Plan Rs 3500 cr capex in FY16, mostly for steel: NMDC

Below is the edited transcript of Narendra Kothari’s interview with Sonia Shenoy and Reema Tendulkar on CNBC-TV18.Sonia: It has been operationally a weak set of numbers for the company but can you run us through the numbers and tell us what went wrong this quarter? A: The annual figures for NMDC is ever highest sales and ever highest production. We have 30.4 million tonne of production which is the highest done by NMDC. Our sales is also 30.5 million tonne which is the highest in a year. The first three quarters we have done good, the last quarter was a pressure on all the fronts. The international price, starting of the year, was USD 116 which has come down to less than USD 50. So, definitely demand and things were there. Total, the January to March, in this last quarter, there was sluggish demand for steel. All the steel producers have high build up of inventory like JSW Steel, Rashtriya Ispat Nigam (RINL), Steel Authority of India Limited (SAIL), etc. There was less demand of production, they controlled their production so there was less demand of iron ore during this period and both due to the demand and prices these margins are less. However, if you count then year-on-year (YoY), even if it is the worst performing year for iron ore industry, NMDC has done ever best performance in all the areas. When you talk about individually, our cost on all other field was comparable and not increased much. However, revenue has come down and our margins have remained at that level.

Reema: Can you tell us what the sales volumes and realisations were for the quarter gone by? A: Sales is 76.9 lakh tonne and sales turnover is Rs 2,829 crore. Sonia: Your other expenses have jumped quite a bit, could you tell us what where the CSR spends during this quarter and for the entire fiscal? A: In CSR, we had done more than Rs 170 crore last year. Particularly in the last quarter we have done an ever highest CSR expenditure of Rs 145 crore. Sonia: Have you made any provisions towards the District Mineral Fund (DMF)? A: No, we have not made any provisions for DMF till now because it is not yet clear. Government has to decide how much DMF will be there. Reema: Could you help us with what your FY16 target sales and production will be? A: FY16 definitely we have a target of production of 35 million tonne and sales of 38 million tonne. Sonia: NMDC has been cutting prices inline with global prices; do you believe that prices have bottomed out now? A: Yes, you are right, the price has almost bottomed out. Our price is less than Rs 2,000 crore, further down is not possible. Again, we are seeing that in the month of May prices are firming little on the upside which in April prices had gone to less than USD 50 to USD 47-48 but now again it has gone to above USD 50 to USD 52-62 and now the price is around USD 60 for benchmark price of 62 percent fine CFR China internationally. Sonia: Take us through your capacity expansion plans and what the exact capex is for the company in FY16? A: First we will come to the steel where we are spending huge amount of capital investment. Last financial year we had done more than Rs 3,100 crore capital investment capex. This year also we are keeping capex of more than Rs 3,500 crore; mainly will go to the steel plant expansion. The steel plant which is at advanced stage of construction as scheduled December 2016 it will be ready for commissioning. So, the production will come in end of 2015-16 and during 2017 the production will come up. About my other capex plant of capacities of the iron ore business, we already have started one mine, 11B project which is under trial production and stabilisation. Another mine of 7 million tonne at Kumar Swami in Karnataka will be starting sometime in middle of this year, maybe August or September. This will start trial production and then stabilise. So, these new two mines of 7 million tonne is 14 million tonne capacity will be added further in this year.