Post on 20-Aug-2018
Leaderview Call on Jindal Steel & Power
September 25th
, 2014
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SPEAKER: Management of Jindal Steel & Power
Moderator: Good day, ladies and gentlemen. I am Sourodip Sarkar, the
conference coordinator for today’s session. Thank you for
standing by and welcome to the Leaderview Call on Jindal
Steel & Power today. At this time, all the participants will
be in listen-only mode and post that we will have a Q&A
session. And now, without further delay, I would like to
hand over the proceedings to our first panellist for today,
Mr. Rakesh Arora. Thank you and over to you, sir.
Rakesh Arora: Thank you everyone and good afternoon and thank you for
dialling in at a short notice. We are honoured to have the
management of Jindal Steel & Power Mr Ravi Uppal, MD
& CEO, Mr Rajagopal, Director & Group CFO and Mr.
Balasubramaniam, Head of IR. So I will hand it over to,,
Bala to take it over from me and we can have the
management comment first before we open up for question
and answer. So Bala?
D. Balasubramanyam: Good afternoon, everybody. At the first instance, thanks a
lot for dialling in to this conference call. The agenda is
with regard to the verdict that has been given by the
Supreme Court on coal allocation case. We have today with
us our MD and Group CEO, Mr. Ravi Uppal, along with
him Mr. K. Rajagopal, Director and Group CFO. Without
wasting time, I would request our MD to give his opening
remark. A few request for all the investors and analyst.
Please try to restrict your questions to one or two so that we
are able to address as many questions as possible. And in
the end, if there are people who are left in the queue, they
can always write back to the investor relation team and we
will answer it back. The duration of this call will be
approximately 45 minutes to one hour. Thank you. So over
to Mr. Ravi Uppal.
Ravi Uppal: Okay. A very good afternoon. My dear friends thank you
for joining us on the short notice. The reason for asking for
this conference is basically that we want to stay connected
with all our very, very honoured investors. We never
wanted you to feel that, you know, after the Supreme Court
judgement that the JSPL management have not, you know,
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September 25th
, 2014
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spoken to you or have stayed connected with you. That’s
the reason for this call.
I want to first of all allude that the Supreme Court
judgement which was delivered yesterday it is actually
sequel to what was first announced on 25th
of August and
then deputations were made to them by all the private
producers of the power and then, of course, the Supreme
Court according to their risk term adjustment have taken
the final decision. Number one, we are very deeply
disappointed with the judgement that has been made by the
Supreme Court. You know, if you recall the 25th
of August
judgement, it was basically an indictment of the decision
making at the government level. It was not a condemnation
or any kind of strictures against any one of the
entrepreneurs, , that who had invested in these projects
along with the captive coalmines. And, you know, if you
recall that in 1993, the mining act was amended because
government wanted to bring more, , the growth into the
sectors of steel, power and cement. And with that, when
made, , the government had offered captive coalmines to
the developers. That definitely had a salutary effect on the
growth of the sectors. The sectors did get lot of investment
and so these mines were, you know, this allocation process
started way back in 1993 and the growth, continued. I
would like to mention here, a mine that you get its
development might cost you between 800 to 1000 crores
depending upon the size of the mine or the kind of
investment which is behind, , and the captive industrial
units is running into thousands of crores. A 1000 megawatt
power project cost, 6000 crores and a million ton steel
plant 6000 crores. So, therefore, government’s larger
purpose in inviting private sector was to bring stimulus to
the growth of this core sector which it did succeed. I mean,
in fact, companies like JSPL, have put a huge amount of
investment and today we have of a capacity of 7 million
tons of global class in steel alone and power we have
capacity of 5200 megawatt. Things have been done in the
exemplary way. World-class plants have been set up,
highly efficient, they are iconic in their own class and JSPL
paved the way for the private sector participation in the
power generation in this country and we are very proud of
Leaderview Call on Jindal Steel & Power
September 25th
, 2014
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it. So, therefore, 25th
of August was basically enactment of
procedural lapses, on the governmental side, but not of
developers. But the judgement becomes more of a
punishment given to developers because government
doesn’t get affected at all. So we therefore are very
saddened by this kind of decision, but, if the decision has
been taken, we have to, stand up to it, we will devise our
own ways to see how best we can overcome how our plan
B and plan C will work to overcome the situation. As the
matter stands right now, after the decision we are obviously
sort of going to make a review petition with the
government at the same depending on how government
wants to act for the cancelled mines. If the government
goes for bidding and offers it to private sectors, we would
definitely participate. We are absolutely convinced that the
mines which are captive for JSPL no one who is more
competitive to get those mines back than us because our
power plants and steel plants are located right at the
pithead. We have full knowledge of those mines. We know
how to operate them, so therefore I think we should be very
competitive if it comes through auction.
If government goes to any other option, which remains to
be seen because still not made public what government
intends to do, we will also handle in the best of the ways.
I just want to assure you that, , the JSPL when it first went
to Raigarh site 25 years ago, there were, it was a very
difficult terrain. There were no resources available, but we
made this kind of titanic plant at Raigarh and we built it up
to its present status in a space of last 25 years and it’s one
of the best performing plants in the country and it has won
several accolades. Same is the case with Tamnar , which
was the first mega plant in this country and there again has
a kind of mine which was given to us after post 1993. They
were of very poor quality. The ash content was anywhere
between 45 to 50%, but by developing that mine, we also
made a business sense into that mine. And we have been
running our Tamnar phase one unit based on the coal that
we extracted from those mines. We are running our steel
plant at Raigarh with the coal coming from the same class
of mines which were basically D and E, F kind of mines.
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September 25th
, 2014
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So I think we have tremendous resilience in the company.
We have always been very innovative. I want to assure you
that we have huge, innovative capability, huge resilience in
the company and a very large management talent pool there
with us who are constantly looking at ways to make sure
that JSPL has never found wanting on any score. You
would recall that the JSPL has always been a leader in the
matter of giving the returns to their customers, to their
investors. Our EBITDA levels have been all-time high.,
even in phase of the adversity and our unsettled situation,
you will recall in the first quarter our JSPL standalone
posted the highest EBITDA level. You know, it is not only
because of the external factors, but by way of focusing on
the productivity, doing projects in time, doing the projects
to the lowest cost, being efficient, the capital management
all of them have combined together to bring JSPL into that
committed position. So I want to assure you that you need
to harbour no anxiety. as far as JSPL performance is
concerned, you know, that our team and the workers are
like soldiers. They work with the absolute unflinching
attention to the task that is signed to them. In days or
weeks to come, we will spare no effort to make sure the
JSPL continue to perform at the levels that are the
benchmark level that we have established in the past. Now,
we will wait for government to decide because the ball is
now in the government side. They have to decide how they
want to go with these mines. They have promised the
Supreme Court yesterday that, they will find a solution with
the space of six months in a way that the industry doesn’t
get sort of disrupted in any way. And we from, of course,
the industrial side will give full cooperation to the
government to make sure that the issue relating to these
miles is amicably resolved.
And in the meantime, we also have a plan B to maintain
continuity of the plants. We are sort of, importing coal
wherever required from outside and we have also been
buying them in auction wherever it was possible and
therefore for the next six months in any case we have no
issue. The operation will go on as usual, so right now we
are planning beyond six months. So for next six months
you can be rest assured that JSPL would deliver to you a
Leaderview Call on Jindal Steel & Power
September 25th
, 2014
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steady performance as they have done in the past, beyond
six months we are working out plans to ensure that the
plants continue to operate without any interruption. So you
are rest assured, you know, that JSPL will not let down our
investors. We will do our utmost to see that the
performance of the kind that we delivered in the past.
That’s all I wanted to say. May I request my colleague, our
CFO, to add few words.
K. Rajagopal: Thank you. So I thought let me also explain somewhat on
the question you may have in mind, financial question. But
I must also be honest to tell you that all answers may not be
available immediately, while the broad direction is
available because many things are still developing at this
time. . You know, the first question will come that what is
the impact of the levy of Rs. 295. And as Mr. Ravi Uppal
explained, so this 295 and also the time period when to
pay, we will be exploring all legal and administrative,
remedies and possibilities available to us. So as I said, these
are still in legal consultants, so we will not be able to
immediately comment on this. It will take some time, but
we are exploring the legal and administrative possibilities
to decide 295 impact and also on in case it is to be paid and
what is the time within which we have to pay because the
three months’ time may not be the correct time that it
should be paid as mentioned the court. So we will have to
examine this.
And, as I said, the impact on the current year profit and loss
account is also to be at a time on the basis of how this 295
if at all levied will be calculated because we believe that we
are still in a possibility in questioning this 295 in course of
the time as I mentioned. And also then how this has to be
calculated, so that amount has to be paid. . So this is still in
early stage, even though the newspapers and investors
having their own calculations of a huge amount.
And also and if at all there is whatever cost comes, how we
have to treat in our P&L for this year is also is under
discussion which will take sometime to consider because
there are several opinion that we have to take at one stroke,
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September 25th
, 2014
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there are several or different opinion from different people ,
so these are all still under evaluation.
And there will be a question on the, if at all, the company
has to pay whatever be the amount, whether we are in a
position to pay and also how does it affect the balance
sheet, so let me assure you that the net worth of JSPL is
about 21,000 crores plus at the end of March and also we
already declared net profit in the first quarter itself. So it’s
almost 22,000 net worth on the balance sheet. So any cash
flow or the P&L impact on this is not the one which will
come and destabilize operations of this company and we
have a very strong balance sheet and I think if at all you
have to pay; it’s an impact, but not an impact which is
really seen in a way that it will disrupt the company.
And other questions will come will be whatever time limit
available to us whether three months or extend the time,
whether company will be in a position to raise money and
I want to assure you that you can see even in the balance
sheet of March we had about more than 700 crores for cash
and so we believe that we are in a strong position to raise
money and pay if at all any amount to be paid on this.
Next question also comes that what does they have impact
on their debt level. So when there is a payment level what
we’ve determined and there will be impact on the debt
level. And that we will have to see how exactly it will
impact and how we can contain through our other
monetization programmes as well as the capital expenditure
reduction programme, but there will be some impact and it
will increase more than what we’ve been planning so far
and that also will be established we will take some time on
this. See, there will be always question on what impact on
the future viability on their future cost of production and
productivity of JSPL. Here, also I think within a day we
should not jump in the conclusion because the important
aspect of judgement is the court has given a cancellation or
a levy, only on the ways of government assurance or a
statement made by them that they are in a position to make
all arrangements to support the operation. So we believe
that we expect the government will come with solutions in
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September 25th
, 2014
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terms of linkages, in terms of making a coall available at
the correct level of cost which support the correct cost of
production. Expecting that, as per our calculation, because
we have several types of calculations that is whether we
ourselves did the auction or with that linkage 100% or we
get particular level of linkage, particular level of e-auction,
particular level of import, so there are other several
possibilities are emerging and which I think to be
premature estimate right now, but there will be an impact .
But according to our calculation, in many of the various
situations it is not that it will come and hit a big hit, so
there will be some hit. Maybe, we need some more time to
come to an understanding of this and then do all this. So on
the overall basis, as I said, that the balance sheet of the
company and the cash position of the company is quite
strong any amount if it all required to be paid, while
company will explore all the legal and administrative
remedies available on challenges of 295 or determine the
295 or determine the time amount within which you had to
pay. And the company will also take steps to review that
CapEx plans and to adjust in such a way without
jeopardizing our productive capacities what we planned.
But in order to ensure, there are short-term impact coming
from this cash flows and some EBITDA reductions in such
a way that our overall long-term and medium-term object
on the net debt EBITDA and the debt equity are not of the
mark than what we are planning. So this is what I thought I
must tell you and we are ready to take some questions.
Rakesh Arora: Mr. Sarkar, can we open the floor for questions and
answers?
Moderator: Sure, sir. So participants with this we are going to start the
Q&A interactive session. Should you wish to ask any
question, you may please press “0” and “1” on your
telephone keypad and wait for your name to be announced.
So participants should you wish to ask any question, you
may please press “0” and “1” on your telephone keypad
and wait for your name to be announced. We have the first
question from Mr. Somil Mehta from IDFC Securities.
Your line is unmuted. You may go ahead and ask your
question, sir.
Leaderview Call on Jindal Steel & Power
September 25th
, 2014
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Somil Mehta: Yeah. Thanks. Sir, if I assume, we have a total capital
mining capacity of 12 million tons, so, you know, starting
1st of April any expected arrangement what we have done
to, you know, source that kind of a huge coal quantities
whether it’s going to be imports and do or boilers are
configured to take, you know, higher proposition of
imported coal assuming that the coal domestic supply will
not be sufficient enough?
Ravi Uppal: Yeah. You know, the total requirement, as you said 12
million, right now we have a good back up on imports. We
are importing the coal from Indonesia under a medium-
term agreement. We are also getting the coal from
Mozambique and Australia. And also from the next 6
months in any case we don’t have an issue. You know, we
have the coal suppliers which are well set up and, of
course, we are going to see that if the auction process starts
which we believe that if it starts in the next 8 to 10 weeks’
time that we participate in those and bring them to finality.
There’s also a provision with the precedent in the past that
if the government on that that we might also ask for our
extension of the 6 month’s time limit that the Supreme
Court has stipulated as of this moment. If you recall, this
was done also in the case of the 2G Spectrum where 6
months was extended to 12 months. So we will keep a close
watch in the situation .
Somil Mehta: Sir, you know, in terms of imported coal, you know, how
much proportion can we use in terms of boiler
configuration 30, 40 or even if we can go as high as 70 or
80% just in the worse case?
Ravi Uppal: Yeah. But, you know, imported coal depends on the quality
of the coal. If you get a 6000 kilo calorie GC coal, then,
you know, you bring that coal and, let’s say, quantities
import and then, you know, you also have the rejects and
which are available locally you mix up with that and you –
Because normally the border intake there is anywhere
between 3300 to 3500 kilo calorie. So the extent of coal
that we will import depend on the grade of coal. Actually
right now we have a medium-term contract signed with
Indonesia and also with the Mozambique from where we
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September 25th
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are getting coal with the GCv anywhere between 4200 to
6000 kilo calorie.
Somil Mehta: Okay. Sir, my second and last question is in terms of our
debt covenants do we have covenants on net debt to
EBITDA and probably if yes what would be the approx
range as an, you know, should we not reach 4.5 times or 5
times or any number would be great?
K. Rajagopal: The financial covenants have its own calculations in each
of this agreement. Actually, even in March 31st 2014, we
have not Breached the covenant except in one place with a
very small amount . So we believe that it should not breach,
but we even in last year we have proactively appraised the
banks that why we are capitalizing various assets. If there is
any breach, so they should allow us the breach for some
time before the operation which was very favourably
considered by all the banks, but fortunately and finally we
did not have any much breach. And so we also believe that
this is the action happened beyond that and I am hopeful
that we still we are not breaching most of them. But if there
is any breach somewhere, we will be in a strong position to
request them to wait for a particular time.
Somil Mehta: So then if I assume that as on March 14 consol level would
be about, you know, 5.5 times what the net debt to
EBITDA was, so we have sufficient room for the next two
years or is that a fair assumption and in that case, you
know, CapEx curtailment would not be very high?
K. Rajagopal: As I said, CapEx will calibrate and the net debt EBITDA
for the balance sheet calculation and the financial
calculation has a little bit difference because they also give
reduction of several short-term loans. So that’s why it is not
always exactly as per the balance sheet. And, as I said, that
we will calibrate the CapEx.
Somil Mehta: Sure, sir. That answers my question. Thank you so much.
Ravi Uppal: Let me just add to what Mr. Rajagopal said. You know, we
have just concluded our major CapEx programme which
was related to the phase one of Angul plus upgradation of
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September 25th
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Raigarh is also over, so therefore we have built up a
considerable amount of CapEx both at home as well as in
Oman. And in any case, our focus at this moment has been
more to sort of sweat the assets that we have built up. So
therefore we are not contemplating any other major CapEx
in the near future.
Somil Mehta: Sure. Sure. Thank you very much.
Moderator: Thank you very much. We have the next question from Mr.
Giriraj Daga from Nirmal Bang Securities. Your line is
unmuted. You may go ahead and ask your question.
Giriraj Daga: Yes. Sir, good afternoon. Thanks for doing the conference
call. Sir, I have two questions. Firstly, Supreme Court has
mentioned that the PPA need to be signed for the
independent power producer. So for JPL what we
understand is somewhere near 75% we are sending in the
merchant market. So are we looking to sign a long-term
PPA with the state government and distribution announced
there?
Ravi Uppal: Yeah. That has been our effort. You know, we have been
trying very hard for the last one year, you know, to see how
we can quickly sign up the PPAs. And if you recall that, it’s
out of that effort that we signed the 400 megawatt PPA
with Tamil Nadu, but then there was a period in between,
but we didn’t have many PPA inquiries, but we see once
again resurgence of PPA inquiries. This seemed to be
coming up and therefore it was made our endeavour to see
that we can sign as many PPAs as possible.
Giriraj Daga: But it has to be done for the Tamil Nadu one also for 1000
megawatt?
Ravi Uppal: Tamil Nadu one, yes. There, again, we will sign.
Giriraj Daga: Okay. And my second question is that what we are hearing
that land is belonging with you, so will you protest that
because our land is also gone? So will you not get
compensation for land also? And where you can appeal
against this like Supreme Court has given a decision, so
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September 25th
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where you think you will appeal and at what court level
you will appeal this?
Uppal: Well, you know, as I mentioned earlier that we will file a
review petition. With that, you normally do with a Supreme
Court itself or once the Supreme Court gives decision, then
you go to the SC review bench only.
As far as land issue is concerned, you know, these all kind
of issues on which you will take a viewpoint once we know
how government wants to go. So I think that the ball is on
their court at this moment we will respond because there
are so many combinations which are possible. It’s very
difficult to, you know, give you a position from our
viewpoint or from our end at this point of time.
Giriraj Daga: Okay. Thank you from my side, sir.
Moderator: Thank you very much. We have the next question from Mr.
Jigar Mistry from HSBC. Your line is unmuted. You may
go ahead and ask your question.
Jigar Mistry: Yeah. Good evening, gentlemen. Mr. Uppal, you
mentioned that you expect the auctions to go ahead in the
next 8 to 10 weeks. Now, you know, one question that even
the previous participant asked was that the land belongs to
the company; what the government gave was only the right
to mine. Now, any coal-bearing areas could be acquired by
the government under the coal-bearing areas acquisition
and development act and therefore for the auctions to go
through, you know, if the government were to auction any
of these coal blocks, don’t you think they would have to be
the owner of not only the right to mine, but also the right to
own that land and hence the auction cannot proceed unless
the land has actually and physically been acquired?
Ravi Uppal: You are right. As I mentioned earlier, we are less than 24
hours from the time the decision was delivered. It remains
to be seen what the modality government wants to adopt,
you know, that there are few ways to do it. Number one is
that they go for auction. In that case, , if they go for
auction, the land may still remain with a company like us as
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September 25th
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they can take surplus mining rights. So that could be one
way to do it. The second way it could be that they give us a
proposal for adequate compensation and then we might
transfer the title of the land. You know, so that can be
several combinations. So it remains to be seen how
government wants to proceed. We don’t know their minds
yet.
K. Rajagopal: Government itself has to find out transfer for all the things.
But the only thing they made the statement in the court
actually they will make all steps to do this. So we have to
wait.
Jigar Mistry: All right. All right. Thank you so much.
Moderator: Thank you very much. We have the next question from Mr.
Bhavin Chhedha from Inam Holdings. Your line is
unmuted. You may go ahead and ask your question, sir.
Bhavin Chheda: Yeah. Good afternoon, sir, for lot of clarity on the call. So
first I understand that you said that the review petition
would be made by you after government coming out with
steps. Is it the review petition dependent on what does the
government wants to react because government may not
react for next three to four months in the penalties due in
next three months, so what is the procedure followed by
you?
Ravi Uppal: No. No. No. We are not going to wait for government
response. We know that the judgement has been made, so
we will do, you know, as a sequel to the judgement, we will
make our review petition
Bhavin Chheda: Okay. And you will be making a review petition for lot of
things to either like penalty getting extension and clarity on
how the auction persist or separate review petition needs to
be filed for each clarification what you want?
Ravi Uppal: No. I think we will file – As I understand, we are still in the
process of discussion with our lawyers, but my initial
response would be that we will file a common petition
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September 25th
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where we will take up all the issues what we think we have
valid grounds.
Bhavin Chheda: Okay. And, sir, in such type of cases I am not very much
aware of the telecom case. Does the review petition will be
filed by the individual companies or association will also
file a joint review petition?
Ravi Uppal: It can be both. This is something which we are still
studying. We have not come to – Now, we have 30 days’
time for us to, you know, file a review petition.
Bhavin Chheda: So you will file it in 30 days?
Ravi Uppal: Within 30 days. So we will certainly do it in a good time.
Bhavin Chheda: Okay. And, sir, my last question. Since this case has been
going on for last two months and there was a very high
probability of the blocks been cancelled, you will have
evaluated what kind of CapEx JSPL would undertake in
next two years taking the current exceptional
circumstances, so if you can clarify on this stand and what
the JSPL’s ongoing projects for next 2-3 years would be
delayed or how the CapEx run rate should we assume for
next 12 to 18 months still there is a clarity on auction
process?
Ravi Uppal: Well, as I mentioned earlier that, you know, we have just
finished our major capacity additional programme both in
the steel as well as power space and we were actually in the
process going a bit slow with the further investments
because we are very occupied harvesting the gains of the
investment that we’ve made and trying to sweep the assets
that we built. So that in any case our decision regardless of
what the outcome was yesterday. But for the rest of it, we
will once again, for whatever the amount we intend to sort
of invest, we will set our priorities and go little more tight-
free state for any new expenditure.
Bhavin Chheda: Okay. Thanks a lot, sir.
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September 25th
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Moderator: Thank you very much. We have the next question from Mr.
Prasad from Edelweiss Securities. Your line is unmuted.
You may go ahead and ask your question, sir.
Prasad: Yeah. Thanks for taking my question. I definitely
appreciate the call. One question on this aspect of takeover
of the mines by Coal India what exactly do we understand?
So does it mean that Coal India is becoming the new mine
owner or is it simply like a operator of the mine and
transfer of ownership or as such has not happened to Coal
India? And how will this process happened? We have
existing employees, land, infrastructure, et cetera, so how
will this happen? You have two parts of my questions.
Ravi Uppal: It’s not clear yet what government intends to do. If they
feel they are quite ready with the process, they might take
that option. But in case they feel that is going to be long-
drawn affair and after 31st of March they want interim
arrangement in terms of ownership, then they might
consider passing it on to Coal India or any other
government agency, so it is still unclear. And depending as
to what the exercise, I think the modality will be sort of
discussed for that and the scope of what they want to do
whether they will become only owner and they want us to
continue mining them as an MDO and just sign an
agreement under which they sell the product to us at the
Coal India rates, there are lot of open issues there. I think
the owners for this entire decision-making lies with the
government. And, you know, whatever decisions they take,
you know, our response will be in the best interest of JSPL.
K. Rajagopal: Maybe, I can also add here because the history is the
government what suggesting that these 40 coal blocks we
left with the current owner, so it is the government’s own
suggestion. The government also can continue to give these
mines as a linkage basis to these people till such time they
come with a more clear action. That is what I feel that can
happen because that is what we believe because in six
months they can’t find answers to all. So since government
themselves suggested that 40 should be left with the current
owner, so I think they may come with a solution that it is
given to them on a linkage basis, maybe, owned by
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September 25th
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government or coal India , but without disturbing. So it is a
positive solution.
Ravi Uppal: Mr. Prasad, the task becomes somewhat easier because
that we are talking about 218 blocks to start with, out of
which 40 blocks, you know, have been given to NTPC and
all of this, so we are talking about our 204 blocks, out of
which the operational blocks are only 40 and so, therefore,
the task becomes much simpler for government for 40 to be
decided. If at all the question of about 218 functioning
operating mines that the scale would be a different kind. So
in my thinking, you know, managing 40 mines auctioning
process relatively this year are all manageable. But, you
know, still it’s a government’s evolution and it’s their
choice what they want to do.
Prasad But I think they will be very careful not to disturb the
production even after 31st.
Ravi Uppal: That’s the assurance that was given to the Supreme Court
that they will take action to make sure that there is no
interruption to the economic activities covered by these
industries depending on these mines.
Prasad: Understand, sir. Sir, just to follow on to that, so can we also
be assured that whatever form Coal India is taking over
these mines, I mean, until March 31st 2015 all that output
will come to us only and that stands 100% of that output
will come to us because the challenge is that Coal India has
its own demand requirements, it has signed certain FSAs
with certain coal demand requirements, so it is facing its
own need. So can we be assured that as Coal India takes
over these mines, all of it will come to us?
Ravi Uppal: Sir, let me share that for the next 6 months nothing
changes. We are going to operate the mines this was amply
made clear by the Supreme Court. It’s only after 6 months
it needs to be decided what the government does vis-a-vis
about say this mandate to – accordingly as mandated to do.
So 6 months, nothing changes as if this is residual.
Prasad: Understand. Sir, all the best. All the best.
Leaderview Call on Jindal Steel & Power
September 25th
, 2014
Page 17 of 24
Ravi Uppal: Thank you.
Moderator: Thank you very much. We have the next question from Mr.
Paresh Jain from Max Life Insurance. Your line is
unmuted. You may go ahead and ask your question.
Paresh Jain: Yeah. Good afternoon, sir. Sir, payment of penalty, is that
finalized or can you appeal against that also?
K. Rajagopal: Payment of penalty is also can be a ground in this review
earlier petition because, if you see, even the Supreme Court
order itself various ordinance were given by the Coal
Producer Association how the Rs. 295 is not a bad amount,
but Supreme Court has considered all the decisions, then
they passed this order. But according to us, that is also
another can be a ground for writ petition But as Mr. Ravi
Uppal explained, so we are in discussion with a very senior
lawyer and to try in the ground what we can put for review
and how it can help us. So, yes, that is definitely in our
mind.
Paresh Jain: Okay. So it is not necessary that you’ll have to pay by
December 31st?
K. Rajagopal: You know, that is what I said; only the proportion is 295
itself And, also, it will also be if at all to be paid the time
three months is being also – give a lots of requests that
more time to be given; not three months is not the correct
one, which I think will be considered.
Paresh Jain: Okay. Fine. Thank you. Thank you, sir.
Moderator: Thank you very much. We have the next question from Mr.
Kamlesh Jain from Prabhudas Liladher. Your line is
unmuted. You may go ahead and ask your question.
Kamlesh Jain: Yeah. Thank you for the opportunity. Sir, I have just one
question regarding your 2 of the coal mines like 3 of the
coal mines. Sir, what is the grade of coal in these mines and
what is the cost of operation or production at these mines?
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September 25th
, 2014
Page 18 of 24
Ravi Uppal: Well, the grade that we have these are F or G grade, you
know, all the two mines that we have been operating so far.
Kamlesh Jain: And regarding cost of production, sir?
Ravi Uppal: Well, you know, it varies, , during a lifetime of the mine,
you know, it changes because sometimes you are doing at
the surface and at another time, , you go much deeper, your
steep ratio keep changing, so therefore it’s very difficult to
put a number at the point of time.
Kamlesh Jain: Okay. But like, sir, if we are going to get the coal from
Coal India post like, say, 31st March 2015, like Coal India
have a different pricing for non-power and power, say, it is
going to be supplied to our standalone operations where we
are operating our units and other ancillaries. So in that
particular operation how much impact would be there .
Ravi Uppal: The fact, you know, that this whole thing depends on what
is the form in which they give this to us – is it the form of
linkage or they will auction the block to us and the mine to
us. I think both areas will be different. Of course, you
know, the government has different rates for different
segments of application. They have one rate for the power
under the linkage and they have another rate for the
industry including steels, cement, et cetera there’s another
rate. So if it comes in the form of linkage, it will be one
scheme of rates. If it comes under the block, then, of
course, it is going to be our own mining cost.
Kamlesh Jain: So like, sir, if it’s non-power, then how much could be the
impact like, sir? Would it be feasible to calculate that
impact or?
K. Rajagopal: Like I said in the opening comments I mentioned, there are
different forms in which the coal will be available. We are
sure coal will be available, but there is 100% linkage or
some percentage linkage and some through e-auction or
some linkage e-auction, some about import. So all these are
through the auction we get and we pay some levy. So there
are 4-5 permutation combination and we have estimated
that we find that overall impact is not that is going to
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September 25th
, 2014
Page 19 of 24
impact very much. So since we do not have all the
situations in clarity, then we should not put the number, but
I must assure you it’s not a big impact.
Kamlesh Jain: Okay. Great, sir. Thank you very much.
Moderator: Thank you very much. We have the next question from Mr.
Vivek from Atlantis. Your line is unmuted. You may go
ahead and ask your question.
Vivek: Hi. I just wanted to check. Most of the questions have been
asked that I wanted to ask, but the F and G grade what is
the price that Coal India is selling coal at for these grades
right now?
K. Rajagopal: Right now It is ranging from Rs. 500 to 800; average would
be 560.
Ravi Uppal: About 560. Again, we have one of our colleagues in coal
business here and he says that is about Rs. 560 to 600.
Vivek: So in that case the number of 295 of penalty doesn’t make
sense, right?
Ravi Uppal: That is what we have been contending all these prices
because, you know, our senior lawyers in Supreme Court
made the same position and he told them very clearly the
two things. Number one, , talking about Rs. 295 the basis
has been the coal india , the price at which they were
selling and corresponding to grade A and B largely,
whereas, you know, secondly they are very currently rich.
When we are talking about our operation, for example,
started 8 to 10 years ago, so therefore they are asking us to
pay at the rate of Rs. 295 from the start of the operation.
It’s absolutely ridiculous. And our grade has always been F
and G. The cost, as you just said, they are still in the Coal
India’s price itself so long as 560 even till today. So you
can imagine 8 to 10 years ago what it was like.
K. Rajagopal: It was less then 295.
Ravi Uppal: Yeah. It was less than 295.
Leaderview Call on Jindal Steel & Power
September 25th
, 2014
Page 20 of 24
Vivek: Yeah. So for anybody else to take over the mine it doesn’t
seem like a very cost effective proposition because you
would have your infrastructure to kind of seeing the coal
and use it in your mine because it is at the pithead, so if
there is auction, then there is high possibility that you
would be able to win that auction?
Ravi Uppal: That is our belief. You know, we have our plants, our units
are located right on the pithead. We have developed the
mines. We know how to get the productivity out of these
mines. Our logistic costs are very low. Anyone who, you
know, takes up these mines other than us for M-Logistic
cost, you know, these industries are very major component
and there are, of course, they are not aware about the mine.
They haven’t worked on it and these are mines of which are
operative, some of them have been used to the limit of 50%
of capacity. So I think, you know, we would be well
pleased to, you know, get these mines back with us if the
auction process is initiated.
Vivek: Yeah. Okay. That’s all from me. All the best. I’m sure, I
think, we will be seeing all these pretty soon. Thanks.
Moderator: Thank you very much. We have the next question.
K. Rajagopal: Last two questions.
Moderator: Sure, sir. We have the next question from Mr. Sanjay Jain
from Motilal Securities. Your line is unmuted. You may go
ahead and ask your question.
Sanjay Jain: Yeah. Thanks. I would like to know by 31st March 2015,
how much of coal would have we mined ever since the
mining operation started in all the three coal blocks put
together?
Ravi Uppal: Well, I don’t have the numbers to give you, but I would say
that, as I mentioned earlier, all these mines that Gare palma
4/1 and 3/4, you know, we have fairly advance stage, you
know, more than 50% in some of these mines. I don’t have
a rate percentage to give you right now.
Leaderview Call on Jindal Steel & Power
September 25th
, 2014
Page 21 of 24
Sanjay Jain: Okay. You would have those numbers that you would have
submitted because the
K. Rajagopal: That time we all have. You can have them and call IR team.
Sanjay Jain: Okay. Thank you.
Moderator: Thank you very much.
K. Rajagopal: Last one.
Moderator: Sure, sir. We have the next question from Mr. Pawan from
AnandRathi. Your line is unmuted. You may go ahead and
ask your question.
Pawan: Thanks for taking my question. My question is very much
on macro and I think some of those questions have already
been answered, but just if you can throw some light on? Do
we have any sense on the process of reallocation and if that
happens, would it be purely be on competitive bidding or
like we would have first write-off bidding for our own
blocks?
Ravi Uppal: But, you know, different suggestions have been made to
government, you know, that in one of them we said that
they should go for the bidding process and whatever is the
highest bid the existing mine operator should be allowed to
match the highest bid. That is one of the suggestions made.
And then, of course, other people have said, “No, the
highest bidder should be given the mine.” So I think there
is a lot of lack of clarity at this point of time. So I think we
need to wait for another couple of weeks before the
government release, picks out these mines. So until then, I
think anything we say would be hypothetical.
Pawan: Sure. And the second question was again on the basis for
295 penalty, so is there any calculation that the government
has submitted to you and other companies or it’s just a
random number because we’ve been like told that there’s
no basis on that?
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September 25th
, 2014
Page 22 of 24
Ravi Uppal: This number, to our mind, has been picked up from the
CAG report where, you know, this number was mentioned
the Rs. 295 should be the average extent of loss suffered by
government that should be made good. And later on,
government, the Attorney General, Rahim, is in deputation
in the court. He once again dropped this number, but this
number there is nothing that is sacrosanct. And as I said the
295, a number taken with the sale, you know, as a
reference, is not valid for most of the miners because the
great number of coal that we are mining were F and G
which is far remote from the kind of coal that is produced
by coal India.
Pawan: Sure. Sir, my last question is slightly hypothetical. So if we
have to cut down on CapEx, so can we assume safely that
it’s going to be on the international resources projects and,
you know, our Indian expansion would be pretty much on
track?
K. Rajagopal: You know, as I said, we will have to calibrate, so which
one we will go ahead with the ones which will give faster
cash flow and we might get it postponed, delayed the one
where the cash flow is delayed. So that’s where the
evaluation is on.
Pawan: Sure. Thanks. Thanks and all the best.
Moderator: Thank you very much, sir.
K. Rajagopal: Sourodip?
Moderator: I’m sorry, sir. Please go ahead.
K. Rajagopal: Yeah. I want to give some concluding remarks again to re-
track what we’ve said that we are exploring the legal and
administrative remedies available to us with regard to Rs.
295 and also the time limit within which we have to pay, as
I said. So if anything that, so that’s why we didn’t quantify
the amount and we did not say what is the impact on our
cash flow and P&L this year. And if at all any amount to be
paid, how it should be accounted in our P&L, that
evaluation is still in progress. And if at all any amount to be
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September 25th
, 2014
Page 23 of 24
paid, I said that we do not have any problem in arranging
for that amount. We have enough cash even in the balance
sheet of March and our net worth is 23 to 22,000 crores and
we are not affected. And then going forward, we said that
on various combination of coal availability and making
available to us we have established that it’s not going to
make a large difference in terms of EBITA in future, let’s
say, next year. And in terms of debt level, it will hit for
some short-term till we are little more operationalized but,
however, we calibrate with the monetization program and
CapEx to see that how it is in manageable level. So this is
our overall message. The company is not affected to the
extent that it has to change course, but it has its own course
and it will calibrate and it has a big balance sheet systems
and core management stuff and we also believe government
has all the intention to ensure that the form is given by
them to the court to ensure how the coals are made
available to all these captive coal blocks are operated so
that production is not affected. So that is a message I want
to give.
Ravi Uppal: Just one sentence I want to add to what my colleague
Rajagopal has said, I think, I will urge all the investors to
have full confidence in the JSPL management. Here, we
have countered many pressure tests in the past and we have
come victorious. We are the company that has created
benchmarks in performance in the past and I want to assure
you will do the same and we’ve got a very, very dedicated
team both in operational level as well as the strategic
management level. And we will definitely, depending on
what government does, because right now the board is with
the government side. We are just waiting to see what kind
of actions they are taking to ensure the uninterrupted
supply of coal to the EUPs and because that’s what they’ve
assured the Supreme Court about. And depending on what
they do, we will immediately act very swiftly, but on the
other hand we are making sure that our operations remain
uninterrupted before 31st of March. We are tapping every
possible option which is there, so be rest assured and we
would urge you to keep confident in JSPL and stay
invested.
Leaderview Call on Jindal Steel & Power
September 25th
, 2014
Page 24 of 24
K. Rajagopal: Thank you. Thank you very much.
Rakesh Arora: Thank you, Mr. Uppal and Mr. Rajagopal. I think the
message is loud and clear and, I would like to thank all the
participants for joining in. Mr. Sarkar, we can now close
the call, please.
Moderator: Thank you very much, sir. With this, we conclude the
conference for today. You may all disconnect your lines
now. Thank you very much.