JSPL might not be able to reduce debt level in H2 of FY23: MD Bimlendra Jha

Bimlendra Jha.

Jindal Steel and Power expects its net debt to remain at current levels, if not lower, due to investments such as coal block auction payments. The company has room to increase borrowings 1.5 times, but doesn’t plan to do so in this financial year, said managing director Bimlendra Jha. The company’s net debt on a consolidated level stood at Rs 7,054 crore at the end of September.

Jha sounded cautious on the 15:15:50 model, where the company plans to achieve an operating profit (EBIDTA) of Rs 15,000 crore; net debt of Rs 15,000 crore and a gross turnover of Rs 50,000 crore. The new strategy is to do better than before, Jha told Moneycontrol in an interview. However, he didn’t mention any numbers. Edited excerpts:

Q) What are the highlights of your Q2 earnings?

We have been able to do a gross revenue of Rs 30,272 crore (consolidated H1). Export volumes reported a drop. But realisations should be better, and even though we were able to sell 2.01 million tonnes of steel in this quarter (standalone), we reduced our inventory substantially. And because we reduced our inventories, which were based on a higher price, a hit was taken on the EBITDA front of roughly Rs 600 crore, which is about Rs 3,000 per tonne, by liquidating inventory. This is where the financing gets a bit complex.

Q) Your net debt seems to have risen sequentially? What’s the road ahead?

I keep saying that cash is the only reality, while profit is an opinion. If you look at our cash performance, it has improved significantly. If you look at our debt, it has been coming down and we have been constantly deleveraging even in this quarter, almost Rs 700 crore (QoQ). If you look at it from the beginning of this year, Rs 8,876 crore is now standing at Rs 7,054 crore at the end of the quarter.

In gross debt, we started the year at Rs 13,326 crore. Now, in our financial results again, at the end of the quarter, it looks like we have increased it to Rs 13,716 crore. But it was just a matter of one week where some money came in that had to go out for repayment of previous debt and we immediately stood within a week or so at Rs 10,611 crore of gross debt. So actually, we have been able to reduce nearly Rs 3,000 crore of gross debt.

Q) What is the debt reduction plan for the second half of FY23?

We want to make investments, we have to open up new coal mines, etc. So, there is some investment-related flow that will take place. There may not be very big changes, but our direction remains that on the existing business, we want to completely meet our debt obligations and only borrow for future businesses…. We would like to keep at it with an overall goal that we have in mind of debt by EBITDA that we have publicly stated. We want to remain somewhere in the ballpark of 1.5x.

Q) Do you see a chance of debt going further up?

No. Let’s say we are very clearly stating that all the current business, the invested business, we want to pare the debt. Okay? But it will not be wise not to invest in our future.

So, on the base business, there will be some debt reduction, but due to investments that are coming up in the coal block, etc., I think net debt, we may be somewhere where we are. But it could be higher as well, depending upon the speed at which we are able to do certain things. So I'm unable to give you a forward-looking statement on this because these numbers, they keep shifting based on the work on the ground that progresses, and that work on the ground progresses based on the approval that one receives. So there is a bit of uncertainty that remains around any of these things on a quarter-on-quarter basis. Directionally, over the years, we can always talk about things, but quarter on quarter, things can be peculiar.

Q) Your debt will go a little higher by the end of the financial year from the level of debt to EBITDA of 1.5 times from the present 0.66 times, right?

So that is an overall ambition. It will not happen this year, for sure.

Q) What happens to the 15:15:50 strategy? Will you stick to that? 

I don’t want to give any unnecessary forward-looking statements in a volatile market… India is the only one that is actually growing as a major economy in the whole world, and particularly in the steel industry, it is the only one that is putting such a positive outlook. And we can all be part of that positive outlook, both in terms of ability to exploit our existing resources, make the right kind of investments and contribute to this growth. So it is a positive story all along, but to be able to give you the specific numbers in a volatile market, it always confuses the shareholders or investors. And we wouldn't like to do that.

Q) What about your overseas business, especially Australia, which delivered an EBITDA loss for the quarter?

All our businesses abroad – in South Africa, in Australia, in Mozambique – they have all turned positive. Any forex gains that we have had, we have taken a prudent view to actually take a profit provisioning… and there are, of course, forex as well as interest-related provisions that we have made… We have completely paid out our external debts, by the way.

Q) The trade ministry is said to be seeking inclusion of the steel industry for the Remission of Duties and Taxes on Export Products (RoDTEP) scheme. What’s your perspective?

We at JSPL are of the view that the government has taken many, many good initiatives that have actually been promoting the usage of steel in India, promoting Make in India, and any such schemes that come up would be in the context of national interest. And we are fully supportive of such schemes.

Rather than focus on that, what we really focus on is India is a positive story that is already happening. We have, from our product portfolio perspective, a perfect portfolio to leverage that opportunity. If there are new opportunities that open up abroad as a result of any scheme, we are happy to use it. But we are bullish on India, in India, and on Make in India. And that is where we would like to conclude.