Thank you. We will now begin the question-and-answer session. The first question is from the line of Vikash Singh from Phillip Capital. Please go ahead.

Good afternoon, sir, and thank you for the opportunity. Sir, I just wanted to understand the iron costs given on the standalone level, if I see, there was a sharp uptick. Any particular reasons for the same?

Your voice is cracking. We are not able to hear the question clearly. There is a problem in the line. Can you switch the I-note?

Yes, sir. Sir, I just wanted to understand our iron costs on a standalone level has jumped up pretty sharply. So, what are the main reasons behind the same?

Iron ore?

Our total raw material cost has increased very sharply. One could be iron ore. What are the other cost components which have led to such a sharp increase in the sequential iron ore cost? Iron cost, I mean to say.

It is not only the iron ore cost. Because we have the power plant also, then coal purchase is also there. And in case of ferro alloy, you see the selling price has gone down. The raw material cost has not gone down. So, raw material consumption includes the effect of the higher cost of the inventory of the manganese ore. And so far, as total material consumed is concerned, that includes the coal consumption in the IPP.

Understood. Sir, in terms of realizations, how should we look at these spot realizations right now versus the 3Q averages? How much they are higher, or they are at the same level? If you could give us some idea.

More or less, prices are at the levels at which these were for the Q3 averages.

It is already conveyed in our opening address. In January, we have achieved 97% PLF. So, the machines are operating at full capacity. But in between, we are facing certain maintenance issues. So, we are addressing all those issues. So, average PLF will improve. But yes, we have to take certain more steps to ensure that at a sustainable level, we achieve 100% capacity utilization. So, that is the case with PLF. But as of now, the plant is operating at 100% capacity and is generating at full capacity of 600 MW.

So, any plan to expand this capacity? I believe we have some already. The infrastructure is already there for the next 600 MW.

Yes, basic infrastructure is readily available. But we have to seek all the approvals and carry out the techno-economic viability study and all the environmental related clearances. So, it will take its own time. Not in the immediate future. But yes, we will take steps one by one. Effectively, first we have to go for the approvals.

Okay. Sir, my second question is related to ferro alloy d ivision. Are they making P BT level losses right now? And since the manganese prices are sharply up in the last few days, have they seen this to reflect in the finished product prices as well?

The ferro alloy prices recently have moved up and we have seen a little bit of improvement on the manganese ore side as well. But we will have to wait and watch in the coming 2-3 months as to what happens because there are protectionist measures which have been taken by many countries like Europe, US, they both announced. So, we will have to see how the demand pulls up in the coming 2 months.

But for this quarter, we had PBT level losses. Is that assumption, correct? Looking at the number right now?

No. We had inventory losses to some extent but not PBT losses.

Thank you. The next question is from the line of Mehek from Agility Advisors. Please go ahead.

Sir, I wanted to understand more from the pricing point of view. So, what is the pricing difference between the power which we sell from the hydro power plant and from the SKS power plant as well as the profitability?

Hydro power plants, we have long-term pricing contracts. So, those are supplied at a fixed price and there are different prices for different plants which are commissioned at different points of time. So far as IPP thermal power plant is concerned, we are selling part of the power in the long-term, part of the power in the medium -term, part of the power in the short -term, and the remaining power we are selling in the exchanges. So, these prices are subject to market fluctuations. So, comparing directly is very difficult. Because there we have a long-term contract, here we are selling majorly in the spot market. A part of it is going into the medium-term also. So, there cannot be a direct comparison. Prices of IPP power plant will be subject to the market fluctuations and seasonal effect also. During rainy season, the price realizations may be lower. During summer season, you may get much better prices. So, there is no direct comparison between both the projects.

Okay, but any ballpark number, what would be the average realization? Like in thermal, you mentioned in the last previous conference, it's close to INR 5.0 a unit. So, similar, what is in the hydropower plant as well? Any ballpark number?

Hydropower plant, in one plant, we have tariff of INR3.85. Another plant, we have INR5.21. And third power project is subject to cost plus formula. So, that varies from may be INR7 to INR5 or so. So, in case of thermal power plant, we can expect INR 5 plus on average for the whole year.

Okay, and profitability will be different for both. Like for thermal, EBITDA level is close to 40%. Hydropower, it would be more or it's in the similar range?

Hydropower EBITDA level is in the range of 80%.

80%, okay.

Because there is no raw material cost, there is more of the interest cost. So, EBITDA cannot be compared for both the projects. One has the raw material; another has the interest as the raw material. So, there is no direct comparison on EBITDA level.

Okay, understood. And sir, last question, any update on the Supreme Court ruling for the SKS power plant?

Hearing has not yet taken place.

Thank you. The next question is from the line of Balasubramanian from Arihant Capital Markets. Please go ahead.

Sir, my first question regarding th e ferroalloy prices. It's Q -on-Q 19% decline in average realization for ferro manganese, there is 8% Q -on-Q decline in silico manganese. So, like any specific reasons, like what are the dynamics in the market?

Can you repeat the question, please? Because I am not able to hear you clearly. Mr. Jain, can you hear clearly?

We couldn't, we couldn't.

Yes, okay. So, like in ferroalloy price trend, I am looking at the PPT, it's 19% Q-on-Q downside for ferro manganese and around 8% Q -on-Q downside for silic o manganese. Any specific reasons for that and what are the market dynamics at this point of time?

Voice is very muffled. It is actually coming very muffled. I mean, I can hear some parts of it that you want to know the silic o manganese prices and the ferroalloy's overall pricing coming down and what are the reasons thereof. Is that correct?

Yes.

Yes, so particularly there is no reason. It's a commodity and there is a cycle. We have seen that there have been a bit of a slump in demand, you know, and that's the only reason.

My second question regarding on looking at this sales volume data for the iron ore pe llet and sponge iron, etcetera. So only sponge iron only year-on-year 48% growth. The remaining are into less than like some of the like volumes are looking at 20%. The remaining are 18% kind of downside only. So, our revenue has reported 40% to 43% year -on-year and like how mu ch it comes from price realization side and volume realization side?

Can you actually rejoin because everything that you are saying is muffled up. We can't hear you clearly. At least I am not able to – Mr. Jain.

No, we are not able to hear clearly.

It's all like echoing or muffling up.

Okay. Thanks sir. I will come back in queue.

Can you just rejoin and again come back and ask the question please?

Fine, sir.

Thank you. The next question is from the line of Devang from Eagle View Ventures. Please go ahead.

Sir, our long-term borrowings increased from INR1,000 crores to INR2,400 crores. What are the peak debt we can see in coming quarters?

I think this must be the peak for the coming quarters.

Okay. So, this is the peak number for debt?

Yes. At least for unless we go for some other major activity at least for the next few quarters. This is the peak. Now, it is getting reduced as we are starting repaying the loan taken for SKS acquisition. So, it will go down from here.

Okay. And, sir, my second question is we have a good cash on balance sheet. We have very low debt. Can we expect dividend payout in coming quarters or coming years?

That is a matter to be discussed at the board meeting and decided by the board. It is very difficult to comment on this at this juncture.

Thank you. The next question is from the line of Vikash Singh from Phillip Capital. Please go ahead.

Hi, sir. Thank you for the opportunity. I just wanted to understand our capital allocation preferences. Given right now our debt is high, but obviously we would be paying with the cash flow. If we have a second round of capex then our choice of the business would be majorly, first choice of the investment would be steel, power or the ferro alloy. How should we look at it?

No, we are investing in a diversified way. We are investing in hydropower projects also. We will be taking up two more hydropower projects. We will be going for coal mines also as a backward integration. We have planned even for the iron ore mine. So, majorly it is going on the backward integration side. And definitely when we come up with the expansion of the SKS power plant that will be another major capex. So, the capex - capital allocation will be distributed over all the different segments of the activities carried out by the company.

Understood. And sir, we haven't participated in any manganese ore mining auctions I think basically?

There is no major manganese mine which has come up in the country right now. There have been two, three auctions which are all small mines. They are 6 hectares, 7 hectares, 8 hectares and the reserves are very, very meagre. They are like some 60,000, 50,000, 40,000. Those are not viable workable mines with low grades of manganese in it. So, we are not participating in these tenders.

Understood, sir. That's all. Thanks.

Thank you. The next question is from the line of Aman Madrecha from Augmenta Assets Managers. Please go ahead.

Hi, sir. Thanks for the opportunity. So, firstly I would like to understand a strategy on the coal mines like, for example, the upcoming coal mine would be the capacity expansion on the Gare Palma side and another would be the Shahpur West Coal Mine. And so how are we looking at the same and what is our strategy towards the same? And how are we looking at all these mines under the underground mining thing like what is your view on the same and how much viable is the underground mining scenario in India currently?

So, underground mine as we go beneath the surface the grade of the coal increases. So, the capex and the cost of production increases, but at the same time the quality of coal also increases. Now, we are little dependent on imported coal that we are buying from South Africa. So, all these underground coal mines will help us to reduce our imports of RB2 and RB1 grade of coal from South Africa. And even for our ferro alloys units, we are dependent on high-grade coal so that raw material will also come from these underground coal mines.

So, I just wanted to understand till date the underground mining things like, for example, correct me if I am wrong around 95% of the coal mine in India is from open -cast mines currently and around 5%, 7% is from underground mines. So, what was the thing that was hindering this underground coal mining operation in India and what will change going forward because we are entering into various revenue-sharing agreements with Coal India and MDOs. So, what is your take on the changes?

No, we have taken only one mine under revenue-sharing arrangement from Coal India. Rest all are direct allocation to us from the Ministry of Coal. So, in one coal mine, and that will not be underground as we have planned for the mine in revenue-sharing. That will be open cast mine. And underground mines, we have taken two underground mines. One is Sahapur West, and another is Gare Palma IV/5. IV/5 is an operational coal mine which was operated earlier by Monnet and later on by Hindalco. Now, it has come up for auction third time and now we have taken. So, this is an operating underground coal mine and it has got high grade of coal near our existing coal mine IV/7. So, the high-grade coal will be utilized for our Sponge Iron plant and Ferro Alloys plant and to that extent, the capacity of our IV/7 will be freed for SKS power plant.

And just to clarify that I assume you think that underground coal mining is difficult and just has started happening, but India has been doing underground coal mining, iron ore mining, manganese ore mining for the longest period of time. So, there is absolutely no problems in underground coal mining per se.

Understood. So, sir, going by your comments, for example, this Gare Palma IV/7 will gradually meet the requirements fully of our SKS power plant. The Gare Palma IV/5, the approvals are under process and this Sahapur West coal mine that will be used for our Sponge Iron and Ferro Alloys operations, right? Correct?

Yes, surplus coal if any will be sold in the market.

And sir, what is the expected timeline for the Sahapur West? It can take another one and a half years.

One and a half to two years. Two years we are considering from here. Once we get the mining opening permission during the current quarter, it should not take more than two years of the time to commence. We are considering two years’ time to start the production.

So, sir, as of date for this, for the existing operations, like how much of this Gare Palma IV/7 mines we are selling outside and how much we are consuming in captively?

No, we are not selling any coal outside after acquisition of SKS. We are falling short of the requirement, rather we are buying coal from the market.

Yes, sir. Sir, earlier you mentioned about the overall international market has been a little bit impacted because of Australia, has impacted by the flood and alloy market also is quite slow and Gaza attack also have been impacted in the international market. You have mentioned about the demand expected to pick up from February month onwards. What is the status on that overall international market side?

See, the overall international market right now, it is subdued, and it will take some time, I guess, once there is clarity on the protectionist attitude by European Union we have to see. We have to look at that again, Trump has just announced, duties on steel, today, but it's not clear how many countries they are going to apply the duties on to. So, we have to wait and watch. Right now, the focus more will be on India's domestic demand that will come in, the infrastructure push and the growth that we will see in India. So, India will be in a quiet comfortable position because I think that most of the duties will be targeted towards Canada, China, Mexico, Latin American countries. This is what we expect. So, I think overall, you know, after may be a month or two, we'll have the complete clarity on the international markets. But right now, the demand is a little slow.

Okay. So, I'm looking at the sales volume data. Sponge Iron only have grown more than 48% year-on-year. The remaining are less than that only. But our revenue has grown 43% year-on- year in this quarter. So, how do we understand, like, about the growth side, whether its volume driven or price driven?

So, you see, Sponge Iron is one of our intermediary products, which is partly consumed in the downstream production and partly sold off in the market. So, when the Sponge Iron production has gone up, if you see, there is no material change in the Sponge Iron production. Slight change is there, definitely. In the nine months we have produced, 249,000 tons. So, the higher sale is on account of the lower consumption in the steel production because the steel production has reduced a little bit because we have been selling power in the market. That's why percentage wise it appears to be on the higher side because we are selling a very small quantity of the Sponge Iron in the market. So even slight change in the sale side. There is no material change in the production side, but yes, sale side it has gone up because we have consumed less quantity in the production of steel. Otherwise, our steel capacity is more or less constant and stable. So, except marginal improvement on account of the efficiency, there is no material change in the production side in the steel segment.

Okay, sir. So, is there any clarity on the growth side, 43% in this quarter year-and-year growth, whether it's driven by price or volumes?

As stated, our steel production has remained more or less stable, except slight improvement on account of the efficiency. So, sales of one product may slightly go up, another product may slightly go down. That may happen. Otherwise, it will remain more or less in the similar levels. Because if we are selling surplus power, because we are getting better realization on sale of the power, we are reducing production of the steel billet. That may result into increase in the sponge, but that may reduce the sale of the billet. But it will not affect the profitability because ultimately, we are generating revenue either by sale of the steel or by sale of power.

Got it, sir. Thank you.

Thank you. The next question is from the line of Rajesh Bhandari from Nakoda Engineers. Please go ahead.

Sir, first of all, the quality of the presentation and the content of the presentation, both are extremely good.

Thank you.

Sir, this power plant, which is said to have PLF of around 97%, 98%, that means it will generate something around 500 crores of units in the years?

No. This is for 1 month. What happens in between is that there are maintenance shutdowns as well. So generally, in the best operated plants, 85%. If you sell in the market partly and sometimes you are not able to sell, then between 80% - 85% is a reasonable PLF for IPP which are selling in the open market. So, 80%, 85% PLF on annual basis we should consider as a good percentage. May be 80%.

We can expect that there will be a difference of INR400 crores in profitability because of SKS power plant?

It should come comfortably. Yes, in the entire year it should come comfortably.

Yes. Sir, is there any status of the court case?

Any?

What is the status of the court case now, sir?

There is no hearing yet.

Sir, what is this Mineral Fibre? You have started manufacturing of Mineral Fibre in Vizag?

This insulation wool is used as insulation material in the buildings also, in the industries also. So that it is used for heat insulation.

But it has a better selling value?

Sorry?

The sale price. Sale price is good?

Yes, sale price is good.

See, this is based on opportunity. It is an ongoing process. If there is an opportunity, it is seen.

And now the debt is so big, sir. So why don't we do any QIP, sir? So, the debt will be reduced. Interest cost will be reduced.

That will be reduced gradually. If you do any big acquisition, it goes up. Despite that, there is not much increase in the net debt. The annual EBITDA remains as much as the Net Debt. So, there is no such concern.

See, nowadays, whoever gets a QIP, and our company is so comfortable, so according to that, it can come easily, sir?

It's okay. We will see when it is needed. Right now, we don't feel the need.

Okay, sir. This is my question. Right, sir. Thank you.

Thank you. As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments. Over to you, sir.

Yeah Thank you. To summarize, while the steel segment faced pricing and margin pressure, SKS Power's operational performance improved, and hydropower generation saw year-on-year growth. Backed by sound balance sheet, low leveraging, and strong liquidity, the company has been reinvesting surplus funds in a number of diverse projects for consistent growth. In the next financial year, 25-megawatt hydropower plant, mineral wool project, 50-megawatt solar power plant, and Gare Palma IV/5 will also contribute to the profitability. The diversification strategy of the company has paid off to have consistently sustainable cash flows, insulating us against cyclicality of the steel industry. Please feel free to reach out to us or our IR team for any further questions. Thank you, all the participants.

Thank you. On behalf of S arda Energy and Minerals Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.