kind of additional volume can we expect from Chhattisgarh in FY 2023?

Amitava Mukherjee — Director of Finance & Director

Chhattisgarh, we — if we do around 44 this year, the Chhattisgarh will be doing around 30 million tonnes. Subsequently, it will go up to around 30 — something 35 million to 37 million tonne in phases. And then in the long term, when deposit 13 and deposit four also come, and it — Chhattisgarh itself will give around more than 60 million tonnes to — 60 million to 70 million, around 70 million tonnes, 65 to 70. But that will be 2030, possibly.

Vishal Chandak — Motilal Oswal Financial Services — Analyst

Sir, I was looking at more closer as in — say 2023 and 2024

Amitava Mukherjee — Director of Finance & Director

FY 2023, I think this year, it’s around 30 million, 31 million. So FY 2023, I think it will be around 34 million to 35 million.

Vishal Chandak — Motilal Oswal Financial Services — Analyst

Got it. Thank you, sir.

Amitava Mukherjee — Director of Finance & Director

2.5 million tonnes downhill conveyor at Bacheli coming up — coming in. We are doing the waste mining. So that will — and in any case dispatch is not constraint even as a base. Even at 35, constraint dispatch will not be a constraint.

Vishal Chandak — Motilal Oswal Financial Services — Analyst

Sure. Yeah. Thank you, sir.

Operator

Thank you. [Operator Instructions] The next question is from the line of Rahul Jain from Systematix Shares. Please go ahead.

Rahul Jain — Systematix Shares — Analyst

Yeah. Hi. Sir, thanks for taking my question. Sir, on the pellet side, sir, you said that we are going to add six million in Vizag. Is that plan final? Or is it still under consideration?

Amitava Mukherjee — Director of Finance & Director

So that is under consideration. What is — what we are — the slurry pipeline Phase one is from Bacheli to our steel plant in Nagarnar. That’s a 15 million tonne slurry pipeline, right? That’s Phase 1. For which contracts were awarded and work is going on. And it’s — within that, we have a two million tonne pellet plant at Nagarnar, for which also contract has been awarded to L&T. So this is the Phase one. Phase two is from Nagarnar to Vizag, which is 313 kilometers, which is at the project evaluation stage, right? Sanction the work, we are just evaluating the project. One of the options there is that we’ve contemplating we might sell either the concentrate itself at Vizag of 68 million tonnes, or the other option is that in future, we might actually have a pellet plant of six million to eight million tonnes and sell instead of concentrates, we might as well sell pellets. So we’re only at the contemplation stage and.

Rahul Jain — Systematix — Analyst

And sir, can you spell out how much is your capex for FY 2023? And what is the timeline for this slurry pipeline? I mean, for next two years, what is the capex?

Amitava Mukherjee — Director of Finance & Director

Next year, we are planning around INR3,500, of which around INR2,000 crores would be NISP. That is the steel plant. If the steel plant is demerged from the mining business that would be around INR1,500 crores. Mostly on slurry pipeline, which will be more than INR500 crores, and then we will have a major project of screening plant three at Kirandul, which is a 12 million tonne capacity expansion plan, screening plant at Kirandul.

Rahul Jain — Systematix — Analyst

Right, sir. Also, you will not pursue any more steel investment, right? I mean, this is the final like in Karnataka you’re not setting up a steel plant or something like that?

Amitava Mukherjee — Director of Finance & Director

I can’t hear you.

Rahul Jain — Systematix — Analyst

Sir, you will not contemplate setting up any more steel plants, right?

Amitava Mukherjee — Director of Finance & Director

No, that — with now that Nagarnar is demerged, I think the underlying fact is that we are out of the steel business for the better or the worse.

Rahul Jain — Systematix Shares — Analyst

Thank you. And you will not take up any more such initiatives in the future, right?

Amitava Mukherjee — Director of Finance & Director

No. Because once we have got out of one, I don’t think it makes sense to get into another.

Rahul Jain — Systematix — Analyst

No, I’m just being clear about it. So this is the final sort of investment that we have. So in future, all the cash flows will be towards dividend payment, right?

Amitava Mukherjee — Director of Finance & Director

Never say never again. As of now, it is a big no. And it’s a very resounding no.

Rahul Jain — Systematix Shares — Analyst

Okay. Thank you so much.

Amitava Mukherjee — Director of Finance & Director

But then never say never again.

Operator

Thank you. The next question is from the line of Ashish Gautam, an investor. Please go ahead.

Ashish Gautam — an investor — Analyst

Yeah. So I just wanted to know if we will get any proceeds from the NINL stake sale because NMDC had 10% stake in the company?

Amitava Mukherjee — Director of Finance & Director

Oh, yes, we are going to make a windfall profit out of it. Not only our — not only our loans will be repaid in full along with interest, now that the court has come for INR12,000 plus crores. For the 10% stake, I think we should get around anything between INR400 crores to INR500 crores as a bonus.

Ashish Gautam — an investor — Analyst

So those proceeds will be reflected in the Q4 results, if I’m correct?

Amitava Mukherjee — Director of Finance & Director

It depends on when the realization comes.

Ashish Gautam — an investor — Analyst

All right. Thank you so much.

Operator

All right. Thank you so much.

Saket Kapoor — Kapoor Company — Analyst

Yeah. Namaskar, sir and thank you for this opportunity. Sir, if we take — if you look at the capex done by the organization, it is only improving the efficiency and then on the volume increase. So for this financial year, for the nine months, what has been our spend on the improving of efficiencies on the various projects and also on the volume increase? I’m talking about the screening lines and the crushing side, crushing plants. So what is the update on the same, sir?

Amitava Mukherjee — Director of Finance & Director

You have got big projects lined up. Some of them are under implementation. One small one is 2.5 million tonnes at Bacheli, the downhill conveyor and the crushing plant, 2.5 million tonnes an additional line is being made. We have awarded a contract of more than, I think, INR1,400 crores for the third screening plant at Kirandul, which is a 12 million tonne screening plant, one of the biggest in India. We have already approved — the Board has already approved the project for relocation of the crushing plant of deposit 14 and deposit 11C, so that more ore is those — the existing crushing plants are sitting on ore body, so that they can be released and put to production. And as you know, the honorable Minister himself inaugurated our new screening plant two at the Karnataka sector, Donimalai sector, for six million to seven million tonnes. So we have huge — and these all projects have already been approved and are at various stages of either tendering or execution. So in the next three to four years, all these will be commissioned. And then that is why we say that — when a previous question was asked that how much we’ll do at Bailadila, so naturally we should be able to do more than 50 from Bailadila itself.

Saket Kapoor — Kapoor Company — Analyst

Sir, what is the current EC clearance of our various mines, both for Chhattisgarh as well as Karnataka?

Amitava Mukherjee — Director of Finance & Director

51.5 million.

Saket Kapoor — Kapoor Company — Analyst

And the work which we are doing, the efficiency in the capex, what are the aiming in terms of the expanded capacity?

Amitava Mukherjee — Director of Finance & Director

The plant capacity will go up around 60 million, 70 million tonnes from Bailadila, I think. I think 60, not considering NCL, not considering the mine deposits four and deposits 13 which are under NMDC control through NMDC-CMDC Limited, or NCL. Excluding those, I think some capacity of more than 60.

Saket Kapoor — Kapoor Company — Analyst

Sir, when we look at the pellet part of the story, the last time it was informed that the 1.2 million tonnes pellet at Donimalai would be start — would be contributing to the bottom line going forward. So what is the update on the same? And the losses have definitely narrowed down for this quarter. So what is the update on this? Yes, sir.

Amitava Mukherjee — Director of Finance & Director

Nine-month period, we have broken even for the first time. There was this option of the pressure filter, which have now been solved. And the second filter is also being replaced now. So that will substantially increase the throughput of the pellet plant. And once we hit at least 50% or 60%, we will start making handsome profit. We are currently — we have increased from around 10% to 20%, then we have already broken even. And as we — as and when the second filter is completed, that would take another three months at least, three to four months. So our capacity to be ramped up. And we are looking at sources to feed the pellet plant, the best way to feed the pellet plant.

Saket Kapoor — Kapoor Company — Analyst

Right. Right. Right, sir. A very small point, I will come in the queue, sir. Firstly, sir, as we have contemplated this demerger scheme and as per the understanding of the listed space, once the company goes through this corporate action, buyback is not feasible and is not allowed. So by the time this entire process gets over, the issue of coming up with a buyback is totally ruled out. This understanding — technical understanding is correct, sir? Are we on the same view?

Amitava Mukherjee — Director of Finance & Director

Contemplating any buyback as of now. So we have already have total dividend of more than INR14. Yesterday, we developed — we declared INR5.3 or 79. And previously, we had declared INR9.03. So — INR9.01, I think. So that’s INR14.25 we have already declared. We are not concentrating as of now.

Saket Kapoor — Kapoor Company — Analyst

Correct, sir. And for the cash flow part, sir, for the nine months, can you give the breakup? How much has gone for the capex? And what is the total dividend payout in absolute number, sir?

Amitava Mukherjee — Director of Finance & Director

Yes, the capex is around INR1,500 crores, of which around INR1,000 crores is, I think, NISP.

Saket Kapoor — Kapoor Company — Analyst

Didn’t get it, sir. Come again? For the steel plant, INR1,000 crores.

Amitava Mukherjee — Director of Finance & Director

Yes, the total capex is around INR1,600 crores, of which the steel plant has — we have spent around — INR1,683 crores, of which steel plant is INR1,002 crores.

Saket Kapoor — Kapoor Company — Analyst

Okay. And for the remaining three months, what is the — ma’am, I was just answering to him. Just a follow-up and then I’ll come to the queue, right? I can — I will obey the rules.

Amitava Mukherjee — Director of Finance & Director

Capex figure of around anything between INR2,500 crores to INR3,000 crores.

Saket Kapoor — Kapoor Company — Analyst

I will come in queue, sir. I have two more question. Thank you.

Operator

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

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

Yes. Sir, just one question on the part of this NISP. So how much is the total land we have there? And how much has been used for the steel plant?

Amitava Mukherjee — Director of Finance & Director

Yes, the Director Technical will answer that.

Sumit Deb — Managing Director & Chairman of the Board

It is roughly around 2,000 acres. And as per the configuration, there is not much land is left. You are asking for the expansion part? In that sense?

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

Yes, sir. So like the — what are the opportunities available to expand the current capacity with the available land?

Sumit Deb — Managing Director & Chairman of the Board

It will be very difficult, but it can be worked out. It can be worked out. Mecon has already estimated, it can go to six million tonnes with some rearrangement.

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

No. But like, sir, if they have to increase the — whoever is the party or even if you, let’s say, work on that plant, so can the capacity be increased with the current land available? Or you have to — or [Indecipherable]?

Amitava Mukherjee — Director of Finance & Director

That the capacity can be increased to six million tonnes in the existing land, but some amount of plants has to be rearranged.

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

Okay. So rearrange means what, sir?

Amitava Mukherjee — Director of Finance & Director

Rearrange means, if we set a second blast furnace, then you’ll have to move the plant, etc, to a new location.

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

Okay. Okay. And lastly, sir, on the part of this integrated commissioning. So what is the status of coke oven and all that, like, different modules that commissioning?

Amitava Mukherjee — Director of Finance & Director

You are asking about

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

No, I’m talking about for coke oven plant and various other modules, which are integral to commissioning or integrated commissioning.

Shri Somnath Nandi — Director

Yes. The coke oven heating process has already started. The production from coke oven is expected sometime in end March or April. And also that’s to correct mid of next calendar year, maybe June, July.

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

Okay. And sir, lastly, like near to this steel plant, what are the available land parcels? Or like is it more of a tribal land? Would there be a forest clearance requirement to buy incremental land? Or what is the thing there? What are the available infrastructure over there at the plant?

Sumit Deb — Managing Director & Chairman of the Board

The land, around the plant you are talking about?

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

Yes, yes, yes, around the plant, sir.

Sumit Deb — Managing Director & Chairman of the Board

Actually, we are having a pellet plant there around just besides the plant. That is — we are manufacturing a pellet plant there. Leaving aside other, the private land is there and, of course, forest plant is also there. But those are to be acquired separately.

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

Okay. Very good. Thanks a lot.

Operator

Thank you. The next question is from the line of Prasenjit Bhattacharya from IHS Markit. Please go ahead.

Prasenjit Bhattacharya — IHS Markit — Analyst

Yes, hello. Yes. I just wanted to ask you a little bit about the iron ore market in India, how are you seeing the next three to six months in terms of demand? And I do know, you don’t want to talk about tariffs as such. But given the demand scenario, where do you see prices headed, can you paint the picture?

Amitava Mukherjee — Director of Finance & Director

Yes, the last month, it’s been on the upswing, so that’s good news for us. The demand has been robust. Our demand has always been fairly consistent because of our quality, especially from the Bailadila sector. And even now with the pricing at Karnataka sector, we see very regular demand being there. So demand is as of now, not a problem. We have adequate demand. And we hope with the current steel prices, be it sponge iron or be it flat, all of them have been reasonably consistent and there has been slightly — slight upswing. Based on that, we could take a small price hike after six months. So going forward, we would expect that — this to continue, at least in the near future. So hopefully, we are bullish about the demand scenario in the near future.

Prasenjit Bhattacharya — IHS Markit — Analyst

Okay. sir, just a follow-up question on the — I didn’t get, you said your FY ’23 volume, what was your target? Did you say between 47 million and 51 million tonnes for FY ’23?

Amitava Mukherjee — Director of Finance & Director

That’s for FY ’23. We will do more than 40 plus, 50, anything between 47 to 50.

Prasenjit Bhattacharya — IHS Markit — Analyst

More than 40, yes. Okay. Okay. And just finally, just wanted to understand, just clarify, that the steel plant commissioning you’re expecting in June or July of 2023 then?

Amitava Mukherjee — Director of Finance & Director

’22.

Prasenjit Bhattacharya — IHS Markit — Analyst

’22, okay.

Amitava Mukherjee — Director of Finance & Director

The coke oven plant is already — the heating has started. It’s an irreversible process. The coke oven commissioned in the end of March.

Prasenjit Bhattacharya — IHS Markit — Analyst

Okay. Okay. So June, July ’22. Okay. Thank you so much. That’s all I have to ask. Thank you so much.

Operator

Thank you. The next question is from the line of Dinesh Agarwal from Vastu Construction Private Limited. Dinesh, your line is unmuted, please go ahead. As there is no response from the current participant, we’ll move onto the next that is from the line from Sumangal Nevatia from Kotak Securities. Please go ahead.

Sumangal Nevatia — Kotak Securities — Analyst

Yeah, thank you for the opportunity. A couple of quick clarifications. First, on the steel plant demerger, I joined the call late. But I believe you said that by April end, we will get the demergers closed with the creditor approval required or not required. But the real value of unlocking will happen when the steel plant gets listed. So from there to the listing, what are the steps and what is the time it could take?

Amitava Mukherjee — Director of Finance & Director

It should take out two to three months to list the new company in the stock market, not more than that. Once the demerger is complete. And it could be April, or it could be June, depending on whether we are exempted from holding the creditors meeting or not. So once the demerger is complete, the new company will take the necessary steps get itself listed in the market. So that should take — company take hardly two to three months, not more than that, maybe even earlier.

Sumangal Nevatia — Kotak Securities — Analyst

Okay. Okay. And what are the steps? I mean, we have to file DRHP or something of that sort? Or it’s relatively shorter route?

Amitava Mukherjee — Director of Finance & Director

I’ll have to look at it. I can give you in offline thing. But right now, I don’t have the detailed steps for listing a new company. But just outside this — we’ll have to file the [Indecipherable] meeting for creditors, etc. But I don’t think it should be more than two to three months for listing a new company.

Sumangal Nevatia — Kotak Securities — Analyst

Okay. No worries, I’ll take it definitely from you, sir. So then when the steel plant operates, until the time the dedicated iron ore mine comes in, will we be supplying iron ore to this plant from our existing Bailadila operations?

Amitava Mukherjee — Director of Finance & Director

Yes. I’ve already informed, you’ve joined late. So number one, the construction of a dedicated iron ore mine was never you may have. It was always contemplated that the Nagarnar plant steel will be fed through our existing mines in Bailadila and the new mines of deposit four and deposit 13 that will come under the NPL banner. And we have also gave our clearance to the ministries and to the new company that we will be willing to enter into a 10-year long-term purchase agreement unpriced, of course, to supply iron ore from our existing mines to the steel plant.

Sumangal Nevatia — Kotak Securities — Analyst

Understood, understood. Thank you, sir for repeating it. The next question is on capex for ’22. You said nine months is INR1,600 crores. So remaining fourth quarter, overall for the year, what are we looking at?

Amitava Mukherjee — Director of Finance & Director

INR2,500 crores to INR3,000 crores, depending on how fast the commissioning progresses because a substantial amount of payments are due on commissioning activities. So once the commissioning is started, these tables will get released. So we expect to end at around INR2,500 to anything between to INR2,500 crores to INR3,000 crores, anything between that.

Sumangal Nevatia — Kotak Securities — Analyst

Sir, you think — I mean, what we spent in the nine months, we can spend that in the remaining two months? I mean…

Amitava Mukherjee — Director of Finance & Director

Q4 is always 50% of the entire expense. If we see the last year, out of the INR2,000 crores, we spent around INR1,100 crores in the last quarter.

Sumangal Nevatia — Kotak Securities — Analyst

Understood. Understood. Sir, next question is on the balance sheet. What is the net cash as 31st of December?

Amitava Mukherjee — Director of Finance & Director

Net cash was INR35,000 — was around INR6,000 crores. Today, we have around INR8,700 crores.

Sumangal Nevatia — Kotak Securities — Analyst

Today, as in Jan end or something?

Amitava Mukherjee — Director of Finance & Director

As around Jan end. As on date it is INR9,000 crores. As on Jan end, it was INR8,700 crores. As on today, it is INR9,000 crores. Of course, we have a dividend to pay of INR1,600 crores, advance tax to pay about INR1,000, some ODs of around INR2,700 crores that [Indecipherable]. Around INR3,700 crores is committed expenditure that we have apart from the opex that we’ll need for the next year.

Sumangal Nevatia — Kotak Securities — Analyst

Understood. Understood. And just one last thing on this NINL divestment, you said that there is some loans also extended. So we’ll get a first equity 10% portion of it. But is there any loans also given from NMDC to NINL?

Amitava Mukherjee — Director of Finance & Director

Around INR80 crores of loan was given, interest bearing loan. So we will be comfortably getting the entire thing back along with interest. And apart from that, after NINL needs all its outstanding liabilities — more than INR5,000 crores would be left over after meeting all its liabilities and we’ll get 10% of that. So that will be a windfall gain of around at least sitting between [Indecipherable].

Sumangal Nevatia — Kotak Securities — Analyst

Got it. Thank you so much, sir. And all the best.

Amitava Mukherjee — Director of Finance & Director

Thank you.

Operator

Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to the management for the closing comments.

Amitava Mukherjee — Director of Finance & Director

Thank you for all — to all for attending this conference. We are in the middle of a great year. We expect to continue this great run, not only through the last quarter of this current financial year, but also to the next financial year. We expect to — I have major events lined up in the next financial year, including the demerger of the steel plant, the commissioning of the steel plant and substantial capacity expansion of our mining business. So the entire scenario looks very positive from our perspective. And given the overall demand situation of iron ore, we expect that this great run would continue comfortably in the next financial year. Thank you so much.

Operator

[Operator Closing Remarks]

Amitava Mukherjee — Director of Finance & Director

Thank you.