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Dec 23, 2011, 04.49 PM IST
In an interview to CNBC-TV18, Arun Kumar Jagatramka, Managing Director of Gujarat NRE Coke said that the steel industry in the country is all witness serious shortage of both coal and coke, six months down the line.
"Both coal and coke have a tight demand growth. Hence, when the demand picks up, six to eight months later, you can see a very serious shortage of both coal and coke coming," he said.
Further, he also said that the company has no FCCBs outstanding at the moment. "From a funding perspective, we don't see any issues in any of our operations," he added.
Below is an edited transcript Arun Kumar Jagatramka's interview to CNBC-TV18. Also watch the accompanying video.
Q: Can you take us through the business scenario? Give us an idea of how demand is panning out and more importantly how product prices are panning out for you in the coke front?
A: Coke demand had been stable because despite the sluggishness in steel, there is a shortage of coke and it continues. There has not been any lowering of phase other than within the July to September quarter, when there was an iron ore mining banning in Karnataka that led to closure of almost all the steel players. However, since October the domestic demand had picked up.
There are regular export inquiries, from their yields the steel industry is doing very well this year. And, they have been taking regular coke charges from us. Coal prices for January have been shuttling at 235, which are still higher than the prices a year back. This is despite the sluggishness in the steel.
So, both coal and coke remain tight though the demand growth is not there. However, when the demand growth would be there, maybe six months or eight months down the line, when the demand picks up, you can see a very serious shortage of both coal and coke coming.
Q: How do you see demand and prices moving from hereon? Are you saying that now the steel companies have adjusted to the new reality and they are back on their feet?
A: No, they are now getting the iron ore in the auctions. Since October, we have had regular sales of coke from Karnataka, so from that perspective it was a temporary phenomenon.
Q: We had reports that the FCCB issuance has been cancelled because of the markets conditions. How well funded are you? What are your needs looking forward into of the first half of CY12?
A: We donít have any FCCB outstanding at the moment. All the FCCBs have been converted into the shares earlier this year only. The new FCCBs that we have planned in the current market scenario didnít make sense. We do have a good credit rating and have good support from all the banks. We are getting regular funding in India as and when we need it and for our civil operations particularly; we got a USD 100 million loan just last month. Hence, from a funding perspective we donít see any issues in any of our operations.
Q: Would you expect interest rates to go up because you have this dollar facility from that Axis Bank consortium?
A: It is chosen at the revolving rate, so if the lever goes up then certainty it would move up in line with a lever. Otherwise if they are at the current level, from hereon, we could expect softening in the interest rates going forward.
Q: Would the dollar liability be a fully hedged loan?
A: It is more than fully hedged because it is an Australian company. There have been bad export per US dollar and their liability in US dollar is less than the annual export in US dollar. So, the company is really happy with the strengthening of the US dollar.
Q: What is net-net for your Indian listed entity itself how much do you make by way of exports as a percentage of revenue?
A: Almost 50-60% of our imports today are covered by exports. So we do have a benefit to that extent when the dollar moving up. On import front whatever dollar liability we have because coke is priced on a month to month basis so most of the dollar movement is priced and factored in and passed onto the customer.
Q: Since your domestic cost will be the landed cost of coke, have you been able to enjoy an increase in prices in the last three months?
A: Coal prices have come down from Rs 270 level to around Rs 235 level but coke prices remained at this level and that is a factor of the dollar moving up. The upper moving dollar has been taken care of by that.
Tags: Gujarat NRE Coke
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