Q3 2012 Earnings Call - Prakash Industries Dt-3 Feb’12

Operator Ladies and gentlemen good afternoon and welcome to the Prakash Industries Limited Q3 FY12 Earnings Conference Call. As a reminder for the duration of this conference, all participants' lines will be in the listen-only mode. And, there will be an opportunity for you to ask questions at the end of today's presentation. All participants are requested to restrict to two questions each. Please not that this conference is being recorded. Today, we have with us the management of Prakash Industries Limited led by Mr. Vipul Agarwal, Director of Prakash Industries. We would start the call with opening remarks from Mr. Agarwal, following which we would open the floor for question-and-answers. Thank you and over to you sir.

Vipul Agarwal, Chairman and Managing Director Yeah, good afternoon everyone. I welcome all of you to this call to discuss the financial results of the company for the quarter ended 31 December, 2011. Now, our results for this quarter are quite encouraging for the company and we have achieved net sales of 521 crores as against 382 crores of last year, which shows a growth of almost 36%. And on Q-on-Q basis, I mean from September, if you compare with September '11, we closed it at about 14%. In September we had a sales of 458 crores.

The sales have improved largely on account of much better realization in the product which we made particularly wire rod and billet. And the wire rod prices are up by almost 30% as compared to last year. And similarly billet prices are also up by about 25%, 27% as compared to last year.

Now, EBITDA for the quarter is 92 crores as against 72 crores of last year, which show a growth of 27%. And then, the after providing for depreciation which is 19 crores and financial expenses of 5 crores, the PAT for the quarter is 66 I mean the coal prices have gone up by almost 100% as compared to last year in the e-auction prices. And similarly, iron ore prices have also gone by almost 40% as compared to previous year. As far as volumes are concerned, the Sponge Iron volumes were almost on the same kind of volumes which we achieved in the last year. However, major increase in volumes has been in the power generation, which is up by almost 40% on a year-on-year basis, which is largely because of the new sets, additional capacity which have been implemented during this year from second quarter and then some one set has started in the third quarter also. So, this has enabled the company to achieve about 40% higher generation in the power division.

Now, as far as billet production is concerned, the volumes are little on the lower side as compared to previous years because as a strategy, we had cut down on the billet production from the second quarter of this financial year and we had sold the surplus power on merchant basis under the open access. So the billet production was of course lower as compared to the last year.

However, from December onwards there has been a substantial improvement in the selling prices of the finished steel products. And towards the end of quarter, like I mean for December onwards, we have resumed our production in billet to the optimum level, and currently we are, in January also we have run the induction furnace at the business optimum levels, and we are producing at full levels.

Similarly, in the wire rod, the production has been lower as compared to last year, because when we cut down the billet production, wire rod portion has to be cut. So that's why the wire rod production and TMT and structure production is also on the lower side as compared to the last year.

And we had exported power during this period. However with the improvement in the margins and the selling prices, we have also resumed the production in the TMT mill with effect from December onwards. And we currently... we are getting decent margins in TMT production, so we are producing at a reasonably good level.

On in the ferro alloy division the volumes were up by 25% as the demand is quite good in the product and we are getting regular orders from our main customers, which is Steel Authority. Every week we have been getting repeat orders from them, so they have been increasing the volumes actually. So the production is higher by 25% in this division. Now this is as far as the operation of the company was concerned and for the quarter.

As regard the expansion projects of the company. The first phase of power capacity, which we are adding. The first phase is now almost complete 75 megawatt is already operational and balance is also we have fired the boilers and hopefully by the next 15, 20 days the entire capacity should be operational.

So, the total first phase capacity should be up and running in this quarter. Similarly, the fourth sponge iron kiln that is also complete now. We are already fired the kiln and hopefully we should be getting production in the next eight to 10 days.

So with this, I mean the first phase of our expansion project is now complete in power as well as in sponge iron. So we are through with the first phase. And now we have recently undertaking at one at a small expansion, we are doing in silico manganese, or ferro alloy actually capacity to utilize the surplus power which we are having with de-commissioning of the new TMT sets I mean we expect some power to be circular. So we are setting up some new furnaces in the ferro alloy division.

Because we have seen that the market for this product has been quite stable and good over the last so many years. I mean this is not... the volatility is very less in the product. So we thought of adding some capacity in this division, so that we can utilize the power as well as we can supply more quantities in the market. This is as far as the expansion project is concerned.

Now as far as future outlook in the steel industry is concerned, we are seeing some positive signs in the industry with the demand showing a revival in the last quarter particularly from December onwards and normally this is the... Although, you never know when... because the steel market is always volatile so we... normally we keep a watch to balance the production to make more steel or export power so we want to strike an optimum balance between steel and power generation to optimize the bottom-line.

As far as power rates are concerned, we have been selling power in the open market for the last three to four months. Although I mean the rates we have been seeing some decline in the power rates in the market. They were prevailing in the range of about 4, 4.5 per unit, but off late, in the last 15, 20 days, they have dropped to some extent.

Currently, they are in the range of 3 to 3.5. However, we have been -- we have signed a medium term contract with one state government for supply of... initially the contract they have signed for about higher volumes over 50, 60 megawatt, but they have reduced their demands. And now we are exporting about 27, 28 megawatt contract we have for the next five months to six months

So at an a average rate of about, -- every month its a different rate, but average it is about 3.75 per unit. So this is a fixed supply, now we need to give to the state for the next four, five month. So, I mean this quantity is assured as far as power sale is concerned.

Now, as far as future expansion is concerned as we have been telling you earlier also, once we finish with the third phase of power expansion, the next phases of expansion we have slightly put on hold mainly on account of the uncertain availability of coal in the market and substantial increase in the coal prices.

Off late even the coal prices have already been increased two times, in the last year and then there was another increase effective 1st of January where the prices are again rationalized on the GCV. So again there was an increase of some sort. However, fortunately this increase of 1st of January has been put on hold for the time being at least till March 2012. So we are back with these December prices which has given us much relief to the company.

However, still you never know when the prices can be revised, so the coal availability and the pricing is always a bit problem, big issue. So we have put on hold these further expansion in the power capacities and we want to link it with the opening of our captive mines.

So, once we get the forest and environment clearance for this mine, we would be taking up the project in the right tunnel. Actually the initial work is, most of the initial work like civil work and the foundation and order placement, everything has already completed. So hopefully once we resume the project activities, we should be able to complete it quite fast, that's why we are trying to link it with the mine opening.

Now, this is what we have. Apart from that we are adding one more Sponge Iron Kiln, which will take our total sponge capacity to 1 million. So that in any case we are taking up, because there already we have the required coal and there should not be a problem. So this kiln, we're going to complete this fourth kiln which is already complete actually. So we are immediately taking up the implementation of the next Sponge Iron Kiln, and we hope to complete the next kiln in the next 18 months by September 2013 odd.

So, with that our 1 million capacity of steel, sponge iron would be complete and we would be totally self sufficient as far as sponge availability and all our requirement is concerned. So this is what I have to say. We can go with the questions now.

Questions And Answers

Operator Thank you very much sir. We will now begin with the question-and-answer session. [Operator Instructions]. The first question is from the line of Giriraj Daga from Nirmal Bang. Please go ahead. Giriraj Daga Yeah. Good afternoon sir.

Vipul Agarwal, Chairman and Managing Director Yeah. Good afternoon.

Giriraj Daga Congrats on good set of numbers actually. I have a couple of questions. First like, what was the iron ore cost, and blended iron ore cost during the quarter?

Vipul Agarwal, Chairman and Managing Director Iron ore cost was the same. There is hardly any change. Its about Rs.7,000 a tonne.

Giriraj Daga But, are we not like getting affected by that -- its going on ongoing inquiry in Orissa and other the states. So, our new cost is still at the same level?

Vipul Agarwal, Chairman and Managing Director Yeah. Iron ore prices have not gone up fortunately. And since we have good relations with some of the suppliers in that area, 20 years relationships we have. So we fortunately, we have not faced, so far we have not faced any problem as far as supplies are concerned.

Giriraj Daga Okay. But the power plant like we were planning to start the next one into 100 megawatt by like March 14, when we get our mine. Or we have indefinitely put on hold that power plant like?

Vipul Agarwal, Chairman and Managing Director No, no. Actually we proposed to start much earlier actually. We expect this, what we are thinking is, that the environment clearance for this mine, which should be in hand by the next maybe eight to 10 months or maybe one year maximum. So if we get the environment approvals say by March 13 at the most, then we plan to start the project after that immediately.

Giriraj Daga And sir, my next question is related to our mining update, any update on iron ore mines, any? Iron ore mines status is the same sir, there is no procure actually as we -- as I told you last time also, one of the officer in this Orissa state, where our smaller Orissa mine is got stuck. That officer is still not clear the file, I mean, he is sitting on all the files, and he is saying, I will not clear any file and you get me transferred, only then, this file will be clear.

Giriraj Daga Okay. So, like, we are not seeing any light actually into that?

Vipul Agarwal, Chairman and Managing Director Iron ore, we are... everything is getting delayed of course.

Giriraj Daga Okay. And last question is that the once we will meet our capacity of 5X25 with the full capacity, how much we have to buy on linkage... how much we will get linkage and the rest we have to buy, what is the percentage?

Vipul Agarwal, Chairman and Managing Director No, for this we have 100% we have to buy e-auction only. Linkage is for our existing capacity actually.

Giriraj Daga Okay.

Vipul Agarwal, Chairman and Managing Director So, for this new capacity we would I mean, some quantity of course available from the linkage and from our some middling and some fines from the Chotia mine but largely we have to buy e-auction.

Giriraj Daga But like we have not applied or we have not got the linkage?

Vipul Agarwal, Chairman and Managing Director No, no we have applied. But Linkage Committee's meeting is not taking place.

Giriraj Daga Okay.

Vipul Agarwal, Chairman and Managing Director Giriraj Daga Okay, okay. And what is linkage coal price like this quarter, average price?

Vipul Agarwal, Chairman and Managing Director Sir average price, I mean last we purchased was at about Rs. 1,800 per metric tonne basic price, so landed was about 2,300, 2,400. You are talking about linkage or e-auction?

Giriraj Daga E-auction, sorry, e-auction.

Vipul Agarwal, Chairman and Managing Director E-auction last we purchased was at 1,800 basic price, landed was about 2,400 per metric tonne.

Giriraj Daga Okay, sir. Thank you. I'll get back in the queue for the next further question sir.

Operator Thank you. The next question is from the line of Ram Modi from Daulat Capital. Please go ahead.

Ram Modi Good afternoon Vipulji.

Vipul Agarwal, Chairman and Managing Director Good afternoon.

Ram Modi Sir what would have been our linkage coal cost now?

Vipul Agarwal, Chairman and Managing Director Linkage is the same, linkage there is no change. We have... the landed cost is 1,600. Landed cost is 1,600. Okay. Sir what would have been our CapEx spend on this new power plant which we would have deferred, which we have deferred.

Vipul Agarwal, Chairman and Managing Director With the existing I mean this 125...

Ram Modi Not the 125, we wanted to go to 600 megawatt that power plant. 100 megawatt next expansion.

Vipul Agarwal, Chairman and Managing Director You see, for the next 100X2 megawatt we have already spent close to about 270 crores, 280 crores.

Ram Modi 270 crores, 280 crores.

Vipul Agarwal, Chairman and Managing Director Yeah.

Ram Modi Okay. So that is the almost spent so means almost civil work is almost over and everything is over.

Vipul Agarwal, Chairman and Managing Director Yes, yes civil work, most of the civil work... not 100%.

Ram Modi Okay.

Vipul Agarwal, Chairman and Managing Director The foundation expected on complete and then we have placed orders for all the equipment. We have released advances and everything, the major amount has gone towards the advances and civil work of course

Ram Modi And whom... And then there is from when we are setting up this first phase of 125 we had taken up some common facilities particularly raw material handling and some other common facilities we have taken up for the entire 300 megawatts.

Ram Modi Okay.

Vipul Agarwal, Chairman and Managing Director So lot of money has gone and for example the raw material handling is complete for the entire 300 megawatt actually.

Ram Modi Okay. And whom we've placed our BTG order with?

Vipul Agarwal, Chairman and Managing Director BTG Siemens and Cethar Vessels.

Ram Modi Okay. Siemens and Cethar Vessels. Okay. And sir how is the market level looking right now as you said it's burned but do you think you're now switching over to full steel rather than selling power?

Vipul Agarwal, Chairman and Managing Director Yes. Currently we are making full steel and we are also selling power actually, because the enhancement in the power capacities we have surplus power.

Ram Modi How much is that now?

Vipul Agarwal, Chairman and Managing Director We are selling about 27 megawatt currently.

Ram Modi Okay.

Vipul Agarwal, Chairman and Managing Director Ram Modi Okay. So, our structural mill is also now under running.

Vipul Agarwal, Chairman and Managing Director No. Structure is still not running. Structure we are not running.

Ram Modi Okay.

Vipul Agarwal, Chairman and Managing Director But, TMT we are running. TMT mill we are running.

Ram Modi Okay. So structural, is it it's very specific that the structural demand is not back and the TMT demand is back, means the industrial CapEx part is not back?

Vipul Agarwal, Chairman and Managing Director Actually structural demand is, I mean is back, it's not that there is no demand. But, if the margins in the structural are not as good as we have in TMT currently.

Ram Modi Okay.

Vipul Agarwal, Chairman and Managing Director So, structural we are still watching this because the prices still keep on going plus, minus. So I mean, for example January beginning was very good, and then we have seen some drop off late in the last 10, 15, 10, 12 days. So, I mean we don't want to start a mill and then shut down again. So we're just keeping a watch on the structural production.

Ram Modi Okay. And what would be the TMT and wire rod realization currently?

Vipul Agarwal, Chairman and Managing Director Well, currently if you want current realization for wire rod, it is about 36,000 and for TMT also it is about same 36,000. Okay. So no difference currently in both these segments also.

Vipul Agarwal, Chairman and Managing Director Yeah, both are almost the same.

Ram Modi Okay. And sir the last question is in terms of our, what would be our power cost generation cost now in our new power plant?

Vipul Agarwal, Chairman and Managing Director You see in the new power plant, we are using -- I mean, if you see on a weighted average kind of thing, because some coal we are using from the middling, some from linkage also, and some from e-auction. So weighted average total cost if you see, it would be about Rs. 2.25 generation cost.

Ram Modi Rs. 2.25?

Vipul Agarwal, Chairman and Managing Director Yeah.

Ram Modi Okay. And this Rs. 3.75 means currently whatever state government power agreement we have done, we are selling the whole at Rs.

3.75?

Vipul Agarwal, Chairman and Managing Director Of course, this is the gross realization.

Ram Modi Okay. So the transmission duty and everything.

Vipul Agarwal, Chairman and Managing Director Some transmission charges, some of the charges have to be deducted.

Ram Modi Vipul Agarwal, Chairman and Managing Director So, net realization would be in the range of about Rs. 3.10, Rs. 3.15.

Ram Modi Okay, okay. Okay sir, thank you.

Vipul Agarwal, Chairman and Managing Director Thank you.

Operator Thank you. [Operator Instructions]. The next question is from the line of Nirav Shah from Antique Stock Broking. Please go ahead.

Nirav Shah Yeah, good afternoon.

Vipul Agarwal, Chairman and Managing Director Yeah, good afternoon.

Nirav Shah Sir, we were almost on the verge of completion of our billet expansion of around 150,000 tonnes in the November month, so have we commissioned that?

Vipul Agarwal, Chairman and Managing Director No, no. We have not commissioned. We had put it on a hold, in the last quarter itself we had put on hold that expansion.

Nirav Shah Okay. But I believe it was almost 70%, 80% complete?

Vipul Agarwal, Chairman and Managing Director

Yeah, it is almost 60%, 70% complete, but we have not finished it because unless we utilize the current capacity on the full basis and there was no point. Okay. So sir, can you just break up that, can you just give us how much pending CapEx is on that 0.15 million tonne of billet capacity?

Vipul Agarwal, Chairman and Managing Director That should be about 30, 40 crores maybe.

Nirav Shah 30 crores to 40 crores. And then in terms of overall CapEx for FY2013, sir how much are we now planning to spend?

Vipul Agarwal, Chairman and Managing Director FY13?

Nirav Shah Total.

Vipul Agarwal, Chairman and Managing Director FY12 or '13?

Nirav Shah 12 and 13 both.

Vipul Agarwal, Chairman and Managing Director No '12, our total capacity in '12 would be about 350 crores.

Nirav Shah And for '13 it will certainly get deferred down because we have postponed the future plans and '13, it should be about 200 and '14 it should be about 130, 140 maybe.

Nirav Shah So we are not factoring anything on the 100 megawatt of second phase.

Vipul Agarwal, Chairman and Managing Director Nirav Shah Yeah.

Vipul Agarwal, Chairman and Managing Director Then about 50-60 crores would be towards the 100 into 2 megawatt, and but in the following year, we hope to start CapEx on this project. So about 120, 130 crores would be on the 100 into 2 megawatt only.

Nirav Shah In FY14? Sir, how much did you give the guidance of total CapEx for FY14?

Vipul Agarwal, Chairman and Managing Director About 150 crores.

Nirav Shah 150 crores. Okay. And sir can you just share the production and sales volume details for all our products during the quarter? How much may we produce of billets and wire rods?

Vipul Agarwal, Chairman and Managing Director Yeah. Billet we produced 92,000, and Wire Rod we produced 71,000. And Sponge we produced 116,000 and ferro alloys we produced 10,000.

Nirav Shah And power generation was you said 40% more.

Vipul Agarwal, Chairman and Managing Director Power generation we did 22 crore units.

Nirav Shah Okay. And in terms of realizations for the products?

Vipul Agarwal, Chairman and Managing Director Realization for this quarter average, wire rod was 35,500 and billet was 30,500. Okay.

Vipul Agarwal, Chairman and Managing Director And ferro alloy was 49,500.

Nirav Shah Sir, wire rod realizations are on declining trend or some kind of weak.

Vipul Agarwal, Chairman and Managing Director Declining trend?

Nirav Shah Because, if I look September quarter, our wire rod prices were down 37,500?

Vipul Agarwal, Chairman and Managing Director No, no. Wire rod in September was 34,000.

Nirav Shah Okay, okay.

Vipul Agarwal, Chairman and Managing Director These are all basic prices.

Nirav Shah Okay, okay. Got it. And sir, final question on the debt front, what is the kind of debt we are having on the balance sheet?

Vipul Agarwal, Chairman and Managing Director Debt, currently we have about is 560 crores, as of today, as of 31st of December, of course, actually.

Nirav Shah This is excluding FCCB? Excluding FCCB of course.

Nirav Shah Okay. Fine sir, that's all from my side. Thank you sir.

Vipul Agarwal, Chairman and Managing Director Yeah. Thank you.

Operator Thank you. The next question is from the line of Tanuj Rastogi from Marwadi Shares. Please go ahead.

Tanuj Rastogi Hi sir. Sir what was the power sales during last quarter?

Vipul Agarwal, Chairman and Managing Director Power sale in the last quarter is 27 lakhs units.

Tanuj Rastogi Okay. So what is the average realization, last quarter?

Vipul Agarwal, Chairman and Managing Director Last quarter is Rs. 3.60.

Tanuj Rastogi Rs. 3.60. It seems the prices have gone down on quarter-on-quarter basis, or this Rs 3.60 is basically a gross realization you are talking about?

Vipul Agarwal, Chairman and Managing Director This is gross of course.

Tanuj Rastogi So what is the net? Net actually it keeps on varying. But on a thumb rule, we have about Rs. 0.60 you have to deduct out for the transmission charges and some over injection is there, some other charges are there.

Tanuj Rastogi Okay, okay. Okay sir. I got it. Sir my next question is just need to understand arbitrate between the billet making or basically the ferro alloy making because now you're going ahead with the ferro alloy expansion which is anyways a very power intensive operation. And as you have sponge iron and billet operations are basically at least in that operation coal is backward linkage, just need to understand the incremental EBITDA burden in both the operations if you are able to breakdown the cost and the realizations?

Vipul Agarwal, Chairman and Managing Director It's not easy to breakdown the cost right now, but I can tell you in brief the thing is and when you make silico manganese, ferro alloys like if I transfer my power at even Rs. 4 per unit for making of the silico manganese, I am still making money, I am still not at loss. But, if I transfer power at Rs. 4 to my billet division than I make a loss. I get a lesion of say Rs. 3.40, Rs. 3.30 as far as billet manufacturing is concerned.

So that's why, you gain much... you gain more in ferro alloy production as far as, as compared to the billet production.

Tanuj Rastogi Sir, what is your blended ferro alloy cost?

Vipul Agarwal, Chairman and Managing Director Blended ferro alloy cost?

Tanuj Rastogi Yes sir.

Vipul Agarwal, Chairman and Managing Director No, no. Blended means we only make silico manganese.

Tanuj Rastogi Okay.

Vipul Agarwal, Chairman and Managing Director So our total silico manganese cost comes to about 45,000 odd including power everything. If you transfer power at Rs. 3 sorry, at Rs.4 or something. Okay, okay. Okay, sir. Thank you very much sir. That's it from my side. Thanks.

Operator Thank you. The next question is from the line of Amitabh Sonthalia from SKS Capital & Research. Kindly go ahead.

Amitabh Sonthalia Hello?

Vipul Agarwal, Chairman and Managing Director Yes sir.

Amitabh Sonthalia Yeah. Hi. Thanks for taking the questions. So I have a few questions. One is what is the latest consolidated debt?

Vipul Agarwal, Chairman and Managing Director Debt total is 560 crores.

Amitabh Sonthalia Okay.

Vipul Agarwal, Chairman and Managing Director Plus we have FCCB.

Amitabh Sonthalia Okay. What is the total, what is the... so if you include that, FCCB is -- you consider that to be debt or...?

Vipul Agarwal, Chairman and Managing Director FCCB if you take it as a debt, it is about outstanding is 350 crores. So 350 plus 560 you can say it is about 900 cores in total debt. In addition... apart from that we have cash of about 120 crores. On net basis the total debt is about 800 crores, it is less than 800 actually.

Amitabh Sonthalia Okay. 800 crores net debt. And what is the CapEx planned for the remaining part of this year and next year? CapEx plan for this year for the balance three months is not much now, it is just think 20 crores, 30 crores needs to be spend because most of the projects are complete. And for the next we propose to spend about 200 crore and then following year about 150 crores.

Amitabh Sonthalia Okay. Which will be taking care of by internal accruals or do you...?

Vipul Agarwal, Chairman and Managing Director Yes, yes. Internal accruals only.

Amitabh Sonthalia Okay. So there is no major CapEx?

Vipul Agarwal, Chairman and Managing Director We don't need, I mean we don't need to raise any more debt actually.

Amitabh Sonthalia Okay. And what's you mentioned FCCB why you're not including that as part of our debt if may ask?

Vipul Agarwal, Chairman and Managing Director These are due for conversion in 2015.

Amitabh Sonthalia Okay.

Vipul Agarwal, Chairman and Managing Director So...

Amitabh Sonthalia But they do have a coupon right? It's...

Vipul Agarwal, Chairman and Managing Director Yeah. They do have a coupon. Which is being accounted for in your interest cost every year?

Vipul Agarwal, Chairman and Managing Director Yeah, yeah of course.

Amitabh Sonthalia Okay. I was just wondering if you look at this 800 crores of net debt or 900 crores of gross debt. Your interest cost for the financial expenses is only... in this quarter is only 4.5 crores?

Vipul Agarwal, Chairman and Managing Director No, no. Because these... all these debt was basically for our CapEx, and the CapEx are all under entailment decision. Now they are getting completely...

Amitabh Sonthalia So, you're capitalizing them?

Vipul Agarwal, Chairman and Managing Director We are capitalizing the interest, yeah.

Amitabh Sonthalia Okay. So next year, if you can give us some guidance on your interest cost for the full year? So, is it safe to assume that you will have... what's your average cost of debt on this 800 crores?

Vipul Agarwal, Chairman and Managing Director Average cost will be about 10% on weighted average per share.

Amitabh Sonthalia

Weighted average per share? Right. So, on a next year... on our full year basis, you will...

Vipul Agarwal, Chairman and Managing Director Our total interest outgrow next year would be about, if you see about 70 crores, 75 crores, out of which more than 60%... approximately 55% or 60% would come into revenue and balance will still get capitalized actually.

Amitabh Sonthalia Vipul Agarwal, Chairman and Managing Director Not half about 40%. 35%-40%.

Amitabh Sonthalia So as opposed say for example, in the nine months to-date your financial expenses row is only about 7.5 crores, last quarter maybe another 5 crores, 7 crores.

Vipul Agarwal, Chairman and Managing Director Yeah.

Amitabh Sonthalia So against 12 crore, 13 crore figure for this year, next year would be about 50 odd crores?

Vipul Agarwal, Chairman and Managing Director Yeah that's right. You're right.

Amitabh Sonthalia Okay. And how would... sorry go ahead.

Vipul Agarwal, Chairman and Managing Director Yeah, I think it should be less than 50 but total outgrowth is 75 and if 30-35 is capitalized, so about maybe 40 crore odd.

Amitabh Sonthalia 40 crores will be the line item. Okay. And so what is the just one second -- and have we provided for any mark-to-market on the foreign currency loans and FCCBs et cetera?

Vipul Agarwal, Chairman and Managing Director Yeah, that is also -- actually so far it has not capitalized.

Amitabh Sonthalia Sorry? So far it has not capitalized actually because it wasn't the part of the CapEx. So...

Amitabh Sonthalia So far it's not set any actually on the P&L.

Corporate Participant It is not in the P&L account so far.

Amitabh Sonthalia Okay. And what would that figure be, if you -- I don't know I couldn't the press release is not very clear, so I don't know if it's there in your notes or accounts?

Vipul Agarwal, Chairman and Managing Director It should up to December it's about 30 crores, 35 crores.

Amitabh Sonthalia For the quarter or cumulatively?

Vipul Agarwal, Chairman and Managing Director Cumulatively.

Amitabh Sonthalia Okay. So FCCB of 350 crores roughly what level was it raised at, what was the rupee-dollar rate when you issued FCCB?

Vipul Agarwal, Chairman and Managing Director See, when we raised it was about 46, 45... 45.5 or 46.

Amitabh Sonthalia Okay.

Vipul Agarwal, Chairman and Managing Director So there is approximately 10% appreciation after that. As on current levels. But, as on December end levels it probably was higher, right?

Vipul Agarwal, Chairman and Managing Director I think it was 51 between...

Amitabh Sonthalia Rupee at December end levels was close to 53. So that could mean 15%, 20%.

Vipul Agarwal, Chairman and Managing Director Yeah, so... Yeah. It would be... that's why I am saying, I am not exactly aware of this event, it could be about 40 crores, 45 crores maybe.

Amitabh Sonthalia Okay. And, do you... you don't obviously this is an open exposure unhedged et cetera, right?

Vipul Agarwal, Chairman and Managing Director Yes. Of course you're right.

Amitabh Sonthalia Okay. And, has there been any buyback of FCCBs or are you looking at that... will you look at that possibility, are you in case you have...?

Vipul Agarwal, Chairman and Managing Director Yeah we are contemplating. So far we have not made up our mind, let us see, but we can afford going for it.

Amitabh Sonthalia Okay. And what about creeping acquisitions, sir, have you done any in the last quarter, in the last few months?

Vipul Agarwal, Chairman and Managing Director No, no. So far, we have not done.

Amitabh Sonthalia Vipul Agarwal, Chairman and Managing Director Yes, yes. But we have not done, I mean, let us see, we have still not decided.

Amitabh Sonthalia Okay. And just a quick question on your segmental revenues and profits, bulk of our profits are coming from power. So, what is the -- I mean, when we benefited from the high emerging power tariffs as you mentioned. So, what is I mean, what's the likelihood of sustainability of this kind of profitability from power segment?

Vipul Agarwal, Chairman and Managing Director It should continue, it should not -- I mean...

Amitabh Sonthalia But, is it likely to be volatile based on the.....

Vipul Agarwal, Chairman and Managing Director No, the power rates are not that volatile, I mean the kind of rates currently prevailing, we don't see any major down trend from these levels. We hope that this should improve only with the summer season now setting up maybe after three months. Normally during that period, the power rate tend to go up actually.

Amitabh Sonthalia And on the steel segment, why have the return ratio so low in terms of ....

Vipul Agarwal, Chairman and Managing Director No, no. That is our transfer pricing. We are transferring power at a higher rate to take advantage under the tax laws. Because the power profit's drives power out of 100% under the income tax.

Amitabh Sonthalia Okay.

Vipul Agarwal, Chairman and Managing Director So, we are transferring power to higher rate, I mean so that we get profits in power business, so that we get higher exemption in the profit and from the tax. Okay, okay. So actually, I mean the segmental results in terms of the profit, PBIT levels are somewhat misleading in terms of the....

Vipul Agarwal, Chairman and Managing Director No, no, they're not misleading.

Amitabh Sonthalia No. This is because of the consolidate benefit that we're getting. This is not like power on a standalone basis is that profitable, you're saying.

Vipul Agarwal, Chairman and Managing Director I mean, we are transferring power at a market determined price. And that's how we are claiming the benefit under the income tax. That is what we are doing. Even for the internal consumption. I mean, for internal consumption, we could have done at the cost basis, because that could have been done. Instead of transferring as cost, we are transferring as market determined prices.

Amitabh Sonthalia This is not something which can be litigated by that department or anything.

Vipul Agarwal, Chairman and Managing Director No, no, no. We are transferring at the market driven prices.

Amitabh Sonthalia Okay. And of course, on one hand you're paying MAT, but you're taking MAT credit also, right?

Vipul Agarwal, Chairman and Managing Director Yeah.

Amitabh Sonthalia So there is in terms of on a cash flow basis, you are out of in terms of you're having to pay those out.

Vipul Agarwal, Chairman and Managing Director Yeah of course we have to do. So in terms of, it is on a nine monthly basis, you paid out -- if I understand correctly, I mean...

Vipul Agarwal, Chairman and Managing Director You are right, we have paid out the entire amount.

Amitabh Sonthalia And you've taken a tax credit of that. So on a cash basis, your profits are much lower.

Vipul Agarwal, Chairman and Managing Director Yeah, sure.

Amitabh Sonthalia And depreciation also, what is it likely to be next year sir? Just roughly, a rough idea because you're commissioning.

Vipul Agarwal, Chairman and Managing Director

Amitabh Sonthalia Yeah. So the depreciation has remained flat year-on-year. So I'm just trying to get a sense of what the figures might be next year when you have commissioned your current....

Vipul Agarwal, Chairman and Managing Director Should be about 90 crores or I think.

Amitabh Sonthalia For the full year?

Vipul Agarwal, Chairman and Managing Director For the full year, yeah.

Amitabh Sonthalia Okay. So the combined... Sorry to interrupt.

Analyst Just one quick question about your dividend policy, why it is so low? You've had almost Rs. 21 EPS last year and you paid out Rs. 1 only.

Vipul Agarwal, Chairman and Managing Director What should it be?

Amitabh Sonthalia It should be much higher.

Vipul Agarwal, Chairman and Managing Director If you think this should be much higher, we'll attempt to do it much higher this year, okay.

Amitabh Sonthalia Sir just 5% payout is by any standards...

Vipul Agarwal, Chairman and Managing Director But there are no yardsticks for this, there are no yardsticks on the basis of EPS. If you think, it should be higher, we'll try to do it higher.

Amitabh Sonthalia Okay, sir. That's what I wanted to know. Thank you so much.

Operator Thank you. The next question is from the line of Mr. Vijay Kumar from TCS Securities. Please go ahead, sir.

Vijay Kumar Hello. Congratulations for the good set of numbers.

Vipul Agarwal, Chairman and Managing Director Yeah. Thank you. Sir, my question is more on a macro level that, you're seeing that the demand is pretty strong from December. What's your outlook on demand and where is the demand coming from?

Vipul Agarwal, Chairman and Managing Director Mainly demand -- in our case it doesn't mean long products, mainly the demand comes from real estate or infrastructure. So, as you, I mean generally, during this period the construction activities are just peak and they're improving. So, demand generally comes from construction activities.

Vijay Kumar Okay. And, are you worried about new capacities that is coming up, would that affect your top-line in terms of volumes?

Vipul Agarwal, Chairman and Managing Director New capacities?

Vijay Kumar New capacities from other players.

Vipul Agarwal, Chairman and Managing Director Yeah. New capacity is of course, new capacities are always coming in, but at the same time demand is also growing. So but, I mean So, but I mean, we are not very much worried from that point-of-view, because we think that I mean the growth and demand should be more as compared to the growth in the capacity addition. So, because, new capacity additions generally is taking place with players like us only, these Brownfield expansion. So, those are not very high as compared to the demand, growth demand growth.

Vijay Kumar Okay. What's your sense of demand growth, sir, in terms of percentage for long products?

Vipul Agarwal, Chairman and Managing Director Long products, normally 8% to 10% growth should be there.

Vijay Kumar And your sense on realization?

Vipul Agarwal, Chairman and Managing Director Vijay Kumar Next year? Your sense on realization, I am saying where do you feel the realization is heading to next year?

Vipul Agarwal, Chairman and Managing Director Realizations, we don't see the major improvement. I mean we are happy if the current realizations which we have, these kind of rationale, if we get average throughout the year, we should be happy. Because normally what happens during the four to six months period from June-July to September-October, normally the realizations tend to go down. So, hopefully we should be getting the kind of realizations we are getting today, similar realizations we should be getting average for the next year. That is what we hope.

Vijay Kumar You mentioned that 35% to 40% of your CapEx would not get capitalized. This is for that 280 crore that you've spend on the power expansion which will not be coming next year. Is that correct?

Vipul Agarwal, Chairman and Managing Director That plus one addition we are making in this point here in.

Vijay Kumar Yeah, the first kiln.

Vipul Agarwal, Chairman and Managing Director Yeah, the first kiln. Yeah, these two major projects, plus some small CapEx is going in the ferro alloy division also.

Vijay Kumar Okay. And coming to your this 125 megawatt power plant, like you mentioned it will be up and running in the next 10-15 days, the balance 50 megawatts. When do you think those units would get stabilized?

Vipul Agarwal, Chairman and Managing Director Those would capitalize by end of this month or maybe early March. By March everything would get capitalized.

Vijay Kumar And post that, you'd continue giving about 25 and 28 megawatts to the grade, and balance would get internally consumed or your power sales would go up? You see, it depends probably at coal prices and we may have to keep one or two hold units and shut down, depends on the power rates in the market because for captive consumption we are already using whatever we want to use because we're not increasing any steel capacity. So when these two more two units are commissioned, if the power rates are okay and the coal prices are okay, then we will need to export more of course.

Vijay Kumar Okay. I'll put it this way sir. What was your post this expansion of tower, what would your surplus capacity in megawatts?

Vipul Agarwal, Chairman and Managing Director We should be having about 60 megawatt total capacity.

Vijay Kumar Surplus.

Vipul Agarwal, Chairman and Managing Director Surplus. Out of which, 27 is already exporting. So maybe another 40 to 50 megawatt surplus we should be having in the next one month or by March actually. So that we propose a supply under the open access as much on the open exchange, if we get good credit actually.

Vijay Kumar So, sir you also mentioned that about 200, 2400 is your e-auction cost, assuming that your Coal India moves to the GVC pricing mechanism, what will your price go up to?

Vipul Agarwal, Chairman and Managing Director Then, this price may -- I mean I can't say, but it all depends on the e-auction. This could go up to 2,400-2,300 basic price. I mean landed could go up to 3,000 also.

Vijay Kumar 3,000. So your power generation cost would go up to Rs.2.95 kind of thing.

Vipul Agarwal, Chairman and Managing Director No. It will cross Rs. 3 actually. So as those kind of costs there is no point in generating then it is better to keep the unit closed. Sir one more question on the policy, recently Maharashtra government have kind of come and curve the captive power, that is they have increased the taxes for selling for captive power plants to be sold to the grid, do you think something like that would happen?

Vipul Agarwal, Chairman and Managing Director Sorry I couldn't understand.

Vijay Kumar Recently Maharashtra that is MERC came up with a directive that the captive power plant that are selling to the grid the tax has gone up.

Vipul Agarwal, Chairman and Managing Director Tax, what tax?

Vijay Kumar From Rs. 0.40 to Rs. 1.50.

Vipul Agarwal, Chairman and Managing Director No, no we are not aware. In Chhattisgarh we don't see anything.

Vijay Kumar Okay. So all is same there to Chhattisgarh government alone?

Vipul Agarwal, Chairman and Managing Director Sorry?

Vijay Kumar To the grid?

Vipul Agarwal, Chairman and Managing Director No, no. Currently for example 27 megawatt we're supplying to Andhra Pradesh, Government, Andhra Pradesh Electricity Board.

Vijay Kumar Vipul Agarwal, Chairman and Managing Director No, then we have to supply and reopen it, otherwise, unless we get some, we keep on getting offers on these days, sometimes from Karnataka, sometimes from Tamil Nadu, on for short term basis, for three months, four months, and like that.

If we don't get those kind of offers, then we can always supply in the open exchange on daily basis also we can supply, rest I don't know.

Vijay Kumar Okay. That's all from my side sir. Thanks a lot.

Operator Thank you very much. The next question is from the line of Sindhu T. from Capital Markets. Participants are requested to kindly restrict their questions to two per participant. Kindly go ahead.

Analyst Good afternoon sir. Here is my question like, you said the iron ore mines are going to get delayed, so I would like to know what will be the peak possible iron ore mining if at all it happens?

Vipul Agarwal, Chairman and Managing Director I can't say anything. I mean, it's so uncertain I can't comment any dates, because there is so much...

Analyst No. What will be the peak iron ore mining productions sir if at all?

Vipul Agarwal, Chairman and Managing Director Peak iron ore mining production?

Analyst Yeah. Peak possible iron ore mines.

Vipul Agarwal, Chairman and Managing Director Sorry, peak production you're saying? Yeah.

Vipul Agarwal, Chairman and Managing Director No, no. From this mine which you're talking in Orissa, the peak production is likely to be about 1 million tonnes in a year.

Analyst 1 million tonnes. And, how much would be used for the captive... for your captive sir, iron ore requirement?

Vipul Agarwal, Chairman and Managing Director No. 100% we'll be using captively only.

Analyst Okay. 100% will be used. And one more thing sir, I would like to know like the sponge iron kiln, which you are having the existing sponge iron capacity does it have the waste heat recovery, base power capacity sir?

Vipul Agarwal, Chairman and Managing Director Sorry.

Analyst Does the sponge iron capacity, the existing capacity, does it have the waste heat recovery capacity sir?

Vipul Agarwal, Chairman and Managing Director Yeah. Of course. Waste heat is a integral part of sponge iron.

Analyst And the new one also will be having this thing?

Vipul Agarwal, Chairman and Managing Director New one will also be having, yes.

Analyst Okay. Sir may I know sponge iron realization sir for this quarter? Sponge iron realization is 21,600 actually.

Analyst 21,600. And the volume sir?

Vipul Agarwal, Chairman and Managing Director This quarter we have produced a 115,000.

Analyst 115,000.

Vipul Agarwal, Chairman and Managing Director Yeah.

Analyst Yeah. Thank you sir. That's all from my side.

Operator Thank you very much. The next question is from the line of -- from Motilal Oswal Securities. Please go ahead.

Analyst Good afternoon sir. Sir, actually I just wanted to know whether there is any of power units, whole power units are down or everything is working right now?

Vipul Agarwal, Chairman and Managing Director Right now, one unit we have kept closed. One old set.

Analyst Okay. Sir, this is because realization are not lucrative enough or something else?

Vipul Agarwal, Chairman and Managing Director Yeah, realization is not that lucrative and the coal prices are higher. So currently one unit because and then it's little coal emission is also slightly higher at the old sets. So one set we have kept closed. Okay sir. Sir the other thing is that this ferro alloys projects which you are doing, sir what are the time lines in the CapEx for this particular project?

Vipul Agarwal, Chairman and Managing Director This should be complete by August-September, we hope to complete by August-September this year.

Analyst Okay.

Vipul Agarwal, Chairman and Managing Director And CapEx should be about 50 crores, 60 crores.

Analyst

50-60 crores and sir is there the capacity?

Vipul Agarwal, Chairman and Managing Director Capacity would be actually one furnace gives about 1,000 tonnes every month

Analyst Pardon me

Vipul Agarwal, Chairman and Managing Director So 24,000 in a year you can say.

Analyst 24,000 in a year. Okay sir. Any particular reason for going for this ferro alloys as a business is not going very great. So...

Vipul Agarwal, Chairman and Managing Director No for us we have seen a very steady kind of business from this division actually.

Analyst Okay. In the last so many years because we have been of this division actually.

Analyst Okay.

Vipul Agarwal, Chairman and Managing Director In the last so many years because we have been supplying regularly to steel authorities. When we keep on getting regular orders from them. And there volumes are increasing actually. So we have, I mean we are not able to fulfill there requirement also actually. They want more from us. And since we have for the last four five years, three four years, we have been getting regular orders from them, so that's why we want to increase the capacity here.

Analyst Okay, sir. That's all from my side. Thanks.

Operator Thank you. The next question is from the line of Sanjeev Panda from Sharekhan. Please go ahead.

Sanjeev Panda Yeah. Sir just to understand. We know that the company it's basically, the resources, mine resources has basically the crème that we would like to know more about. Could you please throw some light what exactly is the status of your mines?

Vipul Agarwal, Chairman and Managing Director Status as I told you sir, iron ore mine is getting delayed because of these approval issues. And as far as the coal mine is concerned, one

mine is already operational. For the second one, we are now working aggressively on the second mine, which is the Fatehpur mine, which is exclusively for this expansion in the power capacity. And hopefully, we hope to open this mine in the next two to 2.5 years. So, this is as far as coal is concerned, iron ore mine of course has got stuck in these approval issues.

Sanjeev Panda Okay. And could you please give some, the kind of coal we get from the mines or the calorific value and what would the mining cost at be?

Vipul Agarwal, Chairman and Managing Director Currently we are raising 1 million tonne every year from the existing mine which we have. And the calorific value is 4,000 plus. And the blended cost at our plant from this mine is about Rs. 850. Okay. Sir the next question is regarding the ferro alloy that you have entered. As you said that your cost of production is around 45,000 per tonne and it seems that entire dynamic is around the transferring of power. As you said that, you find interesting to transfer power, even if you transfer power at Rs. 4, that doesn't make sense. Could you guide us how much would be the incremental benefit that we get if you're transferring at a particular price and what is the gap and which will be beneficial for you, mean say 4,000 units you will be requiring per tonne of ferro alloy right, roughly?

Vipul Agarwal, Chairman and Managing Director Actually it is about 4,800 actually.

Sanjeev Panda Okay. So, in that, if we make Rs 1.5 kind of benefit and because of cost of production you said is 2.5 roughly.

Vipul Agarwal, Chairman and Managing Director Yeah. We make more -- if I tell you 45,000 is the cost, the selling price is close to 47, 48,000, 50 actually. So we make another 5,000 even after transferring power at Rs 4, we still make a return of above Rs. 5,000 a tonne on the ferro alloy business.

Sanjeev Panda So this 45,000 cost that we added we have included Rs. 4 of transfer price of power for that?

Vipul Agarwal, Chairman and Managing Director Yeah, at Rs. 4. Yeah, you are right.

Sanjeev Panda Transferring at Rs 4?

Vipul Agarwal, Chairman and Managing Director Yeah.

Sanjeev Panda Okay. That's it from my side sir. Thank you, thanks a lot.

Operator

Thank you very much. The next question is from the line of Bhavin Chadda from ENAM Holdings. Please go ahead. Yeah sir. Can you give us the sales volume in the quarter, sponge, billet, wire rod, ferro alloys?

Vipul Agarwal, Chairman and Managing Director Yeah, sure. Sales volumes are, in wire rod it is 59,000.

Bhavin Chadda Yeah.

Vipul Agarwal, Chairman and Managing Director Billet is 29,000.

Bhavin Chadda Yeah.

Vipul Agarwal, Chairman and Managing Director And we also have sold sponge at 32,000 tonne sponge we have sold.

Bhavin Chadda 32,000 tonnes.

Vipul Agarwal, Chairman and Managing Director 32. Yeah.

Bhavin Chadda Okay. And, silico manganese?

Vipul Agarwal, Chairman and Managing Director Silico 8,500.

Bhavin Chadda 8,500. And how much was the captive coal volumes in the quarter? Coal is about 250,000 every quarter.

Bhavin Chadda In the last quarter, it was 2,36,000, so this quarter it was 2,50,000?

Vipul Agarwal, Chairman and Managing Director I think its about 260 in this quarter. I think...

Bhavin Chadda

260.

Vipul Agarwal, Chairman and Managing Director 260. Yeah. 260 in this quarter, I think.

Bhavin Chadda 260 okay. And basically power sales you said 7.2 crore units have been sold in the quarter?

Vipul Agarwal, Chairman and Managing Director Yeah that's right.

Bhavin Chadda Okay, okay. And how much sir after the phase one expansion is complete you said 75 is already operational in four DRI will be operational this month. How much you are capitalizing in this quarter? Entire phase one expansion cost how much is capitalized and how much is pending to be capitalized?

Vipul Agarwal, Chairman and Managing Director You see the total capitalization in this year it is about total capitalization should about 750 crores to 800 crores actually.

Bhavin Chadda Okay. And how much has been done till December?

Vipul Agarwal, Chairman and Managing Director Out of this some has been capitalized. Sorry.

Vipul Agarwal, Chairman and Managing Director Some has already been capitalized actually and that... this includes the entire 125 megawatt of power and kilns.

Bhavin Chadda Yeah 750 crores, 800 crores includes the phase one, 2 like DRI and 125 megawatt power right?

Vipul Agarwal, Chairman and Managing Director Yeah that's right.

Bhavin Chadda Okay. No I am saying till December how much has been capitalized?

Vipul Agarwal, Chairman and Managing Director Till December about 250 has been capitalized I think.

Bhavin Chadda 250 crores has been capitalized. Okay. Thank you sir.

Operator Thank you. The next question is from the line of Giriraj Daga from Nirmal Bang. Please go ahead

Giriraj Daga Yeah sir. What was the CapEx during the quarter sir?

Vipul Agarwal, Chairman and Managing Director In this quarter?

Giriraj Daga Yeah. Quarter should be about... I'm not getting the exact figure. It should be about 100 crores.

Giriraj Daga 100 crore. Because what I was looking at a number like that debt last quarter was around 427 crores.

Vipul Agarwal, Chairman and Managing Director Debt?

Giriraj Daga Yeah total?

Vipul Agarwal, Chairman and Managing Director Yeah that's okay.

Giriraj Daga And debt is this quarter is 560 crore so 130 crore debt has increased. And it would have made some 50 crores of cash profit. So I was just our cash number has increased from last quarter like it was this quarter 120 crores, so what was the cash number last quarter? Or is it the mandatory that we had already drawn so we just took that debt and maybe this is the peak debt?

Vipul Agarwal, Chairman and Managing Director No, no. I couldn't get your question actually.

Giriraj Daga What I'm looking is that we have drawn like 130 crores from the debt during the quarter.

Vipul Agarwal, Chairman and Managing Director The debt has increased by 130 crores you are right.

Giriraj Daga Yeah, but the requirement it appears that was not that high.

Vipul Agarwal, Chairman and Managing Director Giriraj Daga But like, we have intentionally increased the cash level in the business?

Vipul Agarwal, Chairman and Managing Director Intentionally increase the cash level?

Giriraj Daga Means, we last time...

Vipul Agarwal, Chairman and Managing Director No, no, we got a disbursement, new disbursement for one of the institutions.

Giriraj Daga Okay.

Vipul Agarwal, Chairman and Managing Director So, that has not been spent totally, I mean in this quarter, the spent would be then, we repaid one of the loan actually.

Giriraj Daga Okay, okay, okay. But actually this is the peak date in the business?

Vipul Agarwal, Chairman and Managing Director Yeah, that is the peak date now of course.

Giriraj Daga Okay. Sir, my next question is regarding the costing of silico manganese, that we hardly, we don't use much of coke in the silico manganese?

Vipul Agarwal, Chairman and Managing Director We use some pearl coke. Okay. So, what is the amount for 1 tonne of making how much we use?

Vipul Agarwal, Chairman and Managing Director 0.5 tonne to make 1 tonne of silico manganese.

Giriraj Daga And where we are getting like over our ore?

Vipul Agarwal, Chairman and Managing Director Coal, we are getting from... I think from Bihar actually. The coke factories are there.

Giriraj Daga I am talking about ore, sir.

Vipul Agarwal, Chairman and Managing Director Manganese ore?

Giriraj Daga Yeah.

Vipul Agarwal, Chairman and Managing Director Manganese ore, we get from Nagpur area, then we get from Orissa also, from Karnataka also.

Giriraj Daga Like blended rate would be somewhere 7,000 or more than that?

Vipul Agarwal, Chairman and Managing Director Blended would be about 8,000.

Giriraj Daga 8,000. Sir I was just working the numbers like you just said, Rs. 4,800 you can take power requirement, you can multiply with the Rs. 4 so 20,000 is your power cost plus 8,000 you multiply to an 2.5 of requirement. So that would be around 40,000. Plus you multiply with the coke requirement also cost should be higher, right? No, it's 1.9 I don't know how you are calculating. 2.5 what you are calculating iron ore?

Giriraj Daga Ore requirement.

Vipul Agarwal, Chairman and Managing Director Don't know how are calculating.

Giriraj Daga about 2.5.

Vipul Agarwal, Chairman and Managing Director 2.5 what you are calculating.

Giriraj Daga Requirement.

Vipul Agarwal, Chairman and Managing Director Less than two.

Giriraj Daga Less than two.

Vipul Agarwal, Chairman and Managing Director Yeah.

Giriraj Daga Okay, okay.

Vipul Agarwal, Chairman and Managing Director is 1.8. 1.8. Okay. There you can say --. Okay, sir. Thank from my side.

Operator Thank you. The next question is from the line of Arshad Gujrati from Khandwala Securities. Please go ahead.

Analyst Hi, good evening sir. Just one question on your CapEx plan on the silico manganese front. What was the CapEx which you have planned to infuse for this new capacity?

Vipul Agarwal, Chairman and Managing Director About 60 crores.

Analyst And what would be the capacity for that?

Vipul Agarwal, Chairman and Managing Director About 24,000 tonnes in a year.

Analyst 24,000 tonne a year. Sir, I was just looking on the front that you have been doing the CapEx in all region, specially from the sponge, iron, steel and power and because of some uncertain condition in the industry, you have been postponing the CapEx plan. So I was just thinking from the silico manganese point of view also, if there is uncertainty in the demand specially for the silico manganese side, then is there any possibility that this CapEx will also get on hold because of uncertain scenario especially on the industry side?

Vipul Agarwal, Chairman and Managing Director No I don't think, because we have seen a very stable demand and margins in this unit in the next last three, four years. So we don't foresee any possibility holding this CapEx, this is very small CapEx to hold.

Analyst Okay. And how is the funding of this CapEx through internal accrual or through debt side?

Vipul Agarwal, Chairman and Managing Director Yes, these are all internal approvals. Okay, okay. Thank you, sir.

Operator Thank you. [Operator Instructions]. The next question is from the line of Arun Jain from Infina Finance. Please go ahead.

Arun Jain Hi, sir. Hello? Sir, most of my questions has been answered, can I have your iron ore rates?

Vipul Agarwal, Chairman and Managing Director About 7,000 landed.

Arun Jain Okay. 7,000 landed. Okay. Thanks a lot sir.

Operator Thank you. The next question is from the line of Aditya Vikram Gupta from CD Equisearch. Please go ahead.

Aditya Vikram Gupta Good evening sir.

Vipul Agarwal, Chairman and Managing Director Yeah. Good evening.

Aditya Vikram Gupta Sir, I joined a bit late. I just want your outlook on the power sector?

Vipul Agarwal, Chairman and Managing Director Outlook on power sector?

Aditya Vikram Gupta Yes sir. You see, power have been fluctuating off late. I mean there were quite good during the period of September, October, November. But, they have come down somewhat in the last 15, 20 days. But, we see, I mean normally we see power rates getting improved during these summer months, most likelihood from March onwards we should see better price in the power in the power business.

Aditya Vikram Gupta

Okay sir.

Vipul Agarwal, Chairman and Managing Director So its around minimum Rs.3.5 to Rs.4, we should be getting here in any case.

Aditya Vikram Gupta It's from March onwards.

Vipul Agarwal, Chairman and Managing Director Yeah.

Aditya Vikram Gupta Okay sir. Recently we've seen a delay in the power capacities. As in the CapEx we are doing the power sector, so do we see some further delays sir?

Vipul Agarwal, Chairman and Managing Director No. You see first phase, we have already completed now. The future phases we have delayed intentionally, because this availability of coal has become a big issue because the coal prices have gone up by more than 100% in the last one year. So as these coal prices it is highly, I mean it's not economical to run these units and make profit. So we want to link, rather coincide the commissioning of the future expansion with our captive coal mines, that's why we have delayed these projects.

Aditya Vikram Gupta Okay sir. But recently we just heard a news, I guess as in the ministry is trying to reduce the coal price?

Vipul Agarwal, Chairman and Managing Director No, no. They're not trying to reduce, what they have done was as they was another increase in coal prices of 1st of January, when after lot of hue and cry, these prices have been put on hold only day before yesterday. So, but this hold is only up to March, as what they are saying. So, let us see, hopefully they don't increase again after March. Okay, sir. That's all from my side sir. Thank you and all the best.

Vipul Agarwal, Chairman and Managing Director Thank you.

Operator Thank you very much. The next question is from the line of Bhavin Chadda from ENAM Holdings. Please go ahead.

Bhavin Chadda Yes, sir you mentioned your power generation cost at Rs. 2.35, right?

Vipul Agarwal, Chairman and Managing Director Yeah, yeah.

Bhavin Chadda This is to the EBITDA level or including interest depreciation?

Vipul Agarwal, Chairman and Managing Director No, EBITDA level.

Bhavin Chadda Till the EBITDA level?

Vipul Agarwal, Chairman and Managing Director Yeah, yeah.

Bhavin Chadda And this is even after this new plant getting commissioned it will remain at similar level?

Vipul Agarwal, Chairman and Managing Director No, this is for the current generation. But for new plant, it maybe slightly more. Because this is on a weighted average coal cost. Because some coal we are getting from our captive mine, which is at a very low price. Right.

Vipul Agarwal, Chairman and Managing Director And some from linkage and some from e-auction.

Bhavin Chadda So as of now what is your coal mix for the current power plant and what would it be when the new 125 megawatt goes on stream?

Vipul Agarwal, Chairman and Managing Director No, for the existing capacity we have some, we use some coal from the coal mines, Chotia mine and also from the linkage. But for additional capacity which we have for example, this 75 megawatt which we are running as of now. Up to this level, this 235 should be the average cost. That is what I was saying but for additional 50 megawatt which should be commissioned now, it would be slightly more actually.

Bhavin Chadda Sorry sir. Totally you're commissioning 25X5, right phase one was 125 megawatt right.

Vipul Agarwal, Chairman and Managing Director Yeah, yeah.

Bhavin Chadda And what was the old one?

Vipul Agarwal, Chairman and Managing Director Old one was 75 megawatts.

Bhavin Chadda 75 megawatts, so 75 you're running with the mix of captive plus, e-auction plus the linkage one?

Vipul Agarwal, Chairman and Managing Director Yeah, but this 75 also we get some surplus coal from the existing availability also.

Bhavin Chadda Vipul Agarwal, Chairman and Managing Director That...

Bhavin Chadda Roughly sir.

Vipul Agarwal, Chairman and Managing Director You are talking about 75 megawatt or?

Bhavin Chadda 75 megawatt, existing I think is that linkage 30, captive 40 and balance is e-auction 30 like. The rough mix is right.

Vipul Agarwal, Chairman and Managing Director For this 75 it should be... largely it would be e-auction coal actually but some quantity maybe you can say about 25%, 30% should be available from the linkage and balance from the e-auction.

Bhavin Chadda No you said you are using some coal from your captive mines also for this 75.

Vipul Agarwal, Chairman and Managing Director No. But that is for our existing plant also, old plant also. We have old plant, we have a older capacity of about 75 megawatt,

Bhavin Chadda Yeah.

Vipul Agarwal, Chairman and Managing Director So for that also we are using coal from the existing mine and the linkage coal also.

Bhavin Chadda No no sir. Sir I think you got confused. What I am asking is phase one is 125 megawatt that is separate and the old capacity which you are running that is 75 megawatt. So I am asking the two break up separate, Rs. 2.30 One thing you have to understand. I have told you actually some time back that out of the old capacity one set closed also.

Bhavin Chadda How many megawatt has been closed?

Vipul Agarwal, Chairman and Managing Director 25 megawatt we are not running as of now.

Bhavin Chadda 25 you are not running.

Vipul Agarwal, Chairman and Managing Director Yeah.

Bhavin Chadda Okay.

Vipul Agarwal, Chairman and Managing Director So, because of that

Bhavin Chadda So the old one is only 50 megawatt which will be operational

Vipul Agarwal, Chairman and Managing Director Yeah, old one is only 50 megawatt which is operational

Bhavin Chadda Okay.

Vipul Agarwal, Chairman and Managing Director Some -- now which is getting added. So some coal from the old availability is also getting transferred for the new capacity. Sure. And for the new capacity you don't have any linkage right. So if this would entire e-auction?

Vipul Agarwal, Chairman and Managing Director Yeah, 100% e-auction.

Bhavin Chadda Okay. So the generation cost your would be quite high?

Vipul Agarwal, Chairman and Managing Director Yeah if run 100% all the units the new set generation cost would be high. It would be more than Rs 3 I think.

Bhavin Chadda More than Rs. 3. Then sir based on the once you start your new power you will have to either go via ferro alloy root which you are expanding or you have to produce more of a structural TMT or something right? You cannot depend on power merchant sale for your profitability.

Vipul Agarwal, Chairman and Managing Director It depends on power rates actually. If we can get Rs. 4 plus then of course we can go for...

Bhavin Chadda But, again you cannot decide every 15 days or one monthly basis, right to shutdown the steel plant, to restart the steel plant or to shutdown the ferro alloy furnace restart it.

Vipul Agarwal, Chairman and Managing Director No. That's not a problem. We can decide every months also I mean running a... starting a plant, because in merchant power business you can even export for one day or for one hour also.

Bhavin Chadda Okay.

Vipul Agarwal, Chairman and Managing Director Unless you have a medium-term contract for say five to six months.

Bhavin Chadda Vipul Agarwal, Chairman and Managing Director In the open exchange system you can even export for a day. So, I mean if you can get good rate we can start the plant and export for whatever days we get a solution.

Bhavin Chadda Okay. And sir your for the ferro alloys division your manganese ore source is moil or you procure from many sources?

Vipul Agarwal, Chairman and Managing Director No, no, moil is one of them.

Bhavin Chadda Okay.

Vipul Agarwal, Chairman and Managing Director But we procure from lot of other parties also plus, minus.

Bhavin Chadda Yeah, because if I understand correctly of the costing and the profitability of that division, you are already making Rs. 4,000 to Rs. 5,000 EBITDA, that too transferring power at Rs. 4, which is say another Rs. 1 profit there. You're making it to Rs. 9,000 in the silico manganese business, I don't know whether this was the last quarter or was this a sustainable model? Then why were you so late in

expanding the ferro alloy business when the profitability was such high and actually you have postponed after completing 70% CapEx, you have postponed the commissioning of your billet plant, so?

Vipul Agarwal, Chairman and Managing Director Because we did not have power earlier, you know.

Bhavin Chadda No but sir, your power plant CapEx is going on for last two years, you know when your power plant would have commissioned, you shouldn't have waited for power plant to commission and now you are putting up a ferro alloy CapEx which will take another 12-15 months. So that is a strategic mistake, right?

Vipul Agarwal, Chairman and Managing Director No, no. It will not take 12-15 months. I told you, this should be happen ready in the next six months, six to seven months. This is a small gestation project. I mean, you don't need 18 months or two years to set up this silico Bhavin Chadda Okay. So you will set up 24,000 in six months, yeah.

Vipul Agarwal, Chairman and Managing Director And then demand from steel authority has also recently gone up. Earlier, I mean they increased their demand and volumes only recently. So we are now quite hopeful of selling increased volumes to them.

Bhavin Chadda Okay. And sir my last question on this 125 megawatt which you are starting. Is there any application for linkage, or a tapering linkage? And what about the new 2 into 100 megawatt, what is the status there? Is there any application for tapering or direct linkage till you can start the mine, or there is not at all any application for linkage?

Vipul Agarwal, Chairman and Managing Director No, no, no. We have linkage for, we have a application for tapering linkage but the entire 625 megawatts.

Bhavin Chadda Okay.

Vipul Agarwal, Chairman and Managing Director So, but the problem is that this application has been recommended also, but the problem is that the meeting for the linkage committee is not taking place. So unless the meeting takes place, it's totally uncertain where the linkage would be available. Gestation, we have made.

Bhavin Chadda Okay. Thanks a lot sir.

Operator Thank you. The next question is from the line Vijay Kumar from TCS Securities. [Operator Instructions].

Vijay Kumar

Sir, all my questions are answered. I have no further questions. Thank you.

Operator Sanjeev Panda Sir, my questions has answered. Thanks.

Operator Thank you very much. As there are no further questions, I would now like to hand the floor over the Mr. Vipul Agarwal for closing comments.

Vipul Agarwal, Chairman and Managing Director Yeah. So, we hope with all these capacity additions which are taking place, and we are competing most of the first aid expansion by March. And so with this the performance of the company is expected to improve from next year onwards, because all these capacity additions would be operational and would be contributing to the profitability of the company.

And then we are hoping that for the environment, for this our captive, the second mine, Fatehpur mine which is for the power expansion, we hope that the approval comes fast for this mine, so that we can start work on the future expansion in our power capacity. And which will -- I mean otherwise the only concern of course is iron ore where still we are taking all the heads.

So once -- I mean we hope that in the next year at least we can start I mean we can get the approvals for the iron ore mine also. So, I mean let us hope and with all these things, the performance of the company should be much better in the coming years. Thank you.

Operator Thank you. On behalf of Prakash Industries that concludes this conference. Thank you for joining us. You may now disconnect your lines.