Ravi Uppal, Managing Director and Chief Executive Officer of JSPL, said the company was committed to reducing its huge debt pile, but it would need to be done progressively and the immediate priority was to steady earnings.
Speaking to CNBC-TV18, Uppal said that one way of getting rid of its last reported consolidated gross debt of Rs 46,816 crore was to sell disposable assets, even as the company actively looks to sell stakes in its units.
Declaring its third quarter earnings on Tuesday evening, JSPL said it had managed to cut down its consolidated net loss by almost half to Rs 455 crore against a loss of Rs 882 crore in the same quarter last year. The company's consolidated revenue went up 25 percent to Rs 5,408 crore during the quarter while EBIDTA went up to Rs 1,277 crore against Rs 542 crore in the third quarter of the previous financial year.
Jindal said that increased volumes, higher net sales realisations and reduction in costs in JSPL's steel business had helped the company put up a positive show in the third quarter.
He said that realisations were higher by 7 percent and that the EBITDA per tonne had gone up 30 percent to Rs 8,100. He said steel prices had increased by Rs 2,500 per tonne, adding that JSPL does not provide discounts on bulk sales unlike some of its competitors. He said the company had managed to achieve an all-time low inventory in the last quarter.
On the power business, Uppal said JSP was being selective by choosing Power Purchase Agreements and bilateral sales as opposed to the earlier practice of dispatching to merchant markets where the prices were low.
Below is the verbatim transcript of Ravi Uppal's interview to Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Sonia: Can you give us a sense of what were the steel realisations in this past quarter and also what was the EBITDA per tonne that you clocked in?
A: Net sales realisation of steel has improved. In this quarter, the steel realisation is up by about 7 percent which if translated into rupees, we are up by about Rs 2,000-2,500 per tonne. The EBITDA per tonne is about Rs 8,100 in Q3.
Sonia: How is steel demand holding up in the current month? I ask because there is some talk of discounts being offered on bulk sales etc, any truth to that?
A: I cannot speak for others but I can tell you that we do not give any kind of major discounts for bulk sales.
Obviously when you have bulk sales as you do give some kind of a small incentive but not any major incentive. So I am not aware of any bulk discount which has been given.
I would like to say that when we are talking about the improved earnings for the industry of a JSPL, there are three factors which have contributed to increasing the EBITDA. Number one is the increased volume and if you look at our consolidated sales, we are up by about 18 percent on physical turnover of steel. Second is the increased net sales realisation and the third factor is the reduction in cost. So it is a net impact of that which has culminated into a much higher EBITDA in this quarter compared to the same quarter previous year.
Latha: I wanted to know about supply. What is your current inventory?
A: One front where we have done extremely well in the last quarter is the management of the working capital both in terms of inventory reduction as well as the receivables. I am happy to tell you that at the end of this quarter we have the all-time low inventory. Our finished good inventory is about 115,000 tonne which used to be about 250,000 tonne and likewise our receivables have also reduced and all these things taken together have resulted in a major reduction in our working capital.
So lot of funds have been unlocked for the working capital.
Sonia: The pellet sales have rocketed over the past one year, can you give us a breakup of what is the captive and the exports sales and what were the realisations in this quarter?
A: I would say that pellet as one product line, we have done very well. We are the largest exporter of pellets from India. We are producing between 6.5 lakh and 7 lakh tonne of pellet every month because our total capacity is about 9 million tonnes and out of that, we are exporting between 250,000 and 300,000 tonne of pellet every month. The rest of them are sold either in the domestic market or they go to our plants. As far as the realisation, the export realisation in the recent weeks and months have improved. The current price of pellet is anywhere between USD 102 and 105 free on board (FOB) which is being sold.
Latha: Besides the pellet, your Oman unit delivered a decent performance? What is the capacity utilisation and how is demand shaping up for its products?
A: The capacity utilisation in Oman is between 75-80 percent and we do think that this has room for improvement or capacity utilisation, I think it should go up to a level of about 85 percent.
Latha: Let me come to the power business, what is the capacity utilisation there?
A: We have total capacity of about 3,400 megawatt and we are running right now between 1,350 and 1,600 megawatt of power.
Earlier we were dispatching a lot to the merchant market but of late we discovered that the prices that we are getting from merchant market are relatively low. So therefore, there are two segments, which we are focused on, one of them is supply of power against power purchase agreements (PPAs) and the second one against the buyback to agreements that we have with the buyers.
We are selling to the national exchange only to the extent of meeting the technical minimum requirement of a operating unit. This has helped us to reduce our cost and on the other hand it has helped this to improve our net sales realisation.
In Q3 if you notice that our EBITDA earnings have gone up and now our EBITDA is at a level of 35 percent compared to 25 percent that we had for the same quarter last year. So this is basically a result of being very selective who we sell to focusing more on PPAs and the bilateral sales and also reducing the fuel cost.
So all these things have come together and to ensure that we improve our EBITDA to the level that we achieve at the end of Q3. Now in the next six months, we are expecting some more PPAs that we had won quite sometime ago to come onstream. We are going to supply to Kerala, we are going to supply to some other customers on a bilateral basis so I do see the capacity utilisation from March till about September improve.
Having said this, I have not said that we still have room to take lot more PPAs because good part of our capacity is still under-utilised.
Sonia: How do you plan on reducing this massive debt pile that you are sitting on, we ask you this question every quarter but what is the way forward?
A: The company is absolutely determined to reduce the debt level but it has to be done very progressively. We want to make sure that our earnings to become more steady and second step that we are taking is that whatever surplus earnings we have we should use them to reduce the level of debt. That is our topmost priority for the company and alongside, if there are any assets that we can dispose off and any amount that we can realise from them, we will use that to reduce the debt. So all eyes within the company are focused on reduction of debt and we are also determined to do that.
Latha: Can you give us a number on what the debt will look like next year?
A: I cannot give you a figure as of now. Any surplus fund that we have after servicing our debt, they will basically be used to reduce the debt.
Latha: Can you list any of your units -- Oman unit for instance or even JPL?
A: As far as the listing of Oman is concerned or JPL is concerned, we have always had it on the cards how we can cash out the potential of the companies but we have to look for an appropriate time.
Sonia: Are you looking to sell a stake in the listed company, JSPL? Any stake sell talks that are underway?
A: Why limit selling options just to Japanese? There are many others who have expressed deep interest on JSPL steel plants. So therefore, I don’t want to limit ourselves just to one party, we keep talking to various people and depending on to where we can strike a good deal and arrangement, we would decide accordingly.