Feb 14, 2013 01:03 PM IST | Source: CNBC-TV18

Will meet in March to decide whether to hike prices: NMDC

Country's top iron ore producer NMDC’s net sales was down 13.46 percent to Rs 7,500.02 crore. The company’s chairman, CS Verma blamed it on Bailadila region's broken pipline. They were selling about seven to eight million tonnes of iron ore through it and since last one year they could not get any advantage of it.

Country's top iron ore producer NMDC's net sales was down 13.46 percent to Rs 7,500.02 crore in the third quarter of financial year 2012-13. Speaking to CNBC-TV18, the company’s chairman CS Verma blamed the loss on Bailadila region's broken pipline. We were selling about seven to eight million tonnes of iron ore through it and since last one year we could not get any advantage of it, he added.

Also read: NMDC Q3 profit falls 30% to Rs 1,293 cr, shares down

He also informed that in first week of March, the company will have a board meeting to decide whether to hike prices of iron ore or not.

Below is the verbatim transcript of his interview to CNBC-TV18

Q: It has been quite lackluster in terms of performance for the topline. Any price hikes that you all would contemplate this quarter in order to bump up realisations in Q4 going forward?

A: We have been deciding the prices on a monthly basis not on quarterly basis. Earlier we were deciding our iron ore prices on a quarterly basis. Last quarter we resorted to monthly pricing arrangement.

We have already taken a view about the February prices. This we have kept at the same level as of January 2013 level. Our board will be meeting on first week of March to take a view and make a market assessment. Then we will decide about the March prices for the iron ore.

Q: The revenues are almost 27 percent and you have seen a big de-growth in your sales volumes as well. Can you give us an indication of what the quarterly run rate could like in terms of sales, volumes and how long do you expect this pressure to continue?

A: I don’t agree that. We have been able to sell what was expected. We have been handicapped because we were earlier selling about 7-8 million tonnes of iron ore through pipeline. Now, that pipeline in Bailadila region has broken and since last one year we could not get any advantage of it. In spite of that we have been able to sell about 5 million tonne of iron ore during the quarter that ended December 2012.

The first three quarters of the current financial year, sales of the company has been to the level of 18 million tonne. One more factor which impacted our performance in the last quarter was that there had been a heavy rainfall in Bailadila region. It was about 125 centimeter which never happened in last 20 years. It was the highest level of the last 20 years. Our 80 percent production comes from Bailadila region. Now rain has stopped and our production level have picked up.

In January 2013 our production level has been more than 3 million tonne in one single month. This has never happened since inception of the company. Now all the factors are going to be positive. Our uniflow system has started in Bailadila, this will help in evacuation of iron ore. We have already signed our agreement with the Indian Railways for the doubling of the track between Kirandul and Jagdalpur. We have already signed necessary agreements with some customers whereby we will be laying a slurry pipeline between Bailadila region to Vizag.

The problem today is not the production but it is of the evacuation. We were miserably impacted because of the breaking of the pipeline.

Q: When do you expect a normalisation in terms of volume trajectory for you all going forward, on a monthly basis and what sort of realisations would you be targeting?

A: I cannot say as realizations are market related. Our board meets every month and there has been a very high degree of volatility in the iron ore prices, last one year in the international market. In the beginning of the financial year April 2012 the market prices of iron ore were about USD 150 per tonne and then they fell to a low level of about USD 90 per tonne in October 2012. Then again they went up to a level of USD 160 per tonne in just one and a half months time.

Today they are hovering around USD 150 per tonne. In the last two years the highest level of iron ore prices in the international market have been more than USD 190 per tonne. There has been a high degree of volatility in the domestic iron ore price also. Iron ore prices have to be market related. However, the worst is over and in the last two months the demand of steel and iron ore has picked up. It has also picked up both in the international market as well as in the domestic market.

Q: There are some concerns that NMDC may pump in some of its money and buy stakes in other PSUs as well. How would you like to react to those concerns? Is there any plan of buying stake in other PSUs?

A: I will only say that we don’t have any concrete proposal at this moment. Since we are a cash surplus company, we are having about Rs 22000 crore lying in the bank.

Being a government company we have to abide by the guidelines floated by the Department of Public Enterprises (DPE), Government of India on investments. We are open to all sorts of investments. It should give us a good amount of yield, balancing it with the safety of the investment, but which is within the framework of the DPE guidelines on investment.

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Q: Is there any prospect of buying any stake within this calendar year itself or is that ruled out completely?

A: As of now we don’t have any concrete proposal. It is a dynamic situation in which we are working.
 
Q: Has there been any communication at all with regards to the utilisation of cash in terms of buying shares of other Public Sector Undertakings (PSU) companies etc?

A: We had to utilise our money. We are well equipped to utilise our surplus money in the 11th five year plan which ended last year. Our total capital expenditure was just Rs 3000 crore.

In the 12th five year plan which has started last year we have planned our capex at Rs 30000 crore. This is 10 times higher than the last five year capex. We are setting up a steel plant of USD 3 billion. There we are increasing our capacity of mining from 32 million tonne per annum to 48 million tonne per annum.

We are making investments in various value added services like Palletisation. Then we are also laying down various evacuation, Unifloor Systems and many other such systems.  So, we are going to spend our cash in a fruitful manner, which will give a value addition to the company.

Q: What are the sales volumes in Q3 and the blended realisations that you have seen?

A: Our sales in Q3 have been 5.32 million tonne.

Q: What about the blended realisations?  

A: Our total gross turnover in this quarter has been Rs 2048 crore.

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