Steel Authority of India Ltd. (SAIL) Q4 FY22 Earnings Concall Transcript

Steel Authority of India Ltd. (NSE: SAIL) Q4 FY22 Earnings Concall dated May 24, 2022

Corporate Participants:

Vishal Chandak — Senior Vice President

Anil Kumar Tulsiani — Director of Finance

Amit Sen — Director of Finance

Analysts:

Amit Dixit — Edelweiss — Analyst

Rajeev Bajaj — Systematix — Analyst

Saket Kapoor — Kapoor & Company — Analyst

Rajesh Majumdar — B&K Securities — Analyst

Unidentified Participant — — Analyst

Ritesh Shah — Investec Capital — Analyst

Mohit Bansali — Bonanza Portfolio Limited — Analyst

Kirtan Mehta — BOB Capital Markets — Analyst

Rajesh Dubey — Dow Jones Capital Company — Analyst

Prashanth Kumar — Dolat Capital — Analyst

Sumangal Nevatia — Kotak Securities — Analyst

Pallav Agarwal — Antique Stock Broking — Analyst

Falguni Datta — Jet Age Securities — Analyst

Sagar Gandhi — Future Generali India Life Insurance — Analyst

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the 4Q FY ’22 Earnings Conference Call of SAIL, Steel Authority of India Limited hosted by Motilal Oswal Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded.

And I’ll hand the conference over to Mr. Vishal Chandak from Motilal Oswal Financial Services Limited. Thank you, and over to you, sir.

Vishal Chandak — Senior Vice President

Thank you, Ruthija. Good afternoon, everyone, and welcome to the fourth quarter earnings call for Steel Authority of India. On behalf of SAIL, I would like to apologize for the delay because of some unavoidable circumstances. I would also like to thank the management of SAIL for giving us this opportunity to host them again for this call. So from the management side, we have Mr. Tulsiani, who is the ED Finance.

I welcome you, sir, and over to you for his opening remarks.

Anil Kumar Tulsiani — Director of Finance

Thank you, Vishal. Good afternoon, everyone, and welcome to the investor con call on the financial results for Q4 and financial year ’22 of SAIL. First of all, I would like to thank Vishal Chandak from Motilal Oswal for arranging this con call.

The company has published the results yesterday, which I’m sure everyone must have seen and I’m happy to see the reaction from the different comments. I would briefly apprise the audience on the highlights.

Starting with the economic scenario that we have been operating in, the economies around the world have since been fighting the impact of COVID-19. While the recovery stories around the globe have been heartening, the economies have now been thrust into inflation concerns, as well as the uncertainties and supply chain disruption emerging from Russia-Ukraine war. The Indian economy has also started a reshape recovery path.

Though the yearly GDP ended in red at 6.6% for financial year ’21, but the estimate for financial year ’22 has been pegged at 8.9% growth in the second revised estimate published recently. The scenario, however, is now being swayed by inflationary measures and Russia-Ukraine war. The projection for the coming years has been getting moderated accordingly.

The steel industry has enjoyed one of the best periods during the first half of financial year ’22, which was later eaten [Phonetic] into by the rising prices of imported coal, CDI, ferro alloys, et cetera. The steel demand and prices have also been volatile during the end of financial year ’22, given the consistent decline in production and demand in China and global trends.

Now we come to the performance of SAIL. Company has clocked its best ever production and sales during the year. The crude steel production for financial year ’22 is at 17.36 million tonnes as compared to 15.21 million tonnes in financial year ’21. That is a growth of 15%. The sales for the year have been the highest ever at 16.15 million tonnes as compared to 14.94 million tonnes in the previous year.

As mentioned earlier, the increase in prices of imported coking coal and other raw materials had a major impact on our cost of production. The impact of coking coal alone had an adverse impact of more than INR12,000 crores on the cost of SAIL. The company has been taking measures of improvement in operational efficiencies, which partially offset the impact of the same with reduction in coke rate by 1%, replacing scope with CDI by around 12%, reducing specific energy consumption by around 2%. The changes in MMDR Act has impacted the company substantially during the year with royalty payment increasing.

In line with the physical performance, SAIL has posted its best ever annual financial results. For the first time in the history of SAIL, we have crossed — the revenues from operation has crossed INR1 lakh crores. For the year, it was INR1,03,473 crores as compared to INR69,110 crores. Quarter four also was very good for us and we clocked a revenue from operations of INR30,758 crores. The EBITDA for the financial year ’22 is at INR22,364 crores, but PBT is INR16,039 crores and PAT is INR12,015 crores.

SAIL is focused on proactive stakeholders engagement, which includes — the company has recommended INR2.25 as final dividend for financial year ’22. SAIL has declared highest ever dividend in financial year ’22, that is INR8.75, which includes two interim dividends declared per year. SAIL also emerged as the top most buyer on GeM amongst all CPSEs in financial year ’22. SAIL has supplied steel for various projects of national importance, like the Central Vista, Delhi; Mumbai-Ahmedabad High-Speed Rail; Delhi-Meerut RRTS; Polavaram Irrigation Project, et cetera.

We have also supplied liquid medical oxygen in excess of 1.3 lakh tonnes majorly during the second wave of COVID-19. We also set up separate Jumbo COVID Care facilities, which increased the COVID-19 dedicated beds. For our employees also, we have implemented the wage revision, which has helped in improving the motivation to a very large extent. We are regularly now holding customers meets to understand the requirement of our customers.

The borrowings also have reduced significantly during the year. We have reduced our borrowings from nearly INR22,000 crores to the level of INR13,400 crores.

With these words, I hand it back to Mr. Chandak for opening the question-and-answer session. Thank you.

Vishal Chandak — Senior Vice President

Thank you, sir. Ruthija, can you please open this for the Q&A.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Amit Dixit from Edelweiss. Please go ahead.

Amit Dixit — Edelweiss — Analyst

Yeah. Good morning, and thanks for the opportunity. And congratulations for a good performance. I have couple of questions. The first one is on coking coal. While you have indicated that the coking coal cost increased by around INR12,000 per tonne in the quarter, can you quantify the coking coal cost in Q4 FY ’22 in dollar terms and how it is expected to change in Q1 FY ’23? That is the first question.

Anil Kumar Tulsiani — Director of Finance

You have another question?

Amit Dixit — Edelweiss — Analyst

Sorry?

Anil Kumar Tulsiani — Director of Finance

Yeah.

Amit Dixit — Edelweiss — Analyst

Yeah. So that’s the first question on coking coal. Thank you.

Anil Kumar Tulsiani — Director of Finance

In the financial year ’22-’22, the total imported coal cost was around INR20,000.

Amit Dixit — Edelweiss — Analyst

No, sir. I’m asking in Q4 FY ’22, what was the coking coal cost and how it is expected to change in Q1 FY ’23?

Anil Kumar Tulsiani — Director of Finance

It is supposed to — it is likely to go up substantially. In the — in Q4 only, it was around about INR28,000 to INR29,000 in that range and it is expected to be slightly more in the first quarter of ’22-’23.

Amit Dixit — Edelweiss — Analyst

When you say slightly more, how much is that slight?

Anil Kumar Tulsiani — Director of Finance

You can say around about 10% to 12% increase.

Amit Dixit — Edelweiss — Analyst

10% to 12% increase.

Anil Kumar Tulsiani — Director of Finance

Yeah.

Amit Dixit — Edelweiss — Analyst

Thanks, that helpful. The second question is essentially that government of India has imposed export duty and we expect that realization in domestic market would be lower as a result. Now, we have substantial brownfield CapEx plan. So does this move by the government change in any way your CapEx ambition or you are planning to delay the CapEx or what kind of CapEx we can look forward, I mean in the coming two, three years?

Anil Kumar Tulsiani — Director of Finance

See, we are — we have some long-term plans for expansion. In the immediate future, we are basically going in for some rehabilitation and debottlenecking schemes. So for the time being, again, it’s too early to decide on doing something, thinking about it in another angle. We will continue with our investments in our current plants and assets. And regarding the future — for future expansion plans, we’ll just take a call after some time. We cannot take a call immediately that we’ll defer something or we’ll continue. We are neutral on that for the time being.

Amit Dixit — Edelweiss — Analyst

Okay. So what would be the CapEx for this year and the next year?

Anil Kumar Tulsiani — Director of Finance

We have planned a CapEx of INR8,000 crores for ’22-’23.

Amit Dixit — Edelweiss — Analyst

Okay. Thanks, that’s very helpful. Congratulations and all the best.

Anil Kumar Tulsiani — Director of Finance

Thank you very much.

Operator

Thank you. [Operator Instructions] The next question is from the line of Rajeev Bajaj from Systematix. Please go ahead.

Rajeev Bajaj — Systematix — Analyst

Good morning, sir.

Anil Kumar Tulsiani — Director of Finance

Good morning.

Rajeev Bajaj — Systematix — Analyst

Good morning, sir. I’m Rajeev Bajaj from Systematix.

Anil Kumar Tulsiani — Director of Finance

Hi.

Rajeev Bajaj — Systematix — Analyst

Sir, what’s your total borrowing as on 31, 2022?

Amit Sen — Director of Finance

It is INR13,386 [Phonetic] crores.

Anil Kumar Tulsiani — Director of Finance

The total borrowings are INR13,386 crores.

Rajeev Bajaj — Systematix — Analyst

But sir, in your presentation, you are showing INR17,284 crores.

Anil Kumar Tulsiani — Director of Finance

That is the Ind AS impact.

Rajeev Bajaj — Systematix — Analyst

For the debt equity also, you have shown [Technical Issues]

Anil Kumar Tulsiani — Director of Finance

Yeah, according to that.

Rajeev Bajaj — Systematix — Analyst

So what that INR17,284 crores consist of?

Anil Kumar Tulsiani — Director of Finance

It consists of financial leases.

Rajeev Bajaj — Systematix — Analyst

These current liabilities are also taken in that borrowing?

Amit Sen — Director of Finance

Financial leases, INR3,800 [Phonetic]…

Anil Kumar Tulsiani — Director of Finance

The financial leases are INR3,898 crores. If you add this to that, then probably it will add up. So basically the borrowings are INR13,364 crores.

Rajeev Bajaj — Systematix — Analyst

Sir, what’s the borrowing I have seen there because it doesn’t include the yield liability, which is occurring balance sheet. But that INR17,000 crore figure I’m not able to reconcile. That is in your presentation not on your accounts.

Amit Sen — Director of Finance

Mr. Rajeev, the borrowings are basically in the presentation shown inclusive of the financial lease liabilities, which we have to account for in terms of the Ind AS requirements. So that is a part — considered as a part of the borrowing. So the presentation reflects that figure of INR17,000 crores. But if we talk about the pure debt what we are holding as on 31st of March, like sir has said, the borrowings stood at INR13,386 crores.

Anil Kumar Tulsiani — Director of Finance

Okay. Okay. Got it. Thank you. Thank you. The next question is from the line of Saket Kapoor from Kapoor & Company. Please go ahead.

Saket Kapoor — Kapoor & Company — Analyst

Yeah. Namaskar, sir, and thank you for this opportunity.

Anil Kumar Tulsiani — Director of Finance

Namaskar.

Saket Kapoor — Kapoor & Company — Analyst

Sir — yeah sir — Firstly, as you — as the earlier participant has spoken about this export tax. Sir, how is the steel sector and SAIL in particular impacted by, if I may use the word ad hoc introduction of export tax, how is going — how is this going to impact the industry and SAIL in particular, sir? Your understanding on this.

Anil Kumar Tulsiani — Director of Finance

Yeah, actually from the sources what we have got, there are round about contracts worth nearly 2 million tonnes of steel exports which will have to be catered to in this coming future. But SAIL doesn’t have that much quantity of exports. And SAIL also has got one advantage that it is basically into exporting of semis also — it has exports of semis also. So semis are basically not impacted by this export tax. But yes, we have got certain orders and we are evaluating [Technical Issues]

Saket Kapoor — Kapoor & Company — Analyst

But in the general — for the general steel industry sir, how is the demand-supply scenario for the country going to very likely change because of the introduction of this tax?

Anil Kumar Tulsiani — Director of Finance

Too early to comment on this at this point of time for the industry. But of course, we have certain things that our exports are — our export orders are comparatively less. So not much of an impact is expected because of this. But yes, extra quanti — quantum which comes into the country and even — so that will surely have an impact on and — has put some pressure on the prices also.

Saket Kapoor — Kapoor & Company — Analyst

And sir, can you give some more color how the Q1 has been shaping, sir. Generally, we find the quarter preceding the monsoon being the strongest quarter in the sense of buildup and also the demand push is there on the construction front. So how have you seen this 45 days shaping up on Q1, sir? And also sir, the finance costs have been significantly higher for this quarter. Any one-off item that you have been expected for this quarter?

Anil Kumar Tulsiani — Director of Finance

Yeah. Come again — can you just repeat the question?

Saket Kapoor — Kapoor & Company — Analyst

Yes, sir. Sir, finance costs have been significantly higher Q-on-Q sir, when we take December versus March from INR316 crores level to INR440 crores level. So what explains this increase? And secondly, what’s the business environment for us for the current 45 days with the first quarter being a strong quarter just preceding the monsoon. So how is the demand currently shaping up, your thought process — your thoughts on the same.

Anil Kumar Tulsiani — Director of Finance

Actually I don’t know — finance cost what you’re telling about?

Saket Kapoor — Kapoor & Company — Analyst

Yes, sir. Finance costs for 31st March 2022 is INR440 crores, whereas for 31st December it was INR316 crores. So I was just looking for the reason for the increase Q-on-Q.

Anil Kumar Tulsiani — Director of Finance

So mainly the forex clause or it’s just also been accounted for out here, the interest cost is quite low. Actually the interest cost for the particular quarter is in the range of around INR250 crores. The balance is the forex clause.

Saket Kapoor — Kapoor & Company — Analyst

Balance is the forex clause. Okay. And now on the demand part, sir, how is the demand shaping up? And currently as per our — what we exited March quarter the realization, how have the — how are the realizations currently for the flat and the long product, sir?

Anil Kumar Tulsiani — Director of Finance

Realizations and — still were better. I think the entire industry had better realizations. That was basically the pressure of the coal cost, which had — but of course, May again like there are some pressures on the prices, so we are trying to cope up with that.

Saket Kapoor — Kapoor & Company — Analyst

And there have been a decline in the realization, sir. Can you quantify for us what kind of cuts have been [Speech Overlap]

Anil Kumar Tulsiani — Director of Finance

See, what happens is this quantification cannot be done at this moment of time because there are certain long-term contracts which we are continuing and there will be certain contracts which we’ll be entering now. So overall what is going to be the impact, we cannot access it during the month. It is possible only after the month [Technical Issues]

Saket Kapoor — Kapoor & Company — Analyst

And on the iron ore sales, can you quantify what have been the number revenue we have booked for this quarter and for the entire year on the sale of iron ore?

Anil Kumar Tulsiani — Director of Finance

We normally do not share this figure.

Saket Kapoor — Kapoor & Company — Analyst

And on the inventory part, sir, there was some litigation issues with the Jharkhand government. So any update on the change

Anil Kumar Tulsiani — Director of Finance

There’s not much changes.

Saket Kapoor — Kapoor & Company — Analyst

Okay. And lastly, on this divestment of the loss making unit at Visvesvaraya and the Salem steel plant, any update you would like to share? And also in the segment results, we have find the other segment showing a profitability of INR240 crores on a revenue of INR434 crores, if you could explain that?

Anil Kumar Tulsiani — Director of Finance

Actually here we say the incentive PRC to the employment of the SAIL, so last time it was kept in the actual book and this time it is appearing in the plant book. So that is why that INR208 crores is getting appearing in the previous year and this time since it’s coming in the plant book so the other units it is showing the plus…

Saket Kapoor — Kapoor & Company — Analyst

Right. And on the disinvestment part, sir, where are we on the divestment of Salem and the Visvesvaraya steel plant. Hello? The divestment of the small units, sir.

Anil Kumar Tulsiani — Director of Finance

Actually there is not much headway made in that for the disinvestment of the smaller units. It is more or less at status quo what it was I would say a year back. And basically, what is happening is that Deepam is driving this particular disinvestment. So we are not much in the know of these things that what is the — what we are finally going to do about it.

Saket Kapoor — Kapoor & Company — Analyst

And a very small point sir, when will — yeah — yes mam, I’ve got sufficient time. Thank you.

Anil Kumar Tulsiani — Director of Finance

Thank you. The next question is from the line of Naresh Majumdar from B&K Securities. Please go ahead.

Rajesh Majumdar — B&K Securities — Analyst

Yeah. Good afternoon, sir. The name is Rajesh Majumdar. Good afternoon. And congratulations on a good set of numbers. Sir, I have one question on the wage bill. So we’ve been seeing a lot of wage settlements and payouts this year and we’ve also seen an reduction in the number of employees as on 31st March ’22. So what should we take as the wage bill going forward now that all the earlier resets have been paid? What should be the steady kind of wage bill now going forward?

Anil Kumar Tulsiani — Director of Finance

It should be more or less — it should more or less stagnate at this level or maybe a bit less, because what is happening is this particular year, we have taken some major hit because of the actuarial valuations of our leave encashment and gratuity, which will not haven an — which will not be an — which will not be a similar impact in the coming years. Plus there’s a reduction in manpower, which is expected at almost 3,500 odd. So the — a reduction of 5% over the year surely will help in reducing our [Indecipherable]. So overall, we feel that with the normal increment in there and this reduction in retirement and this — we will not require this provision for actual valuation of leave and all. So I think it should more or less be in this line or maybe slightly less.

Rajesh Majumdar — B&K Securities — Analyst

No. Sir, the total for the year is INR12,800 crores and that’s the sharp jump. So on a steady state basis, I mean in the earlier calls you have guided at INR11,000 crores, INR11,500 crores. Is that a correct figure to take for steady state wage bill?

Anil Kumar Tulsiani — Director of Finance

See, what has happened is there are two major impacts. One is what I was telling you about this actual valuation, which has impacted us around about INR700 crores to INR800 crores. And in addition to this, as compared to the previous year, there has been an additional impact of around about INR300 crores to INR400 crores approximately, that is for the PIP payment for the employee.

Rajesh Majumdar — B&K Securities — Analyst

Right.

Anil Kumar Tulsiani — Director of Finance

So these two factors have basically added up to that additional amount what we have.

Rajesh Majumdar — B&K Securities — Analyst

Okay. So is that correct? The level of INR11,500 crores, is it a good figure to take anything [Phonetic]?

Anil Kumar Tulsiani — Director of Finance

Means in the coming years, you can…

Rajesh Majumdar — B&K Securities — Analyst

Coming year… …maybe you can — you should keep it at around about INR12,000 crores. INR12,000 crores should be the comfortable figure for you. Okay. Thank you then.

Operator

Thank you. The next question is from the line of Aditya [Phonetic] Wadekar [Phonetic] from Axis Securities. Please go ahead.

Unidentified Participant — — Analyst

Thank you. So thanks for the opportunity. So in FY ’22 our saleable steel production stood 15% higher at 16.9 million tonnes. How do you see the production profile going forward in FY ’23? And do we see any reduction in semis as a proportion of total production going forward? If you can show some — throw some color on that.

Anil Kumar Tulsiani — Director of Finance

See, basically it’s always our endeavor to reduce our finished. So first, we take — so what has happened is now most of our plants are stabilizing. Like we have medium structure mill at Durgapur and USM, universal structure mill at Cisco. So they are not stabilized. So they will take more of the volumes of semis for their own consumption and whatever is available, we will be probably sticking it to the market. But we are very optimistic that this year it will be more than what it was in the previous year in ’21-’22.

Operator

Thank you. The next question is from the line of Manish Oswal from Nirmal Bang. Please go ahead. Mr Manish, please go ahead with your question. Your line is unmuted. Mr. Manish, may we request yourself if muted from the handset, please unmute you.

As there is no response, we’ll move to the next question which is from the line of Ritesh Shah from Investec Capital. Please go ahead.

Ritesh Shah — Investec Capital — Analyst

Hi, sir. Thanks for the opportunity. Sir, can you quantify the average flats and long prices for the quarter that we usually give? And the second is, sir, how should one read to the trend line on flat and long into this quarter specifically after this export duty? Sir, if you — even if you don’t quantify, that’s perfectly fine. Just wanted to have a sense on the trend line given flats account for a bulk of exports out of the country. So should one assume that the impact over the year will be far more as compared to longs? Or are there any other industry variables that one needs to take into account to understand this, sir? Thank you.

Anil Kumar Tulsiani — Director of Finance

Yeah. There is still this substantial difference between the prices of flats and longs. In our case, of course, the longs has a component of semis also in that, which is also bringing down the — which is also impacting the NSR of the long. We can say that in — there is a difference of around about INR8,000 to INR9,000 between the two figures. And…

Ritesh Shah — Investec Capital — Analyst

Sir, my question was currently HR coil prices are at say around INR70,000, INR72,000. The export pricing what we understand it would be around, sir, INR60,000, INR61,000. So there is a huge gap of INR60,000 and 72,000. Sir, how should one understand after this export duty, where is it that this can actually end up? Would it be at the midpoint? How should one understand the scenario, sir?

Amit Sen — Director of Finance

Hi, Mr. Ritesh, this is Amit. See, the question is quite relevant. Of course, the export duty is definitely like we said earlier also is going to impact the prices and demand as well maybe. But see, overall it would be difficult to say anything right now how and where the prices would move, how much quantity would get diverted into the home sales market from the exports, what kind of qualities would shift into the country. So that would be difficult to say. Of course, what happens is, the prices whatever impact would be there would be in line with the market and we’ll have to move in line with those. What we also understand from our competitors, like say, GSW and GSPL and Tata Steel and all, they were into exporting this HR coil quite a bit. So they will definitely have a direct negative impact, but how much of the demand impact or the price impact overall would be there would be difficult to quantify right now.

Ritesh Shah — Investec Capital — Analyst

Sure, sir. That’s fine. And…

Amit Sen — Director of Finance

Additionally, we would also be looking at the prices of imported coking coal to correct somewhere, because that is also not sustainable at the current levels. So hopefully, we will be able to make margins, given if those prices do correct themselves.

Ritesh Shah — Investec Capital — Analyst

Sure, sir. And sir, a related question. Sir, how do we — how should one understand the iron ore pricing locally given there are steep export duties even on pallets over here. So are we looking at a significant surplus locally and hence it can pull down prices? How should one understand this?

Amit Sen — Director of Finance

Sir, we expect the iron ore prices also to soften. Because of the export duty, there will be a softening of the prices, which will in fact help us to some extent, because the softening of the prices will be affected in the IBM rate and our royalties are basically paid on the IBM rates. So we will stand to benefit from that.

Ritesh Shah — Investec Capital — Analyst

Sure, sir. This is quite helpful, sir. I’ll join back the queue. Thank you so much.

Operator

Thank you. The next question is from the line of Mohit Bansali from Bonanza Portfolio Limited. Please go ahead.

Mohit Bansali — Bonanza Portfolio Limited — Analyst

Yeah. Hi, sir. And congratulations for the good set of number. A question regarding your Bhilai steel plant. You were earlier mentioning that you’re going to start the head hardened rail production. So have you started that? And what will be the order book this year?

Anil Kumar Tulsiani — Director of Finance

We have started on trial basis. But however, the quantities to be supplied, we have to be still very — like we have to see into it because once we produce the head hardened, there’s an impact on the normal rail production. So we are still trying it on trial basis. We had some trials in the month of April, but I’m not too sure that how much we’ll be able to produce during this year. The railways are insisting for quite a lot — large quantities, but it depends upon like how much we are able to do it.

Mohit Bansali — Bonanza Portfolio Limited — Analyst

Sir, you are facing some problem regarding production, I just want to understand because from quite long time, you are trying to produce this head hardened rail.

Anil Kumar Tulsiani — Director of Finance

Yeah, actually it takes some time because it’s a new item and it takes some time to stabilize. So it has taken some time. We have our foreign experts also who are also on this thing. So it will take some time to stabilize.

Mohit Bansali — Bonanza Portfolio Limited — Analyst

Okay. And second question, sir, since you mentioned that you are facing this coking coal pricing problem shooting up like anything. What are your plans for your in-house production, like you have Tata coal book, you have ICL coal book, and second, you are sourcing from BPCL. Please go ahead, sir.

Anil Kumar Tulsiani — Director of Finance

Actually we have planned from our internal — from Indian sources, we have planned round about 2.5 million tonnes of coking coal and this thing includes Tata as well as BPCL and other mines elsewhere. But yes — and we are also following up with our ICL mines at Mozambique and we expect a slightly higher quantity in the coming year from there also. So overall, we have planned that imported coal component, which will also include this vendor mines, will be around about 86% in the coming year as compared to round about 87.5% to 88% in this year — in 2025 or 2026.

Mohit Bansali — Bonanza Portfolio Limited — Analyst

Okay. And sir, this rail order it’s been increased this year or it’s on the similar line last year because it is very significant part of your sales. Just wanted to ask that thing?

Anil Kumar Tulsiani — Director of Finance

They always want raise from us around actually as on in various forums we are projecting, more than 1.5 million tons also, but yeah, let us see what best we can for because we are very much keen and supply as much quantity as possible to them.

Mohit Bansali — Bonanza Portfolio Limited — Analyst

Okay. And sir, regarding the deleveraging plan for the future as you have already reduced your loan to INR13,500 crore any quantify you can quantify any figure?

Anil Kumar Tulsiani — Director of Finance

Really it depends entirely on the market scenario the coal prices and the steel prices. So it’s very difficult to give any projections for the pending.

Mohit Bansali — Bonanza Portfolio Limited — Analyst

Okay. But do you plan to make it 0 as soon as possible, because last con call you were saying that in two quarter in next two quarter of this financial year you will try to make it 0.

Anil Kumar Tulsiani — Director of Finance

Sure. But that was the scenario when coal was very low and NSR was also very good. But now with the coal prices going up substantially we are, there are some questions.

Mohit Bansali — Bonanza Portfolio Limited — Analyst

Okay, last question, sir. What is your inventory level as on 31st March, 2022, what is your inventory level?

Anil Kumar Tulsiani — Director of Finance

I think it’s around 6 lakh tonnes, it’s around 6.

Mohit Bansali — Bonanza Portfolio Limited — Analyst

Okay. Thank you, sir. Thank you, sir.

Operator

Thank you. The next question is from the line of Kirtan Mehta from BOB Capital Markets. Please go ahead.

Kirtan Mehta — BOB Capital Markets — Analyst

Good afternoon, sir. Thank you for this opportunity. I have wanted to understand more about the — basically the problems where the segment results have sort of dropped over the last 2 quarters. What are the specific problems that we are facing it and per plant and when do you expect them to resolve?

Anil Kumar Tulsiani — Director of Finance

I think basically what happened in case of, you can see is more or less 50% the long product plant and Durgapur is completely alone product plant the long for the NSR where we were lower, as I had explained earlier, as compared to the — the NSR for the product. So this has impacted the profitability of Durgapur. And secondly, there is one more issue that the railways, have we have requested the railways to give us the pricing for 2021, ’21-’22 we are not yet. So once the pricing of the railways will come the revised pricing of the railways come we expect that the benefit of that we’ll get it in the subsequent period. We expect a substantial increase in the rail prices in the 2021 and ’21-’22 which are still at which we are which we considered at the levels of 19-20.

Kirtan Mehta — BOB Capital Markets — Analyst

Right sir. And in terms of the Rourkela and Bokaro both plants have sort of shown particular improvement in Q4. Rourkela profit increased from 637 to 1800 crore and Bokaro profit increased from 96 to 432 crore. So what are the key changes that has happened during this quarter which supported this better performance.

Anil Kumar Tulsiani — Director of Finance

Actually the MSR in the 4th quarter for the flat products was again, better than the prior quarter firstly, and secondly, they would have done better volumes, also, that is another factor which has helped.

Kirtan Mehta — BOB Capital Markets — Analyst

Sure. Ma’am, can I just go for one last question.

Operator

I would request you sir, if you can rejoin the queue. We thank you so much. Participants are requested to please limit your questions to two per participant. The next question is from the line of Rajesh Dubey from Dow Jones Capital Company. Please go ahead.

Rajesh Dubey — Dow Jones Capital Company — Analyst

Congratulate the management for some of the business included as 4th quarter as well as it is — See, actually, I just wanted to congratulate you for coming out the good financial results and 4th quarter as well as in previous financial year. And as you have mentioned that coking coal was a major factor, which might have impacted your profitability to certain extent in the quarter as well as in the financial year. So coming from that level, we have been hearing that offers for Russian coking coal are likely to come at substantially discounted prices. So what would be your strategy for the mining to increase risk intake take in coming days, and if yes, what would be the payment method is because that is the main constraint at this point in time. This is my first.

Anil Kumar Tulsiani — Director of Finance

Actually, we have got, we normally have long-term agreements with our coal suppliers. Okay. But with Russian coal suppliers, we do not have any such long-term agreement. However, we have, we are trying to get some on trial basis from them once those trial by trial consignments are found to be in order, then we will try to take more coal from the Russian suppliers so this will try —

Rajesh Dubey — Dow Jones Capital Company — Analyst

When that’s likely to happen, sir.

Anil Kumar Tulsiani — Director of Finance

Actually we are — we are trying to get it now only. But the only problem is there are some payment issues with them. And there are some issues relating to insurance of the vessels and even we can say some other issues, which are there linked with that so we are trying to resolve those issues at the moment the issues are resolved, we will surely try to start taking from Russia.

Rajesh Dubey — Dow Jones Capital Company — Analyst

Thanks, sir. Thank you, sir. If I. My second question is related to the indication, which has been given by RBI Governor that into are likely to far more further to tame inflation. So what impact this will have on sales overall financials.

Anil Kumar Tulsiani — Director of Finance

Actually the suppose if the interest rates. Expect to form it will surely have an impact on the entire industry and actually on the entire economy, you can say so still will be impacted by that. Also, but we are, there is just one thing that we are getting our borrowings whatever they are at very competitive rates and bankers are willing to give it at there, you can say the lowest rates also to us. So after whatever the difference that will you also be bearing the impact of that, but I don’t think you have much of an impact with the borrowing is coming down to the levels of thousand 13,400 odd. So I don’t think it will have a major impact.

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 afternoon, sir. And thanks for the opportunity. Sir you have mentioned capex for this year is thousand crores, or do you intend to incur this capex irrespective of other cash flow supporting you will do this?

Anil Kumar Tulsiani — Director of Finance

Of course, to some extent the cash flow will cash flow will have to support it. But then what happens basically in all these plans we some committed already. So that will have to continue on.

Prashanth Kumar — Dolat Capital — Analyst

And the next question. That just today if you see our lead in enterprise value will be lower than pandemic close. That is a flash price that we had in March 2020 and in such a scenario although the external and external environment is from quite challenging like coking coal prices international market being very tough to crack into and things like that in this type of a situation government has imposed duties. Sir did you by when do you expect to go into if at all some sort of cash flow situation. And would you saw on the government that this is a situation a situation of the out there is not easy exporting steel even also retaining million Tony can doing that that in itself is achievements of PAT in the bag with there is doing this kind of do the today barring the industries within labor arbitrage being able to establish ourselves as a country in the international market at a global scale compared with the best of the world and actually being able to volume, but it like achievement, sir. Why are we not getting credit for that?

Anil Kumar Tulsiani — Director of Finance

To answer your question this is basically something beyond our control. It’s a government decision and whatever they decide they are factors. They don’t necessarily look at only steel industry, keeping in mind the entire economy we have to take the decisions of course steel industry given whatever the impact they would be facing or are facing, we would definitely be talking to the government on that if it starts to hurt the margins and all, there would be maybe representations from the steel industry also as of now, we are not planning anything on that we’ll have to wait and watch how the impacts. It is so likely that if, see the can also give us a benefit in the sense that if steel prices come down. It can on the other side also help us in getting a higher demand from the consumers of steel. So if that happens, maybe it can turn out to be a silver lining in that cloud for us. We’ll have to wait and watch and as far as government decisions are concerned, we are going to be with them for the time being. We’ll take whatever call is to be taken in future keeping in will the entire economy and the industry as such.

Operator

Thank you. The next question is from the line of Sumangal Nevatia from Kotak Securities, please go ahead.

Sumangal Nevatia — Kotak Securities — Analyst

Yeah, thank you for the opportunity. My first question is on working capital. If you see last 2 years we’ve reduced debt by 36,000-37,000 crores, but 20,000 of that has just been contributed by working capital or about 10,000 in each of the last 2 years. And if you look at our receivables that inventory. They’ve all gone favorable to a very unprecedented low level. So just wanted to understand, I mean these lower levels of working capital how is it sustainable, and how do you see this working capital movement in FY23?

Anil Kumar Tulsiani — Director of Finance

Actually what has happened is these debtors substantially higher in the earlier year we had a special right and we took up with the railways, the main debtors was railways in the — out of the 8,000 odd crores, it was there in the earlier year almost 5,000 crore to 5,000 was from the debtors from the railways, so this we have taking it up with the railways and we were quite successful in mitigating most of them, there were some invoices, which are 2 to 3 years by we’re not hearing. So we had a special with them and we could clear. So that has basically helped us in reducing the debtors, if you see basically the other debtors we have what BSU better with all, which was in the range of sub 800, 700. So it’s in the range of that on your own with 600 crores. And the other debtors also that is normally in the range of longer 3,000 odd. So it is at the same level. It’s basically the railway debtors which are very high, which have brought it down to roundabout 1100 crores in the current year. But, yes, it is a think that maybe the debtors will go up. The impact is the basic reason for debtors going up is also it depends on the price of the material, which we are selling, and so that also has an impact on the debt if the price is high. So it tends to the debtors also tend to increase.

Sumangal Nevatia — Kotak Securities — Analyst

Okay. So any further benefit, are we expecting in FY23.

Anil Kumar Tulsiani — Director of Finance

And I don’t think this is actually absolutely rock bottom. I think, I don’t think we’ll be able to because again railways, it depends on the budgets whatever they get so last year, they were, they were quite liberal in releasing all the budgets to us, but we do not, what is going to be the impact in this year.

Sumangal Nevatia — Kotak Securities — Analyst

And sir, what about the liabilities. I mean in the table that sector have gone up substantially. These levels have never been seen before. So if you can just explain on that front as well.

Anil Kumar Tulsiani — Director of Finance

Yeah, it is basically what is happening is that we have got I mean with our coal suppliers. So basically, what happens is that the since the coal price has gone up, so it has had a subsequent impact on these tables because we have got credit clients with them off. You can say 2 to 3 to 3 months. So we take advantage of that and since the prices have nearly you can say traveled from what level it was in say March 21. So this has also had an impact on the payables position.

Sumangal Nevatia — Kotak Securities — Analyst

Okay. So since of creditors, increasing from 7,000 to 17,000. So once the coal situation normalizes this benefit which is sitting in working capital is also every month, right. Okay, understood. Sir second question is on the coking coal front, I mean what sort of inventory levels, do we have and you said a 10, 15% increase in 1Q what is the dollar per tonne cost are we factoring in that estimate.

Anil Kumar Tulsiani — Director of Finance

Come again. Inventory days we normally have 35 days of inventory with us. That is at the ports as well as at our steel plant.

Sumangal Nevatia — Kotak Securities — Analyst

Okay. Okay. So, and when you say the 10% increase in coking coal cost in 1Q. In the coming quarter. What is the dollar per tonne cost we calculated.

Anil Kumar Tulsiani — Director of Finance

It should be in the range of around $450 or maybe because see what is happening is, it depends on entirely on the blend what is being consumed, so if there is higher level of TCI. So the rate of TCI is lower, so we extend to get an advantage. So as for the soft coal. So now our emphasis is mainly on higher quantity of TCI and higher uses of softwood so hard coal is one of the most expensive. So we are trying to restricted to the optimum level, so that the cost overall cost of coal comes on even we are planning to have more indigenous coal in future. So the overall price of all cost of coal should come down to some extent, but it will be higher, it will be at least 15% high.

Sumangal Nevatia — Kotak Securities — Analyst

This is a follow-up. This is a follow-up, just one sec. Just wanted to understand, sir. On the coking coal in front and what is the spot rate versus what we will average out in terms of cost in 1Q. So just want to get some directional sense as to, in 2Q, what sort of inflation one can expect is coking coal prices stay flat from here on.

Anil Kumar Tulsiani — Director of Finance

I think basically we are also guidance but the spot rate we take, we take the average for the month further and based on that whatever we have, we have got some long-term agreements as I’ve explained earlier, with our suppliers, so we get a discount on that. So we avail that particular discount and we arrive at the price for a particular month, but then what happens is that is done that is at the load port, whatever the rate is there. That is where it whereby actually it comes and gets consumed it takes normally 1.5 to 2 months. So that arbitrages that means whatever we are going to get today. It may not affect sales. The month of June, it will probably affect the month of July. Maybe even August.

Sumangal Nevatia — Kotak Securities — Analyst

So, sir, is the understanding correct that there is no change in coking coal prices in the market in the next few months. Your second quarter coking coal cost will further increase from first quarter as well.

Anil Kumar Tulsiani — Director of Finance

Yeah. We should [indecipherable]

Operator

Thank you. The next question is from the line of Pallav Agarwal from Antique Stock Broking. Please go ahead.

Pallav Agarwal — Antique Stock Broking — Analyst

Yeah, good afternoon, sir. Sir, I had a question on our capacities, when you will be start actually realize this 20.2 million tons of salable steel capacity now all units have stabilized I guess there was, Bhilai there was some issues with the financing facilities so when can we expect of utilization of close to 90% over at all the plant?

Anil Kumar Tulsiani — Director of Finance

Actually see we were having some issues about stabilization of our facilities due to which we were not able to like reach our capacity but 22-23 that we will surely we are doing well as compared to even 21-22. So we expect that will be very near to our capacities in this 22-23.

Pallav Agarwal — Antique Stock Broking — Analyst

So do you and do you think that the Indian market can absorb this incremental volumes now basically would be export duty is coming in or do you think there’ll be some sort of production cuts that can happen across the industry.

Anil Kumar Tulsiani — Director of Finance

I think it’s too early in the year to talk about it. So what happens is, like we did not expect our COVID year and suddenly things turning around last year. So it’s too preliminary to talk about this and maybe whatever policies the government has introduced implemented now introduced now whether they will last for the entire year or they come out with some softs for us, we really do not know. It’s really a preliminary thing. So we cannot just think whether, but yes, our intent is to produce and sell the most.

Pallav Agarwal — Antique Stock Broking — Analyst

Sure sir, just lastly, sir, what was our export proportion in FY22?

Anil Kumar Tulsiani — Director of Finance

Around 8.6%.

Operator

Thank you. The next question is from the line of Falguni Datta from Jet Age Securities, please go ahead.

Falguni Datta — Jet Age Securities — Analyst

Yeah, hi, good afternoon, sir. So I have 2 questions. What is our coke rate?

Anil Kumar Tulsiani — Director of Finance

Coke rate for the current financial year is 440, 445.

Falguni Datta — Jet Age Securities — Analyst

Okay. And sir, what was the average realization for Q4, average realization for Q4. This was around, around 60,000. What is the average realization for Q4, I just missed that number.

Anil Kumar Tulsiani — Director of Finance

60,000.

Falguni Datta — Jet Age Securities — Analyst

And if you could just give me the flat price flat realization separately for Q4.

Anil Kumar Tulsiani — Director of Finance

It was around between 64000 to 65000.

Falguni Datta — Jet Age Securities — Analyst

And sir, lastly, what would be the current flat realization currently?

Anil Kumar Tulsiani — Director of Finance

We really do not know. And if it has improved to some extent, but —

Falguni Datta — Jet Age Securities — Analyst

It’s like, we know that it’s not possible to in this volatility does anything but as on date.

Anil Kumar Tulsiani — Director of Finance

Yeah. Again I explained again I had explained earlier, that it is or the average rate or whatever rate we arrive at it is basically the earlier contracts as well as whatever we have entered in this month, plus what we planned plus with the projects we have got around. So the projects rates or something different. So you need to it’s to tell you the figure how.

Operator

Thank you. The next question is from the line of Sagar Gandhi from Future Generali India Life Insurance. Please go ahead.

Sagar Gandhi — Future Generali India Life Insurance — Analyst

Sir my question is on dividends. So, sir, if my understanding, correct this year if you think 30% of profit after tax. So next year as we cannot predict RPAD, okay. Is it fair to assume that of the 54,000 crores network 5% is what we will have to pay the number, which will be close to 2,600 crores in absolute terms.

Anil Kumar Tulsiani — Director of Finance

Yeah. But I think what is happening is that we will decide that basically based on our profitability and our capability to pay out also because it depends on the cash flow also then if there is been are finding some difficulties, since you having substantial investment in capex and all. So we will have to take up with the government, at that point of time.

Sagar Gandhi — Future Generali India Life Insurance — Analyst

But, sir. In case you choose to do 8,000 crore capex as you guided then then can you convince the environment or is it, is it or is it a negotiable item because in my understanding whichever is that I mean percent of PAT or 5% of network, if you are a profitable enterprise then. That is what you will have to pay.

Anil Kumar Tulsiani — Director of Finance

Yeah. But then in previous years also is or just this guideline was that, but we have some more whatever exemptions from the government.

Sagar Gandhi — Future Generali India Life Insurance — Analyst

Yeah. And sir. Second thing is because we made solid OCF so over the last 2 years and that is also at very reasonable levels even assuming that debt levels will go from here. Is there a scope that consider company will consider a buyback. I mean something or agenda —

Anil Kumar Tulsiani — Director of Finance

Yeah, we are not, we don’t plan to have any buyback in the near future.

Operator

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

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

Sir, one question on the part of coking coal, it seems very unlikely that your cost can hardly grow 15% even if we take a like say whatever land which we want to take on the spot prices or the benchmark lately. So it should not be lesser than like to probably 25%, 30%. So, and when we say that we consume PCI. But even today, this year had lowest have a discount to the prime coking coal. So it’s really difficult to understand your guidance on 15% increase in coking coal cost of our inventories at around 35 days.

Anil Kumar Tulsiani — Director of Finance

See basically what is happening is that we expect to improve our to some extent and then higher level of of pellets which have already started. So this will bring down the coke rate also to some extent like whatever we have planned at nearly a reduction of onward 5% in the coke rate in this current financial year. So we certainly expect that all these cost control and cost cutting measures will surely help us in bringing down to some extent the impact of coking coal, the coking coal cost.

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

It’s not about when I say adjusted for input-output makes it just purely on the coking coal cost so coking coal cost price had nothing to do what your consumption cost.

Anil Kumar Tulsiani — Director of Finance

We are talking about the consumption cost.

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

So usually we used to give the precise number for the coking coal cost. And at this time around. Finally, you are giving the ranges, but for the how much I lost in or convention costs in the previous quarter, and what do you, what has been the consumption cost in like that —

Anil Kumar Tulsiani — Director of Finance

We will send to you offline.

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

And secondly, on the capex side, sir. We have roughly around 3500 crore capex in last year and this time like we are guiding thousand crore capex, so what incremental capex, we are going to take, because we have not ordered any single in the last 1 to 1.5 year because we were focused on commissioning both assets have been commissioning for so what on new capex new ordering we have done in last 6 months.

Anil Kumar Tulsiani — Director of Finance

So we have actually that had lot of automations and look and we have also done for our stance has in batteries which which will also. We have also got clearance follows Cam charging battery, which are very capital intensive. And moreover, there’ll be some other the major other expenditures are in the small schemes is the plants will be taken up, so you can say each plant will be taking 300 to 400 crores was the schemes at the local level, which will be which are known as AMR schemes, which will be taken up. So we feel that actually we — I’m not too sure that’s how we are going to achieve it. But then, yes our target for the year 8,000 crores and some major schemes are in the pipeline for which the major expenditures will also take place.

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

Okay. It would be appreciated. So if you can give at least some breakup like where we are going to spend because in the earlier presentations to give like how much would be on the, let’s say, process management and all those.

Anil Kumar Tulsiani — Director of Finance

Send it to you offline.

Operator

Sure sir. I would like to hand over the conference to Mr. Vishal Chandak for closing comments.

Vishal Chandak — Senior Vice President

Thank you everyone for participating in today’s call. I can see a huge amount of queue on the question answer is still there, but unfortunately due to paucity of time the management has to leave. I would like to thank Mr. Tulsi for the time and as well. So handing over to you for the comments please.

Anil Kumar Tulsiani — Director of Finance

Thank you. This year is a real challenge for us, last year was really a dream year for I think the entire steel industry and we just hope for reduction in the prices are full and other inputs, which will help us in reducing the rising cost of production. And going forward, our focus will be on increasing volumes improving the product mix and improving operational efficiencies, controlling costs and hopefully we are able to deliver sustainable results in the coming quarters also. Thank you.

Operator

[Operator Closing Remarks]