Gare Palma IV/2&3 have total capacity of 6 MTPA: JSPL

Rajagopal: Yes. We have retained - we have won the bid and we have to pay Rs 108 per tonne. So that is the cost for us.

Reema: Can you tell us who the other bidders were and what the other bid prices were?

Rajagopal: The other bidders were Adani, GMR and some more.

Reema: Are we aware of what the other bid prices were?

Rajagopal: We don’t know because it is e-auction and the amounts are appearing and we have to keep bidding. We will not know that.

Reema: Can you just tell us whether now the functioning of the Tamnar1 would not see any sort of disruption and whether this coal that you do generate would possibly be used for any other plant as well?

Rajagopal: As per the coal rules that in same company you can use for other plants. May be we have to take permissions or we have to inform the concerned authorities that is our understanding.

Ekta: So, we do assume that you could use it for another plant that might have not been receiving coal?

Rajagopal: The bidding rules were that you were to bid for each end use plant. So, first you are to use for that end use plant and in case you are using for any other plant of the same company we are to either obtain a permission or we have to inform them that is what the rule is to be followed.

Nigel: What is the current mining capacity of both these blocks?

Rajagopal: Currently the capacity is 6 million tonne.

Nigel: Do you see if there is scope to be scaling this number up?

Rajagopal: We have to see in future because now these rules are all nowadays more clarified and they have made it expandable and we have to see it.

Nigel: Saying that you get around 6 million tonne from both these blocks, that totally satisfies 1,000 megahertz? That is Tamnar-1

Rajagopal: Exactly.

Nigel: So the additional 1 million tonne could be used for Tamnar-2?

Rajagopal: As I said because we went against particular end-used plants and then if you want to use it for other end-used plants of the same company we can use after taking permission or after keeping the concerned authorities informed. So that all we have to see how it is worked out.

Nigel: The total power that will generate from here, only 15 percent will be allowed to be sold via merchant sales, am I right on that one?

Rajagopal: Yes.

Nigel: So you would have to sign power purchase agreements (PPAs) for the remaining 85 percent, how much have you already signed?

Rajagopal: We already have a PPA 400 with Tamil Nadu, another 250 with Kerala, another 250 also. We were already having about 800-850.

Nigel: As per your Q3 numbers, at that time you didn’t have all PPAs signed or were they already signed and were they already functioning?

Rajagopal: As of now, only Tamil Nadu is functioning. Other ones will take time.

Nigel: That is around 400 MHz?

Rajagopal: Yes. But not all 400 going but we sorted on that.

Nigel: In the interim I presume that you start both these two mines, you are generating power and you are generating around 1100 MHz roughly then how do you sell the remaining part of it, you can sell only 15 percent via merchant sales so what do you do with the other power?

Rajagopal: As I said we have already so much supply under the PPA so we will do that. Balance 15 percent we can sell. So, there will be some which we will not be able to sell through this. In that case we have to buy coal on e-auction and then generate and sell. You can always generate and sell, only thing you can’t use this coal; then we have to buy coal from outside.

Nigel: At what price would the coal price as well as selling price happen at?

Rajagopal: Coal e-auction is available. Nowadays prices have come down, landed costs ranging from Rs 2000-2400. We can go down further and selling price is ranging from Rs 3-3.50.

Nigel: And the next couple of blocks that you would be looking forward to, could you just take us through that schedule and whether it is power and non-power?

Rajagopal: We have in several blocks where we are already scheduled. Maybe let me not just recount all those things because many of them are depending on the coal bidding strategy, so let me not recount these.

Nigel: How big a positive is it? I was reading a few of your notes and you believe that in fact it would be a big positive and JSPL was definitely a favourite to win both these two blocks. Take us through your first take, the stock is flying away as I speak?

Arora: It is extremely good news that we are getting on JSPL after a long time and my congratulations to the management and Mr Rajagopal. Basically we think that now the big overhang which was there about the feasibility of the Tamnar 1000 megawatt is gone and the stock has been laid I would think and things should improve from here on. This is the first sensible bidding that we have seen in the whole auction space and I hope that the trend improves from here on and we will see companies being more sensible about how they are going about auctioning and bidding in this auction.

Nigel: How much of value would you give these two blocks and the upcoming blocks because there will be further bids because as you said this is a sensible bid, but going ahead as well how much more value -- suppose they can go ahead and they can secure their coal for captive use as well how much of a positive will that be?

Arora: The stock has fallen around 80 percent and was trading at half time price to book. So this 18 percent increase today might look big but it is actually not. In fact just if investors consider this company as a growing concern probably it will come back to one time price to book which is more like Rs 230-240. So I think this is the start of the upmove and as more policy decisions are taken by the government, things become clearer both on coal and iron ore, I think the upside is huge in this company.

Nigel: Will you be revising your estimates today itself post this big move? What is your current take on the stock?

Arora: We were already building in that JSPL will win this coal block. So, no real change to our earnings. Our target price also stays which is around Rs 225-230.

Nigel: As Rakesh was saying this entire bidding process is very sensible, could you tell us the number of bidders that were there, I think it was 10 or 11, so post that 50 percent cut off how many bidders were there and could you tell us exactly who were the bidders?

Rajagopal: Let me not get into all these things. All will be available later on so it is not any information which I have to give.