Sarda Energy & Minerals Limited (SARDAEN) Q2 FY23 Earnings Concall Transcript

Sarda Energy & Minerals Limited (NSE:SARDAEN) Q2 FY23 Earnings Concall dated Nov. 14, 2022

Corporate Participants:

Pankaj Sarda — Joint Managing Director

P.K. Jain — Director and Chief Financial Officer

Manish Sarda — Deputy Managing Director

Analysts:

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Unidentified Participant — — Analyst

Samil Surendran — Argus Media — Analyst

Niraj Mansingka — White Pine Investment Management — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Sarda Energy & Minerals Q2 H1 FY ’23 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Pankaj Sarda, Joint Managing Director, Sarda Energy & Minerals Limited. Thank you. And over to you, sir.

Pankaj Sarda — Joint Managing Director

Thanks a lot. A very good afternoon, everyone. I extend a very warm welcome to all of you to the Q2 FY ’23 earnings call of Sarda Energy & Minerals Limited. Our press release and investor presentation containing details of performance has been uploaded. Today’s presentation and discussions may include forward-looking statements, which must be considered in conjunction with the risks that the industry in general and our business in particular face and actual results may vary materially.

As our name speaks, we are in the business of energy and minerals with diverse revenue streams and the effect of our diversification strategy is reflected in the results of this quarter, which are already before you, but diversification has helped in reducing volatility into our earnings. Global economies are facing macro headwinds on account of war between Russia and Ukraine and sanctions. This has resulted into supply disruptions, creating high inflation. Globally, central banks are adopting tighter monetary policies to rein in the inflation, resulting into liquidity tightening and higher interest rates. World steel production has gone down in nine months of CY 2022 from 1,461 million tons to 1,405 million tons Y-o-Y.

All countries, except India and Middle East, have reported negative growth. In spite of fall in exports and increase in imports, India has reported positive growth in steel production from 87 million ton to 93 million ton in nine months of CY 2022. This reflects inherent strength of Indian economy and domestic steel industry. Domestic steel prices softened post-imposition of export duties. This coupled with increased coal prices has put pressure on margins in steel business.

New capacity addition in ferro alloy and fall in demand due to shutdown of steel capacities has affected ferro alloys prices and margins. Price of high-grade coal remains at an elevated level due to supply concerns and have seen price volatility. Grid power prices have also been increased by most of the state utilities due to increased fuel cost on account of compulsory mixing of imported coal and thermal generation. This has reduced profit margins in steel and ferro alloys manufacturing. However, we are much less affected because we are not exporting any steel products. Secondly, we are captively consuming about 35% 40% of the iron ore pellets. Thirdly, with the captive coal, our fuel and power cost is lower and stable. The Company procures majority of its iron ore requirements from market, where prices have corrected. This is also providing cushion against falling prices of steel. Nextly, our ForEx exposure of imports is hedged by exports at the consolidated level. We are least affected by increasing interest rates due to low net debt. And finally, our diversification into hydropower sector provides consistent cash flows.

The overall performance of manufacturing facilities, except for ferro alloys, has been stable Q-o-Q and Y-o-Y. The ferro alloys production sales was down because of maintenance stoppage of captive power plant at our Vishakhapatnam subsidiary for two months. The company recorded highest-ever quarterly production of HB wire and highest-ever half yearly production of pellet and HB wire. One of the power generation units at Raipur was also under maintenance shutdown for part of the quarter, which had a bearing on generation of power and production of steel. However, it was partly offset by importing power from grid.

We exported 16,740 metric tons of ferro alloys valued about INR175 crores against 24,131 metric tons in Q2 FY ’22 valued at INR255 crores and 26,300 metric tons in Q1 FY ’22 valued at INR338 crores. The monsoon was delayed, but extended to October majorly compensating the loss of generation in the initial months. The 113 megawatt Sikkim hydropower project billed 312 million units in H1 FY ’23. At generation bus level, the plant achieved PLF of around 63% in the half year. However due to delayed arrival of monsoon and scattered rains, the Gullu hydropower plant in Chhattisgarh generated only 44.39 million units against 69.96 million units in first half of the previous year. The Uttarakhand project generated 12 million units against 13.81 million units in H1 FY ’22.

Ongoing projects. The installation of ferry alloys expansion projects of 36 MVA at Vizag is over. The Company has moved an application for consent to operate the plant. We expect to start trial runs in this month and commercial operation by end of this quarter. We are also evaluating installation of waste heat recovery power plant and waste utilization facility in Vizag. Final decision will be taken after EV study. The government has approved mining plan of the Company for mining of Shahpur West Coal Mine in Madhya Pradesh and for increase in the mining capacity of Gare Palma IV/ 7 Coal Mine from 1.2 million ton to 1.8 million ton. The process of environmental clearances is going on.

The Company plans to increase it in future to 3 million tons per annum. Construction work at 25 megawatt Rehar hydro project is progressing as per schedule. Orders have been placed for long-term — for long delivery items. We expect to complete the project before the end of FY ’24-’25. We have received permission for increasing the capacity of Uttarakhand hydropower project from 4.8 megawatt to 8.3 megawatt. We are taking steps for other approvals required in this regard.

Now, I hand over to Mr. P.K. Jain ji, who will brief about financial performance and position of the Company. Over to you, Mr. Jain.

P.K. Jain — Director and Chief Financial Officer

Thanks, Pankaj ji. The Company had achieved quarterly consolidated revenue of INR967 crores during quarter two FY ’23 against INR1,261 crores reported in last quarter and INR1,025 crores in corresponding quarter of the previous year. The Company has reported operating EBITDA of INR281 crores during the quarter against INR365 stores in the previous quarter and operating EBITDA of INR404 crores in quarter two FY ’22. Maintenance shutdown of plant by Sarda Metals for two months, delayed monsoon, and inventory losses on account of fall in the prices and shrinkage of profit margin post export ban are the reasons for fall in the revenue and profitability. The Company’s profit after tax at the consolidated level stood at INR181 crores against INR170 crores in the previous quarter and INR256 crores in the quarter two of the previous year.

Debt position. At the standalone level, the Company is net debt free with surplus funds. As on 30th September, 2022, gross debt at the consolidated level stood at INR1,380 crores, bank balances and liquid investments as on 30th September stood at INR675 crores. Total debt net of cash and current investments stood at about INR700 crores and net of the loans given as a part of treasury operations the net debt is around INR350 crores. Loans repayable within next one year which is to be serviced by the [Technical Issue] INR166 crores. Ongoing CapExes, including the coal mines, have been financed from the internal accruals. The Company is not exposed materially to the currency rate fluctuations. Foreign currency exposure is mostly covered by natural hedge by import or export.

External credit ratings. During the quarter, long-term external rating of Chhattisgarh Hydro Power LLP was upgraded from ICRA A- to ICRA A. With this, the external credit rating of the Company and all its operating subsidiaries have been upgraded during the current year. Upgradation of credit rating of all the companies is clear reflection of improving financial and long-term sustainable business outlook.

I now hand over to Shri Manish Sarda who will brief about steel and ferro alloys industry scenario and outlook. Over to Manish ji.

Manish Sarda — Deputy Managing Director

Thank you, Mr. Jain. The imposition of export duty has adversely affected India’s steel production and export. Import of steel has gone up in quarter two FY ’23. India produced 31 million metric tons of steel, recording de-growth of 2.9% quarter-on-quarter. However, year-on year, India recorded growth of 4.15%. Global steel production was 452 million metric tons in the quarter, recording de-growth of 9% quarter-on-quarter and 1.2% year-on year. India exported 1.8 million tons of steel against 2.8 million metric tons in previous quarter. In the six months, India exported 4.68 million tons steel against 10.75 million tons steel during same period of previous year.

The domestic consumption increase from 27.36 million metric tons to 27.93 million metric tons quarter-on-quarter. Energy and logistic prices, which constitute a substantial portion of cost of production and distribution of steel, are at elevated levels. As such, prices of finished steel may not go down substantially. Having our own coal mine, we are largely insulated from increase in energy costs.

Outlook. With the end of monsoon, steel demand in India is expected to improve in second half of year ’23. The demand will be driven by increase in governmental spending revival and construction activities and auto sector revival. That should push up Indian steel prices. Any relaxation on export duty on steel products will be positive from demand and pricing perspective. Depreciation of rupee will keep imports in check. Cost of production is also moderating due to correction in raw material prices.

China’s steel production may be moderate due to winter restrictions. However, the demand is likely to find support as COVID restrictions ease and pave way for pent-up demand from the housing sector. Coke, coal and energy prices may remain range-bound with downward bias. Iron ore and pellet prices may also remain subdued on surplus domestic supply and heavy export duties. Manganese ore prices have also corrected on falling demand.

Ferro alloys prices have started rising again due to production cuts after correction due to oversupply on account of fall in global steel production and capacity additions. However, higher energy prices in other parts of the world may help in improving price realizations. The coal mine gives us a competitive advantage of lower fuel cost from captive consumption and better margins on the sale of coal. The Company is further evaluating various growth opportunities in its field of operations.

This is all about the performance and outlook. Now, we leave the forum open for question-and-answer session. We thank all the stakeholders for their wholehearted support. The Company has been able to —

P.K. Jain — Director and Chief Financial Officer

Manish ji, Manish ji?

Manish Sarda — Deputy Managing Director

Yeah.

P.K. Jain — Director and Chief Financial Officer

Hello? Hello?

Manish Sarda — Deputy Managing Director

Yeah.

P.K. Jain — Director and Chief Financial Officer

Now, we can —

Pankaj Sarda — Joint Managing Director

We can open the thing for the question-and-answers. Moderator?

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Ketan Athavale[Phonetic] from RoboCapital. Please go ahead. Mr. Athavale, you could go ahead with your question. Ladies and gentlemen, for some reason, the line has been disconnected of the participant. We’ll move on to the next question. The next question comes from the line of Subham Agarwal from Aequitas Investment Consultancy Private Limited. Please go ahead.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Yeah, thank you for the opportunity, and first of all, congratulation on a decent set of number. So my question is to Mr. Manish Sarda ji on ferro alloy division. So sir, last quarter we saw multiple companies both in Raipur and Vizag taking or preponing their maintenance shutdown in ferro alloy division and we also did that, and that’s why the volume availability in the market was low. But even after that, the prices went down significantly. Now, sir, I wanted to understand how will be the situation in the current quarter and next quarter probably because now most of the maintenance shutdown is also over and availability in terms of volume would be very high this quarter. So is the demand good enough to take the volume? And what’s your outlook in that regard?

Manish Sarda — Deputy Managing Director

See, domestic demand is quite robust and we are not seeing any major issues in the domestic markets. What we are facing issues are with the international markets where the war is still continuing between Ukraine and Russia, and we have seen the high electricity prices in the European continent with steel plants are mostly closed or not running at a high level. So the demand pockets in Europe and the Western continent is a little poor. But Middle East, Africa, all these places, Asia, we are seeing good demand. So overall, the demand will be a little subdued for sure and domestic demand will remain good. So the domestic consumption will also gone up with all the steel plants running at good capacity now.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Okay. And so we will be able to maintain our historical number of more than 40,000 ton in Q3?

Manish Sarda — Deputy Managing Director

Yeah, yeah, yeah. We should be able to do it. Maybe, we’ll sell more tonnages in India, looking at the demand constraints that we are facing in Europe right now.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

What was our Europe exposure before this when things were normal?

Manish Sarda — Deputy Managing Director

We did around 12,000 tons.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Okay.

Manish Sarda — Deputy Managing Director

And it depends. The price fluctuation situation in different parts of the world and accordingly we take the calls because we are exporting to almost 50 nations — 50 to 60 nations.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Got it.

Manish Sarda — Deputy Managing Director

So what are the best prices available, like Japan has been a traditional market for us.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

And the new plant will be available only from Q4, that’s right?

Manish Sarda — Deputy Managing Director

Yeah.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Got it. And secondly, coming on to the metal division, so we did a very good quarter in spite of decrease in realization. So are we confident of maintaining such results if the realization stays where it is?

Manish Sarda — Deputy Managing Director

See, frankly speaking, nobody can predict the market pricing as to what happens with the fluidity in the situation where we are seeing very high cost of coal and gas and everything in Europe because, as you are aware, that India is the single largest exporter of ferro alloys to the world. So it all depends upon how things shape up in the next three to four months.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Okay.

Manish Sarda — Deputy Managing Director

Yeah, the domestic demand — as I said, the domestic steel industry is doing well. The domestic demand looks to be pretty good at the moment. It’s quite strong and firm. And we are hopeful that the government will take a lenient view on the export duties also, which they’ve been working on. And it’s only a matter of time that we hear some form of reductions in the export duty so that the domestic market is also protected and the international markets are also serviced by the Indian companies. So once that opens up, we are seeing a firm recovery there as well.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Got it.

Manish Sarda — Deputy Managing Director

Because Europe — because European steel plants are not working at full capacity and they will be requiring a lot of steel. Steel demand will be there. When they will not be able to produce themselves, they’ll be definitely importing from India. It’s basically the duty structure, which, has been imposed by the government, has been a bit of a hindrance for the moment.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Got it. And finally, sir, my question was on the hydro power division. So in the opening remark, you mentioned that, one of our power plants, we have got approval of increasing the capacity to 8-odd megawatt from current 4.8. So when we will start this production or we will require some CapEx in this also?

Manish Sarda — Deputy Managing Director

Jain, sir? Pankaj?

P.K. Jain — Director and Chief Financial Officer

Subham, we have already stated in our initial address also, we will be going for further approvals. In principle, government has approved the expansion of the capacity. Now, we have to go for other approvals required for execution of the project. So it will take some more time before we start work on the project.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Got it, got it. No problem, sir. That’s it from my side. Thank you for answering all the questions.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Rajesh Bhandari, an investor. Please go ahead.

Unidentified Participant — — Analyst

Good afternoon, sir. This is Rajesh Bhandari.

P.K. Jain — Director and Chief Financial Officer

Good afternoon.

Unidentified Participant — — Analyst

Yeah, sir, our export is mainly on ferro alloys, the steel items are domestic consumption. [Foreign Speech] otherwise, demand wise, ferro allow demand is same?

P.K. Jain — Director and Chief Financial Officer

Manish ji.

Manish Sarda — Deputy Managing Director

No, ferro alloys demands internationally has gone down a bit because of the war — ongoing war between Ukraine and Russia. The European markets are a little down because of their steel production being cut down due to high electricity costs. So we will see a bit of a demand constraint in the European sector. But domestic demand is pretty good and robust and Middle Eastern demand, the Asian demand is almost at the same levels. So the only demand constraint what we are seeing is in the European sectors.

Unidentified Participant — — Analyst

But [Foreign Speech] or we are —

Manish Sarda — Deputy Managing Director

No, no, we are very much supplying in India also.

Unidentified Participant — — Analyst

In India also? Okay.

Manish Sarda — Deputy Managing Director

Yeah, yeah, yeah. We —

Unidentified Participant — — Analyst

But the price in India may be lower and price outside is higher.

Manish Sarda — Deputy Managing Director

It’s always fluid, so you have to maintain a balance between the export prices and the domestic prices as well. So it’s not necessarily that domestic prices are down and export prices are up. Many times we see domestic prices also being very good. So right now we, are seeing a constraint in demand in Europe, but America will be opening up for —

Unidentified Participant — — Analyst

Yeah, yeah.

Manish Sarda — Deputy Managing Director

America will be opening up because a lot of plants which were supplying from Europe to America, they are also shut because of the high electricity costs.

Unidentified Participant — — Analyst

Yeah, yeah, yeah. Correct, correct, correct.

Manish Sarda — Deputy Managing Director

So American demand will be looking out for ferro manganese.

Unidentified Participant — — Analyst

Yeah.

Manish Sarda — Deputy Managing Director

And people are looking at that revenue as well.

Unidentified Participant — — Analyst

[Foreign Speech] we will be able to sell everything?

Manish Sarda — Deputy Managing Director

Yeah, we are hopeful that we’ll be able to sell-off everything.

Unidentified Participant — — Analyst

And as you said, prices are also improving, ferro alloy prices?

Manish Sarda — Deputy Managing Director

Yes, because a lot of production centers are also being affected, like in Slovakia, there is a plant, which has just shut down because of high electricity cost. So we are seeing that some demand will come up in the near future because plants are slowly shutting down there because of high electricity costs.

Unidentified Participant — — Analyst

And we are no way affected by this export duty directly. Indirectly, there could be an effect on the price and all that?

Manish Sarda — Deputy Managing Director

Yes, directly, we are not exported — we are not impacted by the export duties because we do not produce those kind of products, which have been, but overall, it does impact us as well.

Unidentified Participant — — Analyst

Yeah, yeah, on the prices, it does impact.

Manish Sarda — Deputy Managing Director

Yeah.

Unidentified Participant — — Analyst

[Foreign Speech] realization on standalone, INR190 crore, approximately, INR36 crore profit. And on consolidated, it is approximately INR345 crores segment realization and INR37 crore profit. [Foreign Speech]

P.K. Jain — Director and Chief Financial Officer

[Foreign Speech]

Unidentified Speaker —

[Foreign Speech] That reason. [Foreign Speech]

P.K. Jain — Director and Chief Financial Officer

[Foreign Speech]

Unidentified Participant — — Analyst

[Foreign Speech]

P.K. Jain — Director and Chief Financial Officer

[Foreign Speech]

Unidentified Participant — — Analyst

[Foreign Speech]

P.K. Jain — Director and Chief Financial Officer

[Foreign Speech]

Unidentified Participant — — Analyst

[Foreign Speech] Things will be moving positive only for us?

P.K. Jain — Director and Chief Financial Officer

[Foreign Speech]

Manish Sarda — Deputy Managing Director

One of the major factors that will determine as to how we will progress as a country will also depend upon the ongoing war between Russia and Ukraine because it’s not only Russia and Ukraine fighting, it’s basically engulfing the entire European continent in terms of [Speech Overlap]

Unidentified Participant — — Analyst

Yeah, European continent, yes, is affected.

Manish Sarda — Deputy Managing Director

Energy costing has an impact on the overall global economic situation. So that will be a major factor. If things ease out there between Ukraine and Russia, I think a lot of things will fall in place and it will be positive for the entire economy for the world.

Unidentified Participant — — Analyst

Economy for the world. But ease out [Foreign Speech]

Manish Sarda — Deputy Managing Director

I won’t be able to predict.

Unidentified Participant — — Analyst

[Foreign Speech] China also is not exporting ferro alloy.

Manish Sarda — Deputy Managing Director

Yes, China is not exporting ferro alloys at the moment, but Scandinavian plants are still operating. The European plants have been under pressure, they have shutdown.

Unidentified Participant — — Analyst

European plants have shut-down, so naturally [Foreign Speech].

Manish Sarda — Deputy Managing Director

Absolutely.

Unidentified Participant — — Analyst

[Foreign Speech] Thank you, sir. Thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Vivek Mehta, an investor. Please go ahead.

Unidentified Participant — — Analyst

Hello? Am I audible, sir?

Pankaj Sarda — Joint Managing Director

Yeah, it’s audible.

Unidentified Participant — — Analyst

Yeah, so I have two questions. Sir, what is the current trend in thermal coal pricing? And second is, how are we hedged due to the currency fluctuation?

P.K. Jain — Director and Chief Financial Officer

Manish ji, thermal coal pricing?

Manish Sarda — Deputy Managing Director

Yeah, thermal coal prices have — in the last one week, we are seeing a bit of a drop-down in terms of the pricing. As the overall energy prices have gone down a little bit, so we are seeing a drop of around $10 to $15 in the South African grid of coal. I don’t think so that the pricing of coal will now be heading upwards and I think it will be more or less subdued only for the next three months or so. And how we are insulated is that we have our own coal mines. So our Raipur plant is completely insulated from any energy fluctuations. And our Vizag plant, primarily we are trying to use our own coal from our mines and trying to blend it with the Indonesian and the RB3 coal fines and trying to make it economical blend for our consumption in our Vizag power plant. As far as currency fluctuations are concerned, we have seen a sharp recovery in the rupee right now, and the pound is also appreciated to INR95, INR96 levels. But overall, I think the rupee will again be range-bound between — I think roughly between INR81.5 to INR83.5. And the pound will also be the range-bound between INR93 and INR96. We have a natural hedge as we are exporters of ferro alloys and primarily we are importing coal and magnesium. So we don’t have too much of a currency exposure in the company because of the natural hedge that we have. I hope that suffices your question.

Unidentified Participant — — Analyst

Yeah, thank you. I will be — I’ll come back in the queue.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Samil Surendran from Argus Media. Please go ahead.

Samil Surendran — Argus Media — Analyst

Thanks. Sir, this is Samil Surendran from Argus Media. Sir, can you provide me your tonnage capacity in ferro alloys? What is your current capacity for ferro alloy? And after expansion, how much it would be?

Manish Sarda — Deputy Managing Director

Currently, we are 111 MVA, and after expansion, we’ll become 147 MVA.

Samil Surendran — Argus Media — Analyst

And sir, in terms of tonnage?

Manish Sarda — Deputy Managing Director

See, tonnage will depend upon the product that we choose to produce. If we choose to produce ferro manganese, our capacity will be roughly 240-odd-thousand tons. And if you don’t choose to produce ferro manganese and we choose to produce silico manganese depending upon the profitability and the pricing in the market, we should be roughly around 200,000 tons or close to 180,000 tons.

Samil Surendran — Argus Media — Analyst

Okay.

Manish Sarda — Deputy Managing Director

Because there’s a lot of play between power and ferro alloys. At times, we sell our power as well from Vizag, so that time we reduce our capacities also. So it all depends upon the best available profitability and pricing of products that we get at a particular given point of time.

Samil Surendran — Argus Media — Analyst

Okay, understood. Sir, basically overall, total capacity would be around 240,000 tons if you’re going to —

Manish Sarda — Deputy Managing Director

The installed capacity, if we produce — let’s say, in three furnaces, we produce ferro manganese.

Samil Surendran — Argus Media — Analyst

Is this about just the Vizag plant or other plants?

Manish Sarda — Deputy Managing Director

Even in Raipur also. If we produce — like suppose the pricing of ferro manganese goes up, we produce more ferro manganese, we’ll have more production.

Samil Surendran — Argus Media — Analyst

Okay. So sir, what would be overall total capacity of the plant, both plants including? If we talk about ferro manganese, that would be the most capacity you can produce.

Manish Sarda — Deputy Managing Director

Yeah, around 240-odd-thousand tons.

Samil Surendran — Argus Media — Analyst

Okay, sir. Okay. Thanks a lot for answering my questions, sir.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Niraj Mansingka from White Pine Investment Management. Please go ahead.

Niraj Mansingka — White Pine Investment Management — Analyst

Yeah, I just wanted to know how is the rainfall in the catchment area of Sikkim and how you see impacting it for Q3?

Pankaj Sarda — Joint Managing Director

Rainfall has been normal in that area overall, but now since the Q3 will — definitely be the offseason. So October has been reasonably well. Now, November, December, practically, it’s the rain season, so the capacity utilization presently has come down to maybe about 20, 25 percentage. It will gradually go down now. Until 15th March, generally rains are very, very low, so flow is very less in that.

Niraj Mansingka — White Pine Investment Management — Analyst

No, I asked it because rains have delayed, that’s the reason I asked for Q3.

P.K. Jain — Director and Chief Financial Officer

We got good comparatively. It was better as compared to the other periods. But November, December will definitely be a rainy season.

Niraj Mansingka — White Pine Investment Management — Analyst

Okay, got it. Thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Vivek Mehta, an investor. Please go ahead. Mr. Mehta, you could go ahead with your question. Mr. Mehta, your voice is not audible.

Unidentified Participant — — Analyst

Am I audible now?

Operator

Yes.

Unidentified Participant — — Analyst

Okay. So my next question is, sir, what is the total coking coal requirement per annum? What is the mix between captive and external? And do we purchased the balanced coal from Coal India or do we import from other countries?

Pankaj Sarda — Joint Managing Director

Our coal consumption at Raipur is about 1 million tons per annum.

Unidentified Participant — — Analyst

Okay.

Pankaj Sarda — Joint Managing Director

Maybe 50%, 60% we are — 60% we will be consuming from captive mines, remaining we are procuring from the linkages and some small quantity we use the imported coal also.

Unidentified Participant — — Analyst

Okay. Okay, thank you, sir. Thank you for the answers, sir.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Rajesh Bhandari, an investor. Please go ahead.

Unidentified Participant — — Analyst

Hello? Yeah, sir, I am — just one more question. From third quarter, our Vizag ferro allow production will start, we’ll be able to sell it from the third quarter itself?

Pankaj Sarda — Joint Managing Director

[Foreign Speech] By the fourth quarter, only we should consider as full production.

Unidentified Participant — — Analyst

And per annum capacity will be approximately 40,000 tons depending upon which product we are doing.

Pankaj Sarda — Joint Managing Director

Correct.

Unidentified Participant — — Analyst

[Foreign Speech] approximately 10,000 per quarter, we’ll be able to sell it in the market?

Manish Sarda — Deputy Managing Director

Yes, sir.

Unidentified Participant — — Analyst

[Foreign Speech] Means demand for ferro alloy is absolutely no issue, no problem.

Manish Sarda — Deputy Managing Director

In fact, if this war eases out and steel plants start back kicks — they kick in, they’re starting — all the European plants and all will start up, the demand will be actually quite huge.

Unidentified Participant — — Analyst

[Foreign Speech] Let’s hope it eases out as early as possible. Mainly [Foreign Speech]. And the realization also now onwards will be better for all the things, steel as well as the ferro.

Manish Sarda — Deputy Managing Director

We are very optimistic that the markets in India are very, very good, and globally also the Indian steel demand will be good because in the absence of the European steel cuts and the absence of exports from China, we are seeing that India will have an opportunity and everybody is looking towards India as an alternative good option —

Unidentified Participant — — Analyst

Alternative good option, yes, yes.

Manish Sarda — Deputy Managing Director

— to replace China.

Unidentified Participant — — Analyst

Our realization [Foreign Speech] compared to the earlier quarters?

Manish Sarda — Deputy Managing Director

It’s fluid. I would say, it’s a little fluid right now.

Unidentified Participant — — Analyst

Okay. [Foreign Speech] Thank you, sir. Thank you very much.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Suraj Kokate, an investor. Please go ahead.

Unidentified Participant — — Analyst

Hello. Sir, just wanted to understand how do you see the threat of rising steel imports in India. I think our prices are trading — the domestic prices are trading at healthy premium to the landed cost of import. So just wanted to understand what is driving this healthy premium in the market and is it sustainable.

Manish Sarda — Deputy Managing Director

Can you be more specific about your question as to which steel are you talking about.

Unidentified Participant — — Analyst

General steel product imports, HRC or coated steel products.

Manish Sarda — Deputy Managing Director

So we basically do not produce any flat products. We are into long products.

Unidentified Participant — — Analyst

Okay.

Manish Sarda — Deputy Managing Director

Okay? So we primarily would not be able to give you the correct picture of the HRC and the flat products, which are not being produced by us.

Unidentified Participant — — Analyst

Okay. Yeah, because you had highlighted that imports in the Q2 were on the higher side, so that’s why just wanted to get a sense of that.

P.K. Jain — Director and Chief Financial Officer

That was given from overall steel demand-supply perspective because if some import is happening to other integrated producers who are producing the flat products, they change their product mix that has a bearing on the overall domestic market. That was from that perspective.

Unidentified Participant — — Analyst

Okay. Fine, sir. Thank you.

Operator

Thank you. [Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. Pankaj Sarda for closing comments.

Pankaj Sarda — Joint Managing Director

Thanks. We thank all the stakeholders for their wholehearted support. The company has been able to report good performance on the strength of backward integration and diversification into hydro sector, which will continue to be the — our core strength of — which will continue to be core strength of the company. We hope we have been able to address most of your questions. The presentation made and the discussions held in the performance conference will help the investors to evaluate the performance in better way. Please feel free to reach out if you have any further questions. Look forward to connect again in the next con call. Thank you all.

Operator

Thank you. On behalf of Sarda Energy & Minerals Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.