JINDAL STEEL LIMITED analyst Q&A

Thank you very much. We will now begin the question-and-answer session. The first question is from the line of Amit Murarka from Axis Capital.

Congratulations, Gautam, in the new role. Just the first question is on cost. So, in Q2, there seems to be a significant rise in operating expenses as well as the RM cost. If you could just detail out what are the reasons for the same?

Sure. Thanks for the question. As I mentioned earlier, we had planned shutdowns, DRI, CGP and pellet plants at Angul, and these were for around 25 to 27 days each. And during this period, we had also purchased some external metallics from the market to mak e up for the deficit somewhat. Also, it was a prolonged monsoon that also affected the operations a bit and the technoeconomic parameters of the blast furnace operations. Putting these together, that’s the reason for the cost. And going ahead, we should be in a much better shape.

Would you be able to quantify the impact of the shutdown, both on the metallic purchases as well as opex?

The overall impact was about INR250 crores.

Got it. And just on volumes, so now that the 4.6 million tonne blast furnace is commissioned, what is the volume kind of expectation for FY26, 27?

We’re looking at almost 60% annualized basis volume offtake in H2.

So, you were asking volume for ’26, ’27, right?

So, Amit, as far as next year’s volume guidance is concerned, we will come back to you in the Q4 earnings call and then probably that would be a good time to talk about next year’s numbers.

And H2, you’re saying 60% of the new blast furnace, the 4.6 million tonnes?

Yes. So overall, you’ve received the guidance for the whole financial year. We hold on to that.

Right. And just on the liquid steel and iron making capacities, like currently, you are at 12.6 million tonne liquid steel, but 15 million tonne iron making. So, what is a more kind of, I mean, a better capacity number to kind of consider in the current context?

If I understand your question correctly, I think you should be looking at liquid steel at the moment.

For the current period, yes.

So, Amit, when you look at it, both the blast furnace and SMS are on a ramp-up stage. So that’s how you should look at it. So eventually, these will match. And once we have the second SMS also, then we’ll have a full capacity with it.

The next question is from the line of Parthiv Jhonsa from Anand Rathi.

So, my first question is just continuing to the previous participant, wherein you just said that you are holding into your FY26 guidance. That basically works out to an average of about 2.5 million tonne kind of a number per quarter in sales offtake. If I read it correctly, I think over the last 2 or 3 quarters, you have, it’s a bit difficult that you’re not able to cross that 2 million tonne mark. How confident are you to cross that 2 million tonne mark per quarter in Q3 and Q4? I understand that Q4 is a good quarter but just wanted to understand your take on it.

You’ve picked up the thing correctly, Q4 is the positive quarter, plus we ’re ramping up new capacity. So that’s also adding in. So that’s why we’re holding on to the number.

But just wanted to get your confidence, because last 2 quarters, we have not been able to do it when a couple of our peers as well as if you see a domestic, the numbers are decent enough, right? The offtake numbers have been picking up over 8%. So just wan ted to get your understanding on that.

No, we’re fairly confident because the capacities came on very recently only.

All right, Sir. Sir, my second question is pertaining to the mining activity, whereas I believe in last quarter, Utkal B1, the ramp -up was around Q2. This time around, it ’s been moved to H2. Just wanted to also understand the iron ore mine, what you had picked up quite recently about a quarter back. Just wanted to get the timeline for that and the volumes from each of these basically, if possible.

So Utkal B1, we are now in the phase of commissioning the mine and we told you H2. So most probably by the end of this quarter, we should have output from that mine.

And what would be the volume from that, Sir, and also from the iron ore mine?

Let us enter the mine. I think that ’s something we can take once we ’ve entered the mine and we’ll be able to give you a better picture then.

The next question is from the line of Satyadeep Jain from Ambit Capital.

Just wanted to check on the capacity, iron making capacity, which is still in works, the DRI and BOF 3, any maybe concrete timelines you’re looking at for those in the second half?

Okay. And in the presentation, when you say compared to 18%, 20% ROCE that you’re looking at for projects, it’s mentioned 9%. Just wanted to understand what that is, is that for some new projects you’ve commissioned, or what?

I think you are looking at 2 different things. What that implies is that any new projects that we are looking at setting up over the recent past, the threshold is 18% to 20% ROCE from those projects. What you ’re looking at the other number is what we ’re working on currently as an enterprise.

This is the, you’re talking about the current ROCE for the business, the entire capacity right now?

Yes, exactly.

Okay. Just one last question. Just on the entire industry, I just want to understand, in your view, what is going on? Obviously, there has been extended monsoon. You had your own capacity under maintenance. There is some new capacity restart. But generally, very subdued profitability for the entire long sector right now. Is it purely demand? What could be causing it? And are you just counting on demand revival in the second half to improve profitability for t he segment? Just wanted to understand, in your view, what’s happening?

You picked up a lot of things in your question itself, and I do apologize if I did interrupt you. But I think you picked up a lot of things in your question itself. It was a prolonged monsoon. Typically, if you look at our history, we would spread out our shutdowns probably over 2 quarters. We brought it into the monsoon period. Plus, we knew our new capacities were coming online. So , we were actually getting ready for these ramp-up phases. So now we’re all set to take off from here. And obviously, we do expect that now the monsoons are over, the construction activity will pick up. So , the offtake should get better as well. I hope that answers your question.

Yes, it does.

The next question is from the line of Rajesh Ravi from HDFC Securities.

Part of my questions have been answered. I just wanted to have a more detailed understanding on the incremental cost savings given that the pricing in Q3 is again down on a lower base of Q2, and even coking coal prices also you mentioned have inched up. And even iron ore, there are no savings we are looking at. So, what are the cost saving numbers you’re looking at, which could drive up the margins in H2?

Yes. The prolonged monsoon period hopefully is over, so that should drive the demand side of it. Coming to specific cost saving numbers, I think that ’s something we would not want to get on the call right now. But we do expect that at least 2% to 3% of savings would come over Q2 right now, immediately.

Sorry, 2% to 3% of what?

Overall cost structure.

Okay. And any thought on pricing? Is it all to do with domestic demand picks up? What are the factors you’re looking at before these prices can again , there were expectations that with the safeguard duty, prices will stabilize or look up, but we are looking, both long prices have taken a deep dive and even flats are also down. And even in this quarter, the situation so far has been not at all conducive. So how do you look at the pricing trend?

Sushil, do you want to comment on this?

Yes. We are expecting the demand to pick up from here on, from November, December onwards, because the monsoon itself was very long. And the good part is that all the festivals were bunched together in the month of October. So now we have 5 months of clean demand period, which is seasonally very strong period. So, a lot of factors. The strong government or private capex which is coming in post GST cut. There is a good demand revival in automobile, household appliances, real estate, all those sectors, which are further supported by GST reduction. So, we are expecting the prices to rebound from here.

The next question is from the line of Pallav Agarwal from Antique Stock Broking.

Sir just wanted a clarification on the debt number. So, I think you mentioned that capex acceptances are not in the debt. So, are there any revenue acceptances that we have?

Sunil ji, can you take this, please?

So basically, if we split it, so right now, we have the revenue acceptance around INR4,982 crores, and capital acceptance, we have INR431 crores.

And this revenue acceptance, yes Sir.

Yes. Revenue acceptance is INR4,982 crores.

And this is already included in our net debt figure of INR14,156 crores.

No, this is not included in the net debt figure.

First question is on the project update. So, if you could just share, one is on the slurry pipeline, there’s been continuous delay. So, what exactly is the key bottleneck we are facing? And what’s the latest expectation? And on captive coal, if you can share what is the H1 production of captive coal? And how much are we purchasing from outside? And lastly, on Utkal B2, just wanted to get the latest expectation as far as approvals are concerned. And also, with Utkal C and the earlier coal block, are we looking at extension of the mining capacity?

You’ve asked so many questions. Maybe I may miss some of them. You started with slurry pipeline. Yes, slurry pipeline, 90% we have completed, and we remain on track to complete that project as per the guidance. Then your second question, if I picked it right, was captive coal production. Our guidance of H1 , basis our captive mines was intact, and we continue to hold on to our guidance into H2. Third question potentially which you asked was about Utkal B 1. As Gautam just now mentioned that we have entered into Utkal B1 and our production would be definitely coming up in quarter 4 onwards. So, we remain on track to mine in quarter 4 itself.

Sir, just if you can share what is the production of captive coal blocks in H1 in terms of million tonnes and versus what is the external purchase?

Our external purchases were minimal. Minimum when I say, it would be just legally to nonmaterial levels, which was 3% to 4% level, and rest all was from our own captive mines.

Understood. And Sir, my second question to Mr. Malhotra. I just want to understand, I mean, management churn has been quite high at the top level here. So how are we looking to address it? And what are your key focus areas as you take up this role for the near to medium term?

I’ll take the second part of the question first. If you ’re talking about the long -term goals of the company, I think we need a separate session. We’ve charted out our journey. So that’s something which probably would take too much time on the call. And your first question was management churn. See, when I walk around the company, I see a lot of people who ’ve been here for more than 2 decades. I see a lot of people who ’ve been here for more than a decade. So, I see a lot of stickiness. And if I look at the overall retention rates, they’re fairly high. And that drives a lot of confidence in me to be able to drive the agenda that we’ve set for ourselves. And you see a very rock-solid core management team coming together to drive the goals of the company forward. I think that should give you enough confidence in our journey going forward. And by the way, I tend to stick around.

Just one clarification. The INR250 crores one-off impact that you mentioned, would the entire thing reverse in 3Q?

I think you mean the reverse means it won ’t incur, yes, it won ’t incur, yes, please, if that ’s the question.

All right. So that should be automatically somewhere close to INR1,000 delta, right, in 3Q?

Yes, you’ve got that right.

The next question is from the line of Somaiah V from Avendus Spark.

A few questions. So first one is on the realization in the quarter, Q2. If I look at per tonne realization, it’s almost flat, just a INR500 per tonne Q-o-Q decline. But industry rebar prices, which have seen a sharp decline. So, I mean, anything in terms of exports or value -added products? So, what is helping us to be more or less flattish Q-o-Q?

Sushil, do you want to take this? I ’ll give it a heads up. Yes, we are highly focused on value - added sales, and our exports have also gone up. And within exports also, we ’ve been focusing on value-added sales. So, Sushil, do you want to dive a bit deeper into the question?

See, there are a couple of things which we have done, which make sure that despite an industry drop in NSR, significant drop in NSR, we have a very less drop. One is that our value -added component is very high. If you look at our investor presentation as well, the value -added component in this quarter is 73% of our total sales, which is the highest ever, right . We are continuously ramping up our value-added sales. That is helping us. Thirdly, we also have ramped up our downstream business, which in a way is a value -added business to us. So that also helped us in improving the NSR mix, right ? So apart from that, the export also has helped us on the flat product side. So, our ramp-up in flat product side is much more. The composition has changed, long to flat. So that also has helped us.

The long versus flat mix, what would be this quarter versus previous quarter?

Last quarter, the long component was 56% of sales. This quarter, it is 51%. So flat, we have ramped up from 44% to 49%, because we have tweaked the product mix accordingly based on the market because long side, there was a much more weakness than flat. So, we have improved the flat side. And we continue to work on the product mix side to work on the realizations.

Got it, Sir. Sir, also in terms of iron ore and pellet, our captive iron ore production last quarter and also pellet production, if you could just help us on that?

You’re looking at the exact numbers, what we did in last quarter in terms of our iron ore mines, right?

Yes. Iron ore and pellet.

So, our overall pellet utilization, if I was to say, our overall pellet utilization was in excess of 75%. And our in -house mines, our capacity utilizations were close to 2 million tonnes. That’s what we mined out of our ore mines.

When you say the 75% utilization, this was on 15 million tonne capacity?

Yes.

Somaiah, let me give you a quick perspective. Our Q1 total share of captive mines in the total consumption of iron ore was about 29%. We have ramped it up to 45% in Q2 from our own captive mines, if that’s what you are looking at, right?

Yes, yes.

And the increase is largely on account of better production from Kasia as well as incremental production from Roida-I mines.

Got it, Sir. One last thing, on international assets, if you can just give us what was the profitability last quarter?

Sunil ji, you want to comment on this.

Yes. So, from the international business, as you know, we have very minimum operations there. So, our largest mine there, WCL, is already taken in care and maintenance. So, we are operating in Mozambique and a little bit in South Africa. So overall, there is no t much contribution from the overseas mines.

The next question is from the line of Raman KV from Sequent Investments.

I just want to understand what ’s our current capacity with respect to the steel production. And how much are we planning to add by the end of this year?

So, you’re talking about steelmaking capacity, right?

Yes Sir.

Our current capacity is 12.6 million tonnes. And by the end of the year, we plan to add another SMS of 3 million tonnes, which will take us to 15.6 million tonnes.

I think you’ve got 2 questions over there. One, yes, we are working on increasing the utilization of our current capacities, and that ’s work in progress. And obviously, the output will go up as the new capacities come online.

And Sir, the incremental capex for this additional 3 million capacity, which will come in the second half, what will it be? And how much will it be via debt and internal accrual?

If you look at the historical thing, and you would have picked up in the deck that we’re funding a lot of our capex from internal accruals only, actually a large portion of it, if not all. And the first part of your question was, we ’ve given you the guidance on the overall capex. And in my opening remarks also, I gave you the capex number. What we spent so far is INR30,849-odd crores out of INR47,043 crores of the remaining capex that we have.

The next question is from the line of Amit Murarka from Axis Capital.

So, while you mentioned that the captive iron ore production was 2 million tonnes, how much was Tensa production out of that?

Tensa was minimal in this quarter. What you have to understand is that Tensa as a mine is at its end of life. And we’re working on now extracting some more material out of it, but that ’s only on the boundary wall. It’s an end-of-life mine. I think that’s the way we should look at Tensa.

Sure. So, ballpark 0.1 million tonne or lower should be a number to think of on a quarterly basis?

Top of my head, yes, that would be something close to that. If you want any specifics, Vishal is always available, I think, offline.

Sure, sure. That’s fine. Also, like on the mix per se, so while you did 49% flats in the quarter, now that there will be higher volumes available from the new blast furnace from Q3, Q4 onwards. So, is it fair to assume that you will be doing like 55%, 60% flats maybe in H2 with the higher volumes incrementally being all flats maybe?

I think you’ve hit the nail on the head. Flats will go up, yes. I think that’s something we’ve held throughout the journey as well.

Sure. Also, like this increase in flats would be going to which segments, because I see that the auto has actually been flat for you Q-o-Q, even though flat share has gone up?

What you have to understand is auto has got very long cycles of approval and even plant approvals as well as product approvals. So auto as a segment will take a little bit of time as we get on. By the way, we are getting into yellow goods in a bigger way. Auto is also coming up. But you have to give time to auto. It’s a longer cycle, that’s all.

Yes. In the shorter term, that ’s how you would look at it. If you want to draw a longer curve, yes, you will see the auto cycle coming up as well.

The next question is from the line of Parthiv Jhonsa from Anand Rathi.

Sir, I think I lost you in between on the capex. What’s your second half capex, if you had just declared it out? Just wanted to get that number?

Sunil ji, do you want to come back on this?

Can you repeat your question?

Sir, what is the second half capex?

H1 number is INR4,925 crores. H2, we are planning, as we have already given the guidance of INR7,000 crores to INR9,000 crores. So similar numbers, we are expecting that we ’ll incur in the H2.

Okay, Sir. Sir, my second question was pertaining to the Australian subsidiary, right, where I think Sir said that there are no meaningful numbers which are happening there. You are carrying a substantial loss on the books. Just want to understand your understanding that you are treating it as a going concern. I just want to understand that INR10,700 crores kind of a cumulative loss on that book, how are you going to treat it going forward? Is this subsidiary going to yield some returns? Because if you see, the losses have kept on mounting. I think in the first half, you have done almost INR600 crores, INR700 crores of loss, if I’m not mistaken. So, I just want to get your understanding on that?

So let me explain. In last year, we have already impaired this asset. So right now, we are having assets value of around $187 million, so which is represented by true value , that we have got assessment done by independent valuer. So, the value that we are carrying in the books is representative of true value as valued by independent valuer. That I can say. So, whatever you are seeing is already impaired in our books.

No. So, $187 million of asset you are carrying on the books, but that’s against the accumulated loss of over 1.1 billion, 1.2 billion. So, are you confident of this subsidiary picking up volume going forward or business going forward? What exactly is your understanding there?

So basically, as I have already spoken, whatever value that we are representing, that is land value there, that we have already there. So that land value represents the value of $187 million that I have spoken. So, all our loss that we have incurred there has already been written off in the books.

The next question is from the line of Rajesh Ravi from HDFC Securities.

Sir, I wanted to ask, we have achieved 73% odd value -added share, which is almost all -time high. And now that even flat mix will improve here on with the new facilities. How are we looking at the margin profile for the 2 segments? And primarily, I want to understand that when you say value -added product, are they only based on the application basis or from a margin perspective, the value-added products carry a higher margin profile?

Sushil, do you want to dive into this?

Can you repeat the question, please? My line got disturbed.

Yes, I’ll repeat the question. I wanted to understand when you say value-added product, how do you define them from a margin? Do they also carry a margin perspective or it ’s more about the application or industry where they apply to given that we are now 73% value -added product share and now even our flat share is expected to go up from 40%, 45%?

Right. So, we define it both ways. One is on the application side, which are the critical applications like high strength steel or low alloy high strength steel, that type of steel, or then segment specific as well like defence or, let ’s say, windmill applications and those types of applications, both way. But then the important thing is that as the criticality of the application decreases or the criticality of the steel increases, so the value increases. So, we check it in both terms, in terms of how it gives us the contribution per hour or the value per hour and also in terms of the application. So, we have some defined parameters based on this. We decide what is value -added steel. And that’s consistent. So, when we say 58% to 72%, 73% journey, it’s based on those.

How would that be driving your margin profile? This is what I wanted to understand.

That would need a much more detailed dive. So, if you can get that separately, because that will need a lot of explanation, right?

No, that’s okay. We’ll certainly discuss this separately. Yeah, my just thought was if the prices are soft and if the margins of the value -added product and the flat mix is improving, can we expect most of the impact of the soft prices countered by that?

Certainly.

The next question is from the line of Vikash Singh from ICICI Securities Limited.

I think it’s too early to talk about the cost savings coming from AI. We actually are doing a lot of stuff on it, a lot of interesting stuff. We’re working on efficiency, as I said. We’re working on productivity. We’re working on safety across our shop floors. That’s a very important parameter for us. Apart from that, we ’re also introducing Gen AI tools for all our senior and mid -level executives to be able to capitalize where all the information is available at the tap of a button. So, I think all those factors over a period of time will reflect, but it’s, I think, too early in the journey to start putting a dollar value to it.

Noted. And Sir, second question regarding our presentation. So, if I look at the Slide Number 4, there is still a mismatch between liquid steel versus finished steel. So just wanted to understand your view that by what time do you think that this mismatch would get nullified basically?

Which mismatch, are you talking about 12.6 and 13.25.

12.6 versus 13.25. So, we would still be making less finished steel, right? Because the similar kind of bottlenecks we have experienced in the last 3 years and had not been able to achieve even 8 million tonnes of steel despite talking about 10 million, 10.5 million tonnes of steel capacity?

See, if you apply the yield factor on it, the numbers would be close to this. Plus, we have other things also, other sales also that we can do.

The next question is from the line of Amit Murarka from Axis Capital.

So, on acceptances, I see that the number was, I think, close to INR3,000 crores in March. And right now, the number that you gave is almost INR5,000 crores. So, it’s gone up by almost INR2,000 crores. So, what would be the reason for higher acceptances given that coking coal has actually gone down and your production volumes have also been flattish actually during this period?

So, Amit, this is basically , so since we have started new facility, so for the working capital requirement there, for procuring the coking coal, all these LCs have been used for that purpose. So, this is for the new facility that we have started, majorly.

But generally, like what is the policy that you would follow for acceptances generally, like how does it work? If you could just explain that a bit?

So basically, this is for imported coal that we procure from international market. You know coking coal is basically imported from outside, internationally. So, we have to open the LC at the right time and cycle time is much more, around 45 to 60 days. So, for all these reasons, this quantum increased.

45 to 60 days cycle time is there for procurement of coking coal.

Ladies and gentlemen, due to time constraints, this was the last question for today. I now hand the conference over to management for closing comments. Thank you, and over to you.

Thank you, everyone, for your questions. FY26 is a landmark year for Jindal Steel. This quarter, we achieved 2 major milestones with the commissioning of the second blast furnace as well as the BOF 2 at Angul, significant steps that strengthen our growth journey and reinforce Angul's position as a world -class steelmaking hub. The rest of the facilities are on track for commissioning as per schedule. As we move ahead, our focus remains on operational excellence, value creation and sustainability, along with Industry 4.0 and AI, ensuring that our growth is both responsible and resilient. We appreciate the confidence our stakeholders have in us and look forward to building on this momentum to deliver consistent value-driven growth ahead. Thank you.

Thank you, Sir. On behalf of Jindal Steel, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.