Shyam Metalics and Energy Limited (SHYAMMETL) Q4 FY23 Earnings Concall Transcript

Shyam Metalics and Energy Limited (NSE : SHYAMMETL) Q4 FY23 Earnings Concall dated May. 25, 2023.

Corporate Participants:

Pankaj Harlalka — Head, Investor Relations

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Deepak Kumar Agarwal — Whole-time Director

Analysts:

Amit Dixit — ICICI Securities — Analyst

Ashutosh Somani — JM Financial — Analyst

Arijit Dutta — Kotak Mutual Fund — Analyst

Pruthul Shah — Anubhuti Advisors — Analyst

Raj Ojha — Individual Investor — Analyst

Mulesh Samra — Shah and Samra — Analyst

Nirvana Laha — Individual Investor — Analyst

Nachike Kale — Orient Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Shyam Metalics and Energy Limited Q4 FY ’23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Pankaj Harlalka from Head IR at Shyam Metalics. Thank you and over to you, sir.

Pankaj Harlalka — Head, Investor Relations

Thank you, Seema. Good evening and warm welcome to all attending the conference call of Shyam Metalics and Energy Limited which is for the fourth quarter year ending FY ’23 and for the full year ending FY ’23. We have on the call Mr. Brij Bhushan Agarwal, our Vice Chairman and Managing Director; and Mr. Deepak Kumar Agarwal, Director, Finance and CFO of our company.

So before we start the presentation Q&A, I just wanted to remind you that the discussions today will be covered under the safe harbor statement, which is in the second slide of our presentation. Hope you have had the time to read and go through the same.

We’ll now start the con call and I would like to hand over this to our Vice Chairman and Managing Director, Brij Bhushan ji. Over to you, sir.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Thank you, Pankaj, and very good evening and warm welcome to everyone who is attending this call. The past year for us has been a year of adaption and adoption. With the multiple challenges in the geopolitical crisis leading to be regime of high energy cost, nevertheless continuous learning both at the management and the team level. Despite the same, we have been moving along well and achieving overall growth at our company on the back of continuous growth and expansion. We have been reaping the benefits of moving up in the value chain from the integrated steel chain business.

Improving sales mix, revenue shares of pellet, sponge, billet has reduced from 63% plus in FY ’19 to 31% in FY ’23, which shows that we had been always value adding our product and trying to increase the realization from getting into a better market and price right. Going forward, this share will be further reduced to 25% over next two years. Our finish steel has improved from the contribution of 17% in FY ’19 to 48% in FY ’23 to our revenue. This will sustainably improve our company profitability.

While the steel prices faced headwind during the year, our company has maintained healthy cash generation. It has been year of a brownfield expansion at our existing plants and also a year which opened a new avenue for us in the first year of the operation in the aluminum foil plant. Today around 2 lakh ton of aluminum foil are imported in India. Our venture in this business is targeted towards import substitute. We are able to do a volume of around 11,400 tons approximately and the average foil billing has been in between 6 to 13 micron making us a very extremely specialized and niche player in the niche industry and a complete different product.

Our products are well accepted worldwide and we are exporting more than 60,000 ton of — 60% of our production what we are doing today. The monthly run rate is now around 1,500 tons and the realization is around INR3.5 lakh per ton. On the CRM plant, work is underway at a full swing in our subsidiary company, Shyam Flat Products Private Limited. The product is very extremely interesting as it will build to add more value in our supply chain management. As we all know that the long product dealers, distributors where we have a very strong hold, we will be able to maintain the same supply chain management and we’ll add lot of value in our new business as well as we’ll give more sustainability in our existing business.

This project is approved under the PLI scheme. Once the production is on scheme, we shall add new products to our expanding distribution channel. Similarly, a separate team has started working on the Ramsarup expansion and we are confident of meeting all the target timeline as it has been showcased by our company in the past. The low carbon ferro-chrome facility is also ramping up and contributing further to the top line growth during the last quarter and we expect it to be completely stabilized in year FY ’24.

Our Mittal Corp acquisition will benefit from the backward integration of the existing business and will help us to capture a large part of the value chain in the stainless steel business. As we all know, the stainless steel — the major is raw-material and the ingredient is iron, power, ferro-chrome, ferro-manganese. And I am very proudly — today I can share that more than 90% of the product mix in making stainless steel as a immigrant is going to be a backward and forward. Integration to our existing setup.

We have also been working towards the long-term vision of the company scouting for the good value assets in terms of iron ore mines and coal block. We have been able to identify and get iron ore mines in Maharashtra, Sundarban, which is spread over a 1,526 hectare and contains rich quality of added in excess of 56 Fe content. We also would like to state that generally in the Orissa iron ore mine, the grade are very low and the fine valuation is in the tune of around 70% to 75%, but the mines what we have been allocated held 70% — around 65% to 70% land and are very extreme Fe content.

We have received a composite license as of now, which has more than 10 years to start the extraction for the field. We intend to use the exploration period before we decide the final usage of the material, but potentially having consistent access to high quality resources can have invaluable synergy to our steel business. We will share more detail once we have further clarity on the material inability and quality. The ongoing growth project and the recent acquisition are integrating well within our overall strategy of the efficient and low cost growth.

The capex outlay for FY ’23 were around INR1,579 crores and based on the existing plan, we emphasize the total capex of INR1,500 crores in FY ’24. With the expansion of our product portfolio, increase in the production capacity, we expect to fund most of the upcoming capex through the internal accruals and continue to retain one of the best credit rating in the metal sector. We remain committed to our philosophy of automating and vision to become a diversified metal company through our disciplined approach.

Thank you. Thank you, Pankaj.

Deepak Kumar Agarwal — Whole-time Director

Thank you sir. A very good evening to all. I’m going to review of the reported consolidated financial for the quarter under review and for the year ended as the financial year 2022, ’23. On a consolidated basis, the company for the fourth quarter reported an operating revenue of INR3,380 crores that is a growth of 18% over the quarter four of financial year 2022. Like in the previous quarter, in quarter four, we have been able to sale higher percentage of volume sale of finished steel at a higher realization, which has enabled the company to grow in terms of revenue and EBITDA over the previous quarters. As a result, our EBITDA for the fourth quarter on a consolidated basis was at INR413 crores, a growth of 86% over quarter three of the current financial year and degrowth of 38% over the quarter four of the last financial year.

Just to drive home the point, we grew raw material cost to operating revenue ratio in percentage terms which has been decreased by 160 bps in quarter four of the current financial year over the previous quarter. We have reported a good EBITDA in quarter four of the current financial year in comparison to the previous quarters. In order to maintain this growth and EBITDA numbers, we have been judiciously and cautiously on all other cost components. For the quarter four of the current financial year on a consolidated basis, we reported a EBITDA margin of 12.2%, an increase of 460 bps over the previous quarter on the backing of all — also better realization across all set of segments ranging from 3% to 18%.

For the year ended [Indecipherable] for the financial year 2023, we reported a total revenue of INR12,610 crores and a growth of 21% over the last year. On the EBITDA front, our company reported an EBITDA of INR1,486 crores against INR2,600 crores for the year ended last financial year that is ’21, ’22 with a downside of 43%. As you all are aware, the financial year 2022, ’23 totally a geopolitical crisis and the imposition of export duty on all our metal products. We have reported a net profit degrowth of 51% for the year over the previous year. We could achieve our margin owing to the increase in our steel volume growth with an capital allocation policy and buying key raw materials at the right time basis on our experience.

We’re also focused on improving the product mix which look to implement the blended realizations and concurrently improving the operational efficiency, the cost optimization and utilization of efforts, which enables us to report a good and consistent set of operating profit and net profit. We have achieved a good improvement to our working capital days. For the financial year 2023, our working capital days is at 24 as against 43 days at the end of the financial year 2022. Finally, we achieved a massive improvement to our capital efficiency during the first half and the same trend is being attributed. Our return on capital equity and return on equity at the end of the financial year 2023 are 15% and 14%, respectively.

The gross debt which was at 0.09% at the of the financial year 2022 is slightly higher at 0.18% at the end of the financial year 2022, ’23. Our net debt position is INR448 crores as on 31 March, 2023 and we have also the long-term investment worth of INR910 crores, which has not been considered for having the net debt position. Moreover, an amount of INR201.1 crores is attributable to our joint venture partner in the case of Ramsarup Industries Limited.

And on the cash flow statement, you can look out for the financial year 2023, we incurred capital expenditure of INR1,579 crores as against INR940 crores in the financial year 2022. In addition, we incurred INR379 crores for the acquisition of Ramsarup Industries Limited from the net cash flow operating activities of INR1,507 crores during the financial year 2022, ’23. We have mostly spent on the capex undertaken at our company. I’m glad to share that the financial risk profile of the company is very, very strong and our strategy has always been to incur the capital expenditure in a smaller project in peaceful manner where we feel that the balance sheet is [Indecipherable] state.

At all points of time, we closely monitor the liquidity, solvency and capital efficiency ratio. I would like to assure you that the company obtained a healthy financial risk profile despite the sizable capital expenditure plans. Out of the INR3,950 crores of capex announced during the IPO and further capex in the March, we have already incurred INR3,007 crores for the financial year 2022, ’23 and capitalized INR1,574 crores worth of assets. We have completed almost 75% of our total capex. The remaining INR955 crores shall be expended overall mid year next three years and the [Indecipherable] to be completed in this financial year. We spent INR1,579 crores on the capex this year and for the mix capex additional spend will be INR1,300 crores to INR1,500 crores.

On the announced plant for Ramsarup industries, we have incurred a capex of INR77 crores till March ’22, ’23, out of which 60% of that capex accounted INR46.20 crores funded by us and the rest by the noncontrolling joint venture partner. We have our CRM plans. We have incurred a capex of INR53 crores. We also expect and will go up INR351 crores approximately towards the completion of our acquisition of Mittal Corp during the financial year 2023, ’24 aided by the internal cash generation and sufficient liquidity surplus, which will ensure we take only limited days indulgent to fund flows [Indecipherable].

I would like to share with us the bank limited utilizations at the consolidated period is expected to remain moderate going forward. Annual cash accrual should suffice for the capital requirements and debt repayments. [Indecipherable], we have been following a prudent capital allocation policy by which 70% of the capex generation, cash generation is invested back into the business, 20% in retail to maintain our liquidity surplus and 10% is returned to the shareholders as a dividend payment.

On the back of good operating and financial performance with a strong net cash flow from operating activity of the company, yesterday’s Board meeting declared an interim dividend of INR1.8 per share amounting to an out grow of INR46 crores and also as this is announced that we have also implemented that SME short and [Indecipherable] scheme with an approved — previously approved at the AGM of the company for the share at an option 13,35,000 equity shares taken from the distilled promoter shares comes to around 0.5% of the issues share of the company. This will go a long way to create a growth for our partners and retain the great talent pool in our company.

Now I’ll conclude my portion of updates and the floor open for the question, answer session. Thank you, everyone.

Questions and Answers:

Operator

[Operator Instructions] We’ll take our first question from the line of Mr. Amit Dixit from ICICI Securities. Please go ahead, sir.

Amit Dixit — ICICI Securities — Analyst

Yeah. Hi, good evening, everyone, and thanks for giving me the opportunity. First of all, congratulations for a good set of numbers and the turnaround performance as well as taking the initiative of putting operating numbers every month on the [Indecipherable]. That’s very helpful for us for tracking the company. Two questions I have. The first one is essentially on the number of ag tech [Phonetic] that we are working on including Mittal Corp acquisition — sorry, Mittal Corp integration and the ramp-up of low carbon ferro-chrome project along with we expect that this year by June the steel capacity should also come up. So what kind of revenue growth shall we expect in FY ’24? And what is the target level of EBITDA margin that we should pencil in? That’s the first question.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

See low carbon ferro-chrome is extremely niche product like it’s completely POU business and it is a very high tech from the terms of the technologies and the process side. Since we have commissioned first furnace in NCSE [Phonetic], we have stabilized now almost 80%, 85%. And with the expectation we are able to now gain the desired results. Now from the prospect of revenue side, I can say that if you are doing, say, around 5,000 tons a month, today, around INR100 crores revenue we can generate additionally from the NCSE. Simultaneously, it’s a very high value-added product, like it’s almost 30% to 40% more. I would say it’s almost double — more than double the value of the ferro-chrome.

This business generally enjoys an EBITDA of around 20%, 25% the product side. So this is going to add a very good value. And also the beauty of this product is it is a forward integration of our ferro-chrome. So we don’t have to buy the raw material. So if you talk in the terms of carryover of the inventory cost and all, it is hardly negligible. And number two about your Mittal Corp, see, this is [Indecipherable]. It’s an Italian plant, one of the top of the line in the country. It is right not doing some conversion of Kalyani –Baba Kalyani in the defense, they are doing some product rolling in Mittal Corp as well. So this stainless steel overall from next year is going to generate a revenue of around INR70 crores to INR80 crores.

This year might be we will be doing say around INR400 crores to INR500 crores because it is a plan where we have to do a lot of modifications since this was under the NCLT, lot of wear and tear has been observed. And with today’s time, we’re upgrading the technology, which is not a very major issue, but this plant is going to come in full stream by next year. The beauty of the Mittal Corp is they have a stainless steel PMT facility and PMT is our product. Why we choose Mittal Corp? First of all, we are adding more value in getting into the stainless steel and stainless steel TMT.

If you see probably TMT side, none of the company in the country today is doing TMT. Some client like has tried that we are not very premium. They had lot of politicians. And today NHI and lot of government, other organizations who are doing coastal projects, they are notified to use PMT and they are getting it regulated in the system because now they know the plant is in full swing. They will be able to get it and with our technical presentation, we have been given a comfort from their end like whatever this policy, they were not very stringent is going to be very strong in the time to come.

Apart from that, if you see the stainless steel, what we will be doing in Mittal Corp is majorly of 200 series, right, because first of all, 200 series doesn’t attract any nickel percentage. Number two, whatever ferro-chrome, ferro manganese, iron and power is required going to be consumed from our existing plant. So it’s almost like going backward integration. So this is a very great synergy as adding a new product, getting into more value-added product, getting into more supply chain business and it does it really. We are in the wire rods. We are in the long product business. We have a customer who consume stainless steel wire rod and carbon steel both. So we are making our strength in the terms of the product basket and also increasing the numbers, bottom line as well as being a great risk management from the product mix side. Thank you.

Amit Dixit — ICICI Securities — Analyst

Thanks for the elaborate answer. The second question is essentially on iron ore mine that we have acquired the promoter company. Now while I understand from your opening remarks that the Fe content is really very attractive, but first of all, what are the timelines for starting this mine? And what is the strategy going forward, whether you will transport C4 all the way to your plants in Orrisa and Bengal or you will sell it over here and do that kind of logistics hedge?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

See first of all, this is a very interesting question. And we are ourselves contemplating a lot on the discussion. So — but whatever we have right now, we are working on — I’m just sharing my thought processes. Iron ore is a very rare resource and most of the mines in the country right now is below 60%. So getting a mine of 66%, 67% is a great achievement from the company side. Number two, it doesn’t have a challenge of a land acquisition because the complete land is under the forest. And with the government policy of converting the forest land into normal mining land is not a problem.

Had this been a individual aggregator, it would have been really difficult to start the mine. This mine has a very high grade ore. And if you are able to use this kind of a grade of ore, your coke consumption, your carbon consumption, the CO2 emissions, when we are talking of, the product quality, everything changed drastically. We are now 10 years like the concerns what we have got has a deadline of 10 years. So we are not in a hurry. We have done the initial survey. One on the mines is already operating enjoying the common boundary. So the material is very well good, very established. The resource is very beautiful. There is no doubt.

We have a railway siding 80 kilometers down from that mine. So we can transfer the lines to a railway and can transport over Orrisa plant. Since we are such a high grade ore and with the lump quality, it’s not fine. Generally getting 70%, 65% fine from the mine is something which is very, very there. So it is going to add lot of value, but we are still under the due diligence stage. Lot of homework we have to be once we would do a detailed explanation, risk them in the field, total business plan. So we are not in hurry and it is not going to consume a big capex from the company side.

So it’s a very nominal entry on the allocation side has been committed and maybe some little bit more we have to spend in next one year on the exploration. So we will not be able to take any call on our concrete plan till we do a complete due diligence, exploration, strategy working and then we will be able to share it. But yes, it’s not kind of any kind of a risk we are going to carry over. And whatever call we are going to take is going to be something, a good value for the company side. Thank you.

Amit Dixit — ICICI Securities — Analyst

Great. Thanks a lot and all the best, sir.

Operator

Thank you, sir. We’ll take the next question from the line of Mr. Ashutosh Somani from JM Financial. Please go ahead, sir.

Ashutosh Somani — JM Financial — Analyst

Thanks for taking my question. Sir, the revenue profile which you mentioned for Mittal Corp, what is the capacity utilization that you are foreseeing in FY ’24, ’25? And what is the margin profile one should be looking at for this business in ’24 and ’25. That’s my first question. The second question is, what’s the size of the gross net here and whether we include any debt for Mittal Corp? And what are the working capital requirements, sir.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Hi, Ashutosh. See, the capacity of this plant is presently around 1.80 lakh to 2 lakh ton per annum. But we can easily make up to 2.5 lakh ton with technical study. But I would not like to go all out on the commitment side. We presume that in the coming year, we will be doing around 1.5 lakh ton of steel. And when we are talking from the margin side, to be — it has a great product mix like we are putting the downstream the wire — milling plant and which is going to be commissioned by end of this year. So it will have a different product mix like we expect in that 50,000 to 60,000 tons we’ll be able to do of stainless steel TMT, which is extremely niche. It generally generates an EBITDA of around 15,000 to 20,000 tons in two days time. And in the time to come bit of a general if I’m very prudent on the numbers, I think we should be able to do EBITDA of around INR150 crores average from next year onwards.

Ashutosh Somani — JM Financial — Analyst

Sure. And so on the balance sheet side, if you have assumed any debt or…

Brij Bhushan Agarwal — Vice Chairman and Managing Director

No. Deepak can you just share on the balance sheet side and all if you have any?

Deepak Kumar Agarwal — Whole-time Director

Yes. As far as acquisition cost is concerned, we are incurring around — we will be incurring around INR351 crores that will be throughout internal accrual. And if the working capital requirements between INR150 crores to INR200 crores for this financial year and that will be from the banks.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Majorly we are going to contribute. In the time to come, we are going to integrate our downward. So overall, it is not going to have a mass working capital requirement. The feral of inventory management what we are carrying over is going to be converted to stainless steel. But yes, we will be having a free margin of around INR150 crores in the business.

Ashutosh Somani — JM Financial — Analyst

Sure. And sir, if I can squeeze in another question. On the iron ore plan, what is the mining plan for the year and how much are we looking at in terms of tonnage for fiscal ’24, ’25?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

No. We have no — any target for ’24, ’25 because we just have got a LOI. So these kind of mines are emerging mines which will take its own course of time, maybe once we do a complete thorough due diligence, we’ll be able to not share. But we have enough time, 10 years we have to start the mine. It may be around — eight to nine months will take to do the survey, satellite survey and lot of — so it will take its own time, maybe end of next — this year quarter we’ll be able to discuss about the iron ore funding plans.

Ashutosh Somani — JM Financial — Analyst

Sure. Understood the stage of it. Thanks. Thank you, ji.

Operator

Thank you sir. We take the next question from the line of Mr. Arijit Dutta from Kotak Mutual Funds. Please go ahead, sir.

Arijit Dutta — Kotak Mutual Fund — Analyst

Hi, sir. Good set of results. Congratulations for that. Sir, a few questions. Starting with iron ore block, it is also 126% premium. Initially, we thought that we will not participate in the mining option because the premiums are closing. Why we have undergone to such extent of 126% premium because it can be — even if the grade is higher, it will be on the higher grade on the premium that we have to pay?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

As usual, you always play a googly, Arijit. See, I’ll tell you this is a very high grade mine, 66%, 67% lumps. Your mining cost is very less, number one. Number two, your overburdened is hardly anything. And when you are carrying over 66%, 67% lumps through a plant, the strategy completely changes. If I’m talking this mines with 66%, 67% and the value of 125% across just to say in the general auction, it could not be more than 80% to 90% with a carry over of the quality, with the carryover of the lumps, with the carry of the mining cost. But still I totally appreciate. We will do a detailed working. We have just got an LOI. The risk carryover is hardly negligible.

We will have our complete mining plan totally thoroughly due diligence by the best of big poll. We will definitely like to evaluate and take a next course of action. But this is mine is very special, extremely special in the terms of quality. Land challenges are not there. The government wants to develop this mine. It is in Maharashtra. The government is very good and the alumina silica content is also very low. So overall, the impact of this material down the planned furnace is going to be something extremely on the better side. But yes, still we don’t go in 1,000% detail. We will not be going ahead in full go. We need to do a due diligence and then we will take a final call. Thank you.

Arijit Dutta — Kotak Mutual Fund — Analyst

Thanks, sir. Sir, if I remember in 2021, we have sold some subsidiaries because we want to clean our books, hardly any promoter entity overlap you wanted in the company. Then why a 49% stake we bought through a company where the promoter has interest in stake, why again the complication?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

About the mines?

Arijit Dutta — Kotak Mutual Fund — Analyst

Yes, sir.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Yeah. Deepak will be able to share. Deepak, can you just share?

Deepak Kumar Agarwal — Whole-time Director

Yes sir. Yeah. Mr. Arijit, as you know, the government has come up with on a regular basis mining option. What we do, we are participating in a regular basis for application for mines which require more of network requirement and which is easily available from automotive, NBFCs company. One the risk analysis is completely done and evaluate by [Indecipherable] management team and once the update is in our favor, we shall ensure to bring all right to the operating company, which is basically only to maintain secrecy and participation as a part of our business strategy. There is no such intention to have any related party transactions.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Because most of the mining bid what we do, we create a subsidiary. We don’t want to disclose the identity of our organization because once you disclose, you’ll see a different competition jumping into this and all this mining due diligence and all, we are very secretly and very, very closely we are monitoring it. So these are the reasons. And once we are getting anything, we are disclosing the projection. We can’t share anything in the past that we have got and we have not declared. So this also clarifies the clarity and the intention of the company while we are doing this and once there is any development we have informed the stock exchange.

Arijit Dutta — Kotak Mutual Fund — Analyst

Sir, all these things could have been done in a wholly owned subsidiary also and just…

Brij Bhushan Agarwal — Vice Chairman and Managing Director

That also has been tracked because the people who are doing the mining, who are applying for the mines and all, they also track the shareholder list. They also track the — they go into much of details. There are many of issues. So once you are doing the mining option, participating, lot of strategy you have to follow. So it is a part of our strategy. [Speech Overlap] We don’t put everything in the system. It is done.

Arijit Dutta — Kotak Mutual Fund — Analyst

Okay. Now we got the mine, anything that we would like to go so that it will be under wholly owned subsidiary kind of thing?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

No, not at all. We have not got any mines. And if there is any development in the time to come in the interest of the shareholders, in the interest of the good corporate discipline, it will be very well. It will be stated and declared and with our investors.

Arijit Dutta — Kotak Mutual Fund — Analyst

Understood. Sir, my second question is on the cash flow. Sir, there is a INR380 crores outflow that is fair in the cash flow, it’s written that acquisition of subsidiary. If you can clarify which subsidiary and what is its nature?

Deepak Kumar Agarwal — Whole-time Director

Yeah. Mr. Arijit, the cash outflow for acquisition of subsidiaries, it is mainly in deployment in our subsidiary Ramsarup Industries Limited.

Arijit Dutta — Kotak Mutual Fund — Analyst

Okay. So the Ramsarup payment has been — so Ramsarup we are addressing as a subsidiary, not acquisition of method?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Yeah. Total the acquisition cost of around Ramsarup is INR380 crores.

Arijit Dutta — Kotak Mutual Fund — Analyst

Yes, sir.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Yeah. So we are incurring acquisition cost of Ramsarup is INR378.99 crores, which is 100% our acquisition cost. Well, if you see in the cash outflow for financing activity, there is a non-current borrowing of INR200 crores from our joint venture partner. And our contribution approximately is INR240 crores. If you see in the cash flow statement in the down — in the below line cash flow from financing activity, there is a proceed from non-current borrowing of INR205.96 crores, which has come up from the joint venture partner. We’re [Indecipherable] INR200 crores from this acquisition cost, our contribution is approximately INR200 crores.

Arijit Dutta — Kotak Mutual Fund — Analyst

Very clear. Also in the balance sheet, there is a minority share. The minority share balance has sown to almost like INR386 crores versus INR4 crores last year. Even if we look at the P&L, there is a negative loss of INR9 crores that is going to minority. So if we can reconcile how focused the coming INR386 crores in the minority accounts?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

If you see, we are consolidating our total asset block of Ramsarup in our Shyam sale as 100% and we assume 40% of non-controlling interest as minority share of around INR386 crores something. You are asking why this has been reduced from INR400 crores to INR386 crores, right? INR4 crores to INR386 crores, right?

Arijit Dutta — Kotak Mutual Fund — Analyst

Yes, sir.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

This is only because of the difrrences — this is equivalent to 40% of the [Indecipherable] is basically.

Arijit Dutta — Kotak Mutual Fund — Analyst

40% will be 40% INR380 crores, right sir?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

No. 40% of INR380 crores is not 40% of INR380 crores. We are consolidating the existing assets of — asset block of Ramsarup in our operating company, which is around INR1,000 crores to INR1,100 crores.

Arijit Dutta — Kotak Mutual Fund — Analyst

Okay.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

And out this INR1,000 crores and INR1,100 crores, the 40% is contributing approximately INR400 crores.

Arijit Dutta — Kotak Mutual Fund — Analyst

Okay, understood. And Ramsarup capex guidance of INR750 crores is still there and there is any change to it?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

No, it is still there and we have already incurred INR77 crores till 31 March, 2023.

Arijit Dutta — Kotak Mutual Fund — Analyst

Understood. That’s it from my side, sir. All the best and thank you, sir.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Thank you.

Operator

[Operator Instructions] We take the next question from the line of Mr. Pruthul Jitenbhai Shah from Anubhuti Advisors. Please go ahead, sir.

Pruthul Shah — Anubhuti Advisors — Analyst

Yeah. Thank you for the opportunity and congrats on great set of numbers. My question is with respect to the volume. So this year, we have around 5% Y-o-Y volume growth for full year and our long product volume has grown by 41%. So just wanted to have the idea that what guidance you want to give for next year with respect to total volume and volume of your product?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Yeah. As far as say volume is concerned, this year on Y-o-Y basis from 2022, ’23, our total sales volume reached 2 million tons and we’re expecting that the long steel still sort of be comprising of long product, billets and strong [Phonetic]. We are targeting to sell 2.4 million ton for the current financial that is ’23, ’24.

Pruthul Shah — Anubhuti Advisors — Analyst

Sir, can you repeat 2.4 million tons for?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

2.4 million ton of our total steel volume. And when we talk about the 2.4 million ton, we are targeting 1.5 million ton of long product and rest will be steel, billet and sponge. So approximately, we are targeting 15% growth here, 15% to 17%.

Pruthul Shah — Anubhuti Advisors — Analyst

Okay. [Technical Issues] volume. Hello?

Operator

Mr. Pruthul, your voice is breaking up, sir.

Pruthul Shah — Anubhuti Advisors — Analyst

Hello, am I audible?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Yeah.

Pruthul Shah — Anubhuti Advisors — Analyst

Yes. I’m just asking that 15% to 17% growth is on for total volume including the steel and long product, [Indecipherable] volume.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Yeah. Majorly, it will be in the long product.

Pruthul Shah — Anubhuti Advisors — Analyst

Okay. So like say total volume can grow at 15% and long product can even grow at 20% plus?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

We expect that it should be around 15% to 17% this year.

Pruthul Shah — Anubhuti Advisors — Analyst

Okay. Got it. And sir, one question with respect to tax rate. So in this quarter, the tax rate has been lower. So what’s the reason for that?

Operator

I’m sorry to interrupt you Mr. Shah, your voice is breaking up, sir.

Pruthul Shah — Anubhuti Advisors — Analyst

Yeah, am I audible now?

Operator

Yes, please go ahead.

Pruthul Shah — Anubhuti Advisors — Analyst

Yeah. My question is with respect to tax rate in Q4. So what was the reason of this lower tax in this quarter?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

As far as tax is concerned in the fourth quarter, why it is so low, because we anticipated in the first quarter of the last financial year there that we anticipated that we will getting more profit and we are positioning our tax provision in the last — first three quarters on old region basis — new region basis. But after completion of our fourth quarter, we feel that we will not be converting our tax regime from old to new regime. We will stay with the old regimes. That’s why the adjustment of last three quarters in the fourth quarter.

Pruthul Shah — Anubhuti Advisors — Analyst

Okay. So we have the old regime fully and for FY ’24 also, we are guiding for around 30% tax rate.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Not 34%. For the current financial year, definitely, it’s all [Technical Issues] we will be — we have an option, whether we will continue with the old regime or we will fuel for new regime.

Pruthul Shah — Anubhuti Advisors — Analyst

Okay. So what would be the tax guidance for FY ’24 then?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

It will in the same 27% to 30%.

Pruthul Shah — Anubhuti Advisors — Analyst

Okay. And sir, wanted to know the current realization of the — Hello. Yeah, am I audible?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Yes.

Pruthul Shah — Anubhuti Advisors — Analyst

Sir wanted to know the current realization of the products from pellets, sponge iron and billet, long products.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Whatever the current realizations [Technical Issues] is approximately INR9,000 per ton. Sponge iron is in between INR27,000 per ton. BIllet realization is currently going on INR43,500, INR44,000. Finished steel realization is between INR52,500 to INR53,000 and steel realization INR90,000 to INR92,000 per ton.

Pruthul Shah — Anubhuti Advisors — Analyst

Okay, sir. Thank you so much. That’s it from my side.

Operator

Thank you, sir. We take the next question from the line of Mr. Raj Ojha, an Individual Investor. Please go ahead, sir.

Raj Ojha — Individual Investor — Analyst

Am I audible?

Operator

Yes, sir.

Raj Ojha — Individual Investor — Analyst

Yeah. Thank you for this opportunity. So my first question is about the aluminum business. It is good to see the aluminum plant getting operationalized in record time. So what are your plans to scale up the aluminum business?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

At present, we have just stabilized the plant. There’s is a good demand. Right now, we are operating at around 55%, 60%. We have to bring it to 90% because the complete plant is streamlined, all the R&D whatever development activity has to be done. So we are trying to develop new products within the existing plant only. We are trying to put up a lubricating line, which is — again generates a good income and a good product base in the aluminum space. And presently, we are working right now, but not very concretely I’ll be able to spell everything now. Still able to operate this at 90% and once we are done, then we will discuss about the expansion of the new aluminum business.

Raj Ojha — Individual Investor — Analyst

Sure. Also in FY ’23, our tonnage was around 11,300 metric tons. So like can you give some information about the tonnage in FY ’24, what can we expect in FY ’24?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

We are expecting somewhere around close to 17,000 to 18,000 tons.

Raj Ojha — Individual Investor — Analyst

Okay. Yeah. Thank you.

Operator

Thank you, sir. We’ll take the next question from the line of Mr. Mulesh Samra from Shah and Samra [Phonetic]. Please go ahead, sir.

Mulesh Samra — Shah and Samra — Analyst

Hello. Good evening, and thanks for taking my question. Sir, can you give little more detail on our plant under PLI scheme? I mean, what is the incremental turnover required? How many years we are going to get the incentive and what is the total expected incentive out of that plant?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Around INR2 crores to INR2.5 crores is between overall commercial value. I’ll not be able to spell out very elaboratelu because I just know the overall ballpark number. The advantage we are going to get for almost five years. And like in the terms of value, if you ask, we should be able to generate more than INR20 crores to INR25 crores additional in the terms of PLI benefit every year. So it should accumulate INR100 crores.

Mulesh Samra — Shah and Samra — Analyst

Okay. So in all about INR100 crores we can expect from this plant by way of PLI scheme incentive?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Yeah, very correct.

Mulesh Samra — Shah and Samra — Analyst

Okay. And related to sir, just answer to the aluminum plant, you said you are expected to do about 70,000 to 80,000 tons of aluminum in FY ’24. Have I heard correctly?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

No, 17,000 to 18,000.

Mulesh Samra — Shah and Samra — Analyst

70,000 to 80,000…

Brij Bhushan Agarwal — Vice Chairman and Managing Director

17,000.

Mulesh Samra — Shah and Samra — Analyst

17,000 to 18,000.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Yeah.

Mulesh Samra — Shah and Samra — Analyst

Okay. No, but we have total capacity of 40,000 tons and you said that we are operating at about 55%, 60% and we are likely to reach to 90%. Then we should be able to reach — cross at least 20,000 per ton — 20,000 tons per year.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

[Technical Issues] on the micron. We are having a very thinner base. Generally, the 40,000 ton capacity is on the average micron size of around 18 to 20 micron. Our average is 6 t 9 micron which stretches more than INR40,000 to INR50,000 per ton EBITDA. And it’s very specialized to us. On the return on per hour basis on the tonnage side, this multiply 1.4 times on the other side. This is the area where we are focusing. This includes our EBITDA and to get into a deeper and higher product margin.

Mulesh Samra — Shah and Samra — Analyst

Okay. And most of that is exported or it is consumed locally?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Export, more than 60% is exports.

Mulesh Samra — Shah and Samra — Analyst

Okay. And is there any difference in the realization in export against the local sell?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Export has much better realization. Our more than 80% of the export is in USA. This is a very specialized because there we have obtained an FDA approval. It has been used by a company who are making exclusive and they require foil as part of — so it is a very high value-added business what we have been able to develop. And this the reason why our margins are good and it is extremely very, very different quality in the terms of general material because there is lot of things on the quality side, in build, the sustainability quality, quality of this. So we have been able to achieve every parameter. Our focus is going to be majorly in the export in the time to come. So maybe…

Mulesh Samra — Shah and Samra — Analyst

Looking at these high value accretive products and backward and forward integration, can we expect our margins to come back to our FY ’22 level or you feel still there is a time to reach to ’22 level? We had EBITDA margin of about 25% in FY ’22, blended EBITDA margin.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

We are following the industrial standard if you see. If there is a correction, the finished price, the raw material price, if you take GSW, if you take Tata Steel, also it affects us also. It will not be right for us to state that we’ll be able to generate 24%, 25%, but we have to follow the market trend and the market scenario on the pricing side.

Mulesh Samra — Shah and Samra — Analyst

So sir, looking at the current market trend and the competitive landscape, what do you feel is the achievable level?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Very difficult. This is a question which is very difficult at this point of time because we are — all these products, raw material is highly volatile. And today at the geopolitical crisis where we are all suffering would not be right. So I would — whether maybe second quarter, we’ll be able to realize more better. At this point…

Mulesh Samra — Shah and Samra — Analyst

Okay. I thought that if you have any aspirational numbers with you or you must have some internal targets. So I just wanted to have some color on that.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

My target is not the appropriate for me to discuss in forum. We have always worked on the higher targets. But when we are talking in this forum, we have to be very prudent and very disciplined on our values. I believe in this.

Mulesh Samra — Shah and Samra — Analyst

I appreciate. Thank you so much. And sir, one small clarification, we have to reach to about 75% promoter holding. So any plan on dilution to the equity in the near future?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Yeah. The team is working. We have time. We have now more than a year and we’re looking. Once we are done with the final strategy, we’ll share every detail.

Mulesh Samra — Shah and Samra — Analyst

All right sir. Thank you so much and wish you all the very best.

Operator

[Operator Instructions] We take the next question from the line of Nirvana Laha [Phonetic], Individual Investor. Please go ahead.

Nirvana Laha — Individual Investor — Analyst

Hi, good evening. Thanks for the opportunity. If I did not hear wrong, I think you said that you have 10 years to operationalize the iron ore mine. So this is 10 years for the lease duration, 10 years for you to start operation?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

We have got these 10 years like once they have given the concern within 10 years we have to start the operation. [Speech Overlap] is more than 15 years. I don’t think there’s any concern on this.

Nirvana Laha — Individual Investor — Analyst

Okay. 15 years. And is there a theoretical capacity of iron ore from the mine that you’re aware of that you know?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

It has been estimated around 300 million tons, but still we have to do a lot of research and evaluate. So the tentative number should be around 250 million to 300 million tons.

Nirvana Laha — Individual Investor — Analyst

Got it. And a few questions on the accounting side. So the Q4 depreciation was lower than that the Q3 depreciation. I’m just curious with assets coming online how that happened.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

As far as because in the Q3 a lot of projects has been commissioned in the quarter three. But in the quarter four, none of the plant has been commissioned in the quarter four.

Nirvana Laha — Individual Investor — Analyst

Yes, sir. But depreciation should not — I mean, not increasing, it’s fine, but decreasing is a little — I couldn’t understand how it decreased from INR132 crores to INR126 crores.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Only because of the written down value. Depreciation — as you know fourth quarter will be written down value from the third quarter. And most of that coming plant has been commissioned in the second quarter and third quarter.

Nirvana Laha — Individual Investor — Analyst

Got it. So the fixed asset addition that happened in H2 was only around INR300 crores. That’s what I can see. So I think in this quarter in Q1, there will be a large capex addition. Are you in a position to tell how much can get added in Q1?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

In the first quarter of the current financial year, most of the asset will be commissioned.

Nirvana Laha — Individual Investor — Analyst

Okay. And any number that you can tell right now?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Yeah, it is 1.2 million tons which is approximately INR250 crores and INR90 crores is out of [Indecipherable]. One is also commencing in the first quarter, it will be capitalized approximately INR500 crores.

Nirvana Laha — Individual Investor — Analyst

Okay. Final question from my side. So the cash flow statement, if I look at the half yearly number, the plant PPE investment there was around INR2,130 crores and for the full year that number is showing up as INR1,579 crores. So it appears that purchase of PPE number has dropped over the — from half year to full year. So could you explain this?

Brij Bhushan Agarwal — Vice Chairman and Managing Director

I have to keep in the half year number. I don’t know right now. Let me see if I have.

Nirvana Laha — Individual Investor — Analyst

Because the half year number purchase of PPE is INR2,130 crores and the same numbers for the full year is INR1,579 crores.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

[Indecipherable] definitely share, just share this number in the chat box or [Indecipherable].

Nirvana Laha — Individual Investor — Analyst

Okay. I don’t have access to the chat. I just dropped an email.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Sure. Thank you.

Operator

Thank you sir. Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to Mr. Nachiket Kale for closing comments. Thank you and over to you, sir.

Nachike Kale — Orient Capital — Analyst

Yeah. Thanks, everyone. I would like to thank the management for taking the time out for this conference call today and also thanks to all the participants. If you have any queries, please feel free to contact us. We are Orient Capital, Investor Relations Advisors to Shyam Metalics. Thank you. Thank you so much everyone.

Brij Bhushan Agarwal — Vice Chairman and Managing Director

Thank you, everyone.

Operator

[Operator Closing Remarks]