Will be raising Rs 1,000 cr for payment of dues to suppliers, vendors via QIP: JSPL

Will require around Rs 1,000-1,500 crore from banks for working capital, he further mentioned.

Below is the verbatim transcript of the interview.

Q: 2017 was all about doing things and things have actually turned around. What went right for Jindal Steel and Power (JSPL)?

A: I just feel that god has been really kind to us. We have been able to complete all our projects that we spoke about; we completed blast furnace, we completed sinter plant, coke oven batteries and the last of the major items was our basic oxygen furnace which takes our steel-making capacity to 5 million tonne. We completed that in end of December and now that is operating very well. So that has given us the confidence that now all the troubles are over and now we can look forward to much higher EBITDA and much better performance and much better utilisation of our capacities in Angul in Odisha.

Q: The troubles are over but from the Chairman I would like to know for the investors, is JSPL actually out of NPA, is it the loan account is standard actually and have you gotten it from your bankers or the RBI?

A: We have always been a standard account. It is just out of some technical issues of RBI, because they are very strict, RBI has very strict guidelines, and just on those technical grounds few banks had become NPA. However, because the same RBI policies which talks that if for a year your account has been standard and operating, the banks can actually write back that amount, they can standardise your account. So we meet that criteria also. I hope that soon banks are going to standardise their accounts and I reiterate that no bank has lost a single rupee with JSPL and no bank will lose a single rupee with JSPL. Today all our accounts are absolutely standard and performing.

Q: Coming back to there is no deferment of payment to banks or any delay in payment, let me ask you how is the debt scenario, consolidated as well as standalone what is debt equity ratio?

A: Debt equity ratio would be, I am not exactly sure, would be I think 1.6:1-1.7:1 and so our debts are sustainable. We are also looking at raising some amount of equity next month and for which we are getting a lot of interest in the equity of JSPL because the upside in case of JSPL is huge. So we feel that whatever we have spoken about, whatever we have said, we have outperformed that always.

Even now I feel that there is going to be a great upside. Steel prices have also improved; even though raw material prices have gone up, but steel prices have also improved and there is good demand for all of our products. So, we are very confident that going forward things are going to be much better.

Q: How much are you raising and how will you utilise that?

A: We are going to be raising only about a Rs 1,000 crore and we are going to be utilising it mostly for some debt repayment and just completion – projects we have completed but we need to pay to our suppliers, a lot of creditors are there, so, just to clear all those payments.

Q: We also understand that some of the bankers were here at the Angul plant. Do you intend to take some more loan and if yes, what would that be used for?

A: A small portion, maybe around Rs 1,000-1,500 crore of priority debt again for long term working capital requirements and the for the capex that we have incurred so for which we need some loans. So for that only, but with this also our total debt is not going to increase because by the time we take this much loan, we would have also repaid about the same amount. So in fact our loan is not going to go up.

Q: You also have plans for Oman if we could go overseas. You wanted to bring in the IPO. When does that happen, especially at a time when the prices are high and things are looking up?

A: First we want to do in India, whatever equity raising in February. Then March and April, I feel that March-April we will start the process, and then we are looking at raising some equity in Oman. Again, you are right, the prices are very good in the Middle East and that plant is doing very well. Oman we always had -- to take the plant to full capacity we used to have shortage of natural gas by around 10 percent, so, government of Oman has been very supportive and encouraging and whatever gas requirement was there, they have allocated that gas to us. So now we will be able to operate the plant in fact on 110-115 percent capacity levels.

Q: What happen to other assets – Mozambique, Australia, what is happening?

A: Mozambique and Australia, because the coking coal prices are very good right now, so, both the operations, we hope that by March, both the operations will turn green, they will turn positive and profitable. So we are busy at present to ramp up the production both in Australia and Mozambique.

Q: What levels would that be?

A: It will be very small but at least if they start giving us positive EBITDA, they start to recover the interest that we have to pay, we would be happy with that. As time progresses, we just need to ramp up the production because coking coal prices we do expect them to remain high. So they will be profitable, we just need to increase our production there.

Q: The steel business is clearly looking good for you but what happens to power business? You had one suitor, what happened, it is running at close to 40 percent of the total capacity, how do you see that downside to turn green?

A: Power now we are operating at around 50 percent and I am very confident that power requirement is only going up. Whether you see your house, my house, your friend’s homes, people you know, or people who work for you, everyone’s power consumption is going up and the government’s resolve to supply power 24 hours, 365 days a year to everyone will definitely increase the demand for power and then we are in an area which is full of coal. So there is a severe crisis, there is a severe shortage of coal in the country.

However, I am sure Coal India will take steps to increase their production. If they improve the production and coal is available, then definitely power demand is there. Power prices have improved from before and JPL, so, we are not really looking at – if we get a really good offer, then we will think about it, otherwise we are very happy to keep it because we do feel that definitely in a year’s time power is going to be again very profitable.

Q: Are you also indicating that the suitor has backed out from the whole Tamnar?

A: No suitor has not backed down as such but they are looking for power purchase agreements (PPAs) in the conditions precedent, they are looking for coal tie-up to be done, so, I am not sure whether that coal tie-up or the PPAs can be tied up in six months’ time. However, definitely in a year, year and a half time, there will be coal available, there will be enough PPAs I feel. So it is just a matter of time; we just have to be a little bit more patient with power.

Q: We are very close to the Union Budget which is going to happen on February 1; as the steel industry as well as power, what are your expectations from the upcoming Budget?

A: I just feel, I have just normal expectations. I just feel that if it is a growth oriented Budget and so steel is a basic commodity -- if you are building a house , you need steel, if you are building infrastructure, you need steel. So if anything which is growth oriented and is good for the economy, will be good for power and good for steel. So we have normal expectations.

Q: What do you think in terms of prices considering the coking coal prices were high in between and now the iron ore prices have gone up, especially in Odisha we have seen that close to 10-15 percent of the mining activity may back down because of the Supreme Court order, so, how do you see the future of iron ore, coking coal prices as well as the steel demand being impacted because of that?

A: Coking coal prices have always been unpredictable. There are not too many players in coking coal, so, we do expect the coking coal prices to kind of remain high. We have mixed feeling when we talk about coking coal, even though we have to buy more expensive coking coal, but then our investments in Mozambique and Australia, they become profitable. So as a company actually overall we benefit more by coking coal prices remaining high; that is one.

Secondly, iron ore, it is kind of unfortunate that many miners have closed down their mines because they were unable to pay such high fines that were imposed by the Supreme Court. So I feel it is unfortunate that the availability of iron ore has reduced a lot. I hope that they are somehow able to pay the fines, they are somehow able to get time to pay the fine, and they are able to start because it does not help anybody. By those mines remaining closed, government does not get royalty, and the miners who are allowed to mine right now, they are minting money. They are almost profiteering, but they justify by saying that we have also paid huge fines.

So, I feel that we need to increase our production of iron ore because as a steel maker in India, our only strength is iron ore. So if that itself we make it more expensive -- internationally iron ore prices are coming down, but in India, they have been jumping and jumping just because of the scarcity that has been created because of this order and miners having to close shop.

Q: You have a standard loan account, you have coking coal mines and now you just spoke about iron ore and how steel is going to be the future and so much demand is going to come. Where do you see yourself when 2030 target of 300 million tonne is envisaged by this government? So where do you see yourself there?

A: I definitely feel that JSPL is an important player in steel industry today, will remain an important player in the future also, but right now, we are not really thinking in terms of expanding our capacities or anything. We already have expanded. What we need to do in JSPL is to sweat assets, we need to produce to our maximum capability. We have capacity of 9 million tonne in India, so, we need to produce that 9 million tonne.

So hopefully in the next couple of years, we will achieve this 9 million tonne and as soon as we achieve this 9 million tonne here, 2.4 million tonne in Oman, that is 11.2 million tonne, we will have very high EBITDA levels, we will be able to pay off our debts in the next two to three years. We are a relatively debt free company and then, I am sure we would be able to expand, we will be able to acquire new assets and also brownfield assets, we will be able to do that.

Q: Are you looking at some of them because a lot of them are out for sale.

A: I know. Again, that also I feel it is unfortunate that only three companies in steel in the private sector are solvent. JSW Steel, Tata Steel and JSPL, rest have all become insolvent. So it is a matter of great concern and it is unfortunate. Many of these companies are good companies, but whatever circumstances, because of cancellation of coal blocks, they are not getting, iron ore and so many host of other issues that these companies have become insolvent. So, I hope something happens to that. When we want to grow to 300 million tonne, so the sector, so many companies from the sector, must not be in this shape.