Jai Balaji Ind sees int costs rising by 50-100 bps

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS Steel prices to fall by $100/tn in coming qtrs: Experts ALSO READ See latest News about Jai Balaji Ind See previous management interviews See what other Experts & Brokerages are saying about Jai Balaji Ind Jai Balaji Ind BSE | NSE 10/02/12 Are Mutual Funds betting on Jai Balaji Ind?

Jai Balaji Industries has declared its Q1FY09 results. The company's PAT is at Rs 46.3 crore versus Rs 23.6 crore. The Net Sales is up 85.1% at Rs 464.1 crore as against Rs 250.7 crore. Their Operating Profit is at Rs 99.4 crore versus Rs 63.9 crore. The OPM is at 21.4% versus 25.5%. The other income is at Rs 6.6 crore Vs Rs 2.1 crore. The raw material cost is up at Rs 298.7 crore versus Rs 208 crore. The other expenditure is up at Rs 63.7 crore versus Rs 9.4 crore.

 

Aditya Jajodia , CMD of Jai Balaji Industries said that their exports constituted 5% of their total sales. They are not raising any equity to fund capacity expansion of 2 metric tonne, he added. Jajodiya expects interest costs to go up by 50 to 100bps.

 

Excerpts from CNBC-TV18's exclusive interview with Aditya Jajodia:

 

Q: There are no price controls on pig iron and sponge iron, isn't it? And your problem is only for steel producers and probably in the days to come for iron ore you are relatively left to market forces?

 

A: No, I think the price controls are not there but by and large there is an export duty on the export of pig iron as well as sponge iron. So though there is no price control per se but then the export levy is there.

 

Q: What percentage of your revenues are exported and going forward what are the sort of realizations you expect from pig iron and sponge iron?

 

A: By and large there are not many exports simply because the domestic demand is very high and our export turnover is hardly 5% of our total turnover and whatever we are producing at the moment we in the next 2-3 years, we are planning to sell in the domestic markets itself.

 

Q: Your expansion plans first, you have a Rs16,000 crore plant set to come up are you expecting that there could be some delays in this considering the manner in which funds have gotten tighter?

 

A: We have actually planned the Rs16,000 crore investment in two phases. The first phase would be Rs 6,000 crore in fact most of the land for the first phase, the necessity clearances are already in place and out of the Rs 6,000 crore definitely the liquidity position in the markets have tightened. But then we are not looking at raising any further equity for the 2 million tonne expansion simply because at the moment you are running 1 million tonne plant, which we are hopeful will provide us the necessary cash accruals to fund the equity portion for the 2 million tonne expansion.

 

Q: What about the debt portion?

 

A: Debt; by and large we have a consortium of 15-16 bankers so tying up a debt will not be an issue but definitely with the inflation rates high and the interest rate is now hardening up the interest cost definitely would go up.

 

Q: What is the percentage increase in cost that you have factored in and will that mean any kind of delay or change in plans?

 

A: No, there will not be any delay or change in plan per se but what is happening is that the interest cost definitely would go up by 0.5% to 1% point.

 

Q: Coming back to your products sponge iron and pig iron how are you expecting realizations and sales to pan out in the next 6 months are you seeing any downward pressure on prices at all?

 

A: Here I would like to highlight one thing is that we do not make only sponge iron and pig iron we are integrated steel manufacturer having a capacity of more than 1 million tonnes, half of these metallic come from sponge iron and half of the metallic, half million tonnes comes from pig iron. At the moment we have steel melting capacity of half a million and we are adding alloy steel of half million, which takes our capacity to 1 million.

 

In fact with this 1 million capacity our capacity has become the eighth or ninth largest in the country, so we are at the moment not selling much of sponge iron but some quantities of pig iron and down the line we will not be selling any sponge iron or any pig iron at all.

 

In terms of realization in the last quarter the average price of sponge iron was around Rs 21,000 per tonne at the moment the prices are around Rs 23,500 per tonne. In the last quarter the prices of pig iron was around Rs 26,000 per tonne currently it is around Rs 30,500 per tonne. So moving forward we do not see any weakness in the prices of any of the steel products simply because the prices of raw material internationally as well as in the Indian markets also they are not softening at all.