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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to Q4 and FY '22 Earnings Conference Call of NMDC Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Vishal Chandak from Motilal Oswal Financial Services Limited. Thank you, and over to you, sir.
Thank you very much. Good morning, everyone, and welcome to the Q4 FY '22 earnings call of NMDC Limited. I'd like to thank the management of NMDC for providing us with this opportunity to host them for this call.
As you know, it's a critical juncture and the government has announced various measures, which obviously the management of NMDC would be discussing. So we have with us Mr. Amitava Mukherjee, Director Finance, and he would be joining with NMDC very soon. So without much ado over to you, Amitav sir.
Good morning, everybody. So this has been a great year for NMDC. I believe the results are unprecedented in the history of NMDC. Even the Q4 production and dispatches were the highest ever, if we take the financials for the entire year, they are also the best ever, and it has been a very, very good year despite the fact that we spent around INR 5084 crores against the additional royalty that has to be -- had to be given because of the MMDR Act.
So despite all those, we have managed to record the highest revenue with us 26,600 in terms of entire top line and revenue from operations of 25,800 plus. So -- and the profitability has also increased. So overall, it has been a very good year. Going forward, we believe that from 42 this year, we should be able to make 47, 46 million tonnes to 47 million tonnes. We are planning to do that.
So in the coming year, let us see how the prices sustain and the recent downtrend in prices, but let us see how the situation develops. And -- but we are confident that our volume increases would compensate a little bit a fair amount of decline that we've seen in prices.
Even this year, if you see the -- when the top line exceeded by around INR 10,000 crores, around INR 4,000 crores were quantity driven. INR 4,068 crores was quantity driven, which is the more comfortable thing for us to know also to see from Q4 to Q4, although the prices had come down and we had lost around INR 761 crores based on prices, but the increased quantities actually helped us to earn INR 1,248 crores more.
So we will have to depend more on now the volume increase, the top line based on volume increase rather than, I think, on price increase. Let us see how the price situation actually forms up in the near future. And we are confident that we will be able to meet the challenges that come in this fiscal. So thank you, Vishal. We are ready to take the questions, please.
[Operator Instructions] The first question is from the line of Prashanth from Dolat Capital.
Sir, in light of the recent duties announced by the honorable [indiscernible] and the government of India, and that is sizable in terms of 30 to 50 from iron ore and 0 to 45 on pellet. Sir, now they are doing their part to control inflation or to lower the infrastructure bill or whatever it is and excise cuts, et cetera, to help the poor.
But as a company, we need to do something to protect our margins and this so that the impact is at least on the -- so from this point onwards is something radically or even as an industry -- as a company and also as an industry, you need to do to protect our pricing and our margins also..
I just wanted to know your thought process on this because other commodity like cement, if you see 10, 15, 20, if your income are not exported. But then they manage prices so well across markets, even if there is oversupply in various pockets, the pricing is really held up really good.
So something -- even we should radically do different to protect our prices there. I just wanted to know your thoughts.
Yes, 2 things. So far as the increase of 30% to 50% of all grades -- it does not impact NMDC directly because we were not exporting, we were not in the export market. And to that extent, so far, strictly as NMDC is concerned, it is of academic interest already.
What it, of course, does is that it increases the flow of low-grade pile, if you see the last 2 years' data, most of the exports have low-grade fines and not high-grade fines. High-grade fines was less than, I think, 3 million or 4 million tonnes I was, in fact, just going through in the morning.
And the data that I was given was that high-grade fines when we exported 46 million tonnes from 62 to 65 was only 1.4 million tonnes. And last year, when we exported 15.26 million ton, high grade fines 62 million tonnes. Now 58, so most of it were below 58 in so -- and come between 58% to 60%.
Now as you know that in India, there is not much beneficiation facility that is operational. Some of it has installed, but it is not operational. So 58 will not necessarily, as per my understanding affect the market of 64 because had beneficiation facilities been available. Then of course, you can take it to 58 that will not be exported will be diverted to Indian market and consume in the Indian market.
Obviously, 58 -- to consume 58 you need to be effected and not much verification facilities available, except I believe in JSW. I'm not very sure if others are operational or not. There are some installed capacity, including our own in Donimalai pellet plant.
But most of that is not operational because of issues of disposal of tailings of that. So I do not think, again, directly 58 abundance of availability of 58 will again impact anything from 64 to 65 directly. They are not in direct competition. So these are the 2 perspectives so far as we have for iron ore, of course.
Regarding pellets, of course, as you know, that's in several small plants making sponges, et cetera. Pellets are obviously a substitute for lumps. And to that extent, in that market, there would be when the pellet prices fall, and there would be a certain amount of competition there vis-a-vis pellet, lumps and pellets, of course.
But the figures that I was completely sort of a little surprise was that what I have been given from the -- I understand from the steel mill, is that in the last 5, 6 days, pellet prices haven't fallen all that much, although the other prices have fallen, the figures that I have for 7 days back at pellet in Raipur was -- has not fallen, pellet in Balari has not fallen, but there has been a decrease in prices of pellets at [indiscernible].
So still now pellets are holding up until such time pellet actually start falling drastically, that would be a competition to -- direct competition to lumps. Of course, we have seen the general market and a couple of days back, we have taken substantial price cuts around INR 600 in lumps and fines, I think, INR 500 or something and just don't recollect the figures. I'll let you know that.
So overall, that is the scenario of course we see prices coming down, there might be pressures on our prices, but let's see how it sort of -- how the things settled. So it's too early to speculate on anything.
Understood. Sir, small follow-up is the recent price cut that we have taken, is it -- you mean to say it's got nothing to do with the announcement. It is generally market-driven, which was prior 15-day lag something, the Chinese prices falling, et cetera? Or this got something to do with the government action also, has that caused the market to take this higher?
Because basically, if you see just before the pricing, we keep track on how the steel market was doing. Even before the price cuts, I think the prices are collected by INR 2,000, INR 3,000 across the board in HRCs and in lumps also. So there was a correction even before that, the correction has continued after the duty in positions, all of that.
So that to that extent, some amount of correction was required, irrespective of the duty cut. Let us see how it's actually sort of stabilizes because lumps we have cut by INR 600 and fines have come by INR 750.
So to that extent, I think the prices of steel and others also what happened just before the announcement, our offtake from Chhattisgarh had almost -- it was being affected, and a lot of offtake was being affected, so we had to make a price correction. And thereafter, now, we are watching what is the price situation developing in the steel sector and the iron ore sector.
The next question is from the line of Amit Dixit from Edelweiss.
I have 2 questions. The first one was essentially on inventory, which has gone up sharply during the year and receivable is also up compared to last year. So first of all, if you can let us know the reason for the same? And are there any chances of the reversal in working capital buildup that we saw last year?
Let's take the receivable part first. I'll just brief you on that. So the receivable are basically one major component is the monitoring committee. Now thankfully, what we understand in a couple of days, we'll be doing direct auction on the monitoring committee. We do not need to go through that, monitoring committee.
And of the receivables around INR 1,700 crores were towards regular deals of monitoring committee, which, of course, today, when the auction is held, they get the money, but they give it to us after the last consignment of that action has been taken by the bidder.
So there is a gap of sometimes 1 month that increase because some of the bidders were not lifting the -- what were there so around INR 1,700 crores were on trade receivables in the year-end for monetary committee. That, of course, has been liquidated.
But fresh deals have again been there. So that's a continuous process, and that will thankfully come to an end when we start our auctions by ourselves -- so now the monitoring committee will not be -- the routing would not be monitoring committee.
What is very good is and since we are mentioning monitoring committee, that monitoring committee was retaining 20% of our earnings towards STV and towards ECL. Now when we are going in for -- after the Supreme Court judgment, when we are going in for our own auction, that would not be there, and we stand to gain 20% on all the auctions that are done by ourselves rather than by the monitoring committee.
So that's a big plus for NMDC. Another major component is, of course, or RINL. And that is the only company where we supply on credit. So that was around INR 1,294 crores, but we have now entered into a bill discounting mechanism with involving RINL. So this, in every 3 months time will get liquidated and we'll discount the bills at a very nominal cost and that discounting cost would go to RINL themselves.
So that we have worked out a permanent mechanism so that the cash keeps coming even if it is slightly delayed than others, that is the only part we sell on credit. And of course, then there is some miscellaneous like INR 3 crores from NMDC and INR 21 crores, which are more or less -- INR 21 crores towards regular dues, which has been liquidated since and some of our price revision areas, those are in small sectors. So this is about trade receivables.
Now if you are talking about stocking, yes, our stocking has gone up by around 1.5 million tonnes because last year, our sales are more in the production. Now as the production goes up, naturally, there would be some amount of stock build up, and that is nothing to be alarmed about.
It's about 1.5 million tonnes. Last year, it was actually much lesser. So that's a normal part when the production goes up, some amount of stocking would obviously go up. Is there anything else on the subject, then I can...
Sir, just one follow-up on this. What would be the ECL accrued through that is with the monitoring committee. I think the monitoring committee mechanism is dismantled, then you would get that also back.
That would require a Supreme Court order, which we have been pursuing the Supreme Court for a long time. So that would be 2,848 and that would straight away the day we get it will add to our pack, not to our PBT but to stay to our pack because we have been -- although in the books of account writing it up, it has been -- it has been constantly disallowed by the income tax authority.
As a result, we end up paying tax on that. So as and then this INR 2,850 odd crores come to us, and I think it will not require more than 1 or 2 hearing of the Supreme Court. It will depend on when the large ships decide to hear our case, but 1 or 2 hearings, and we are ready to get that INR 2,800 crores. So that will be a windfall game straight away adding to our pack as and when we get it.
But that will require not only the dismantling of monitoring committee, but actually a Supreme Court order. And this is only 10%. We are not expecting the other 10% to come back to us because that is our contribution towards SPV.
Okay. The second question is on other expenses, which have gone up sharply in this quarter despite mill exports. So any specific reason for that?
Yes, yes. I'll let you know even quarter-to-quarter or year-to-year?
Sir, both will be great.
This is year to year. Let me talk to you about year-to-year. Of course, it has the other expenses have gone up by any other expenses company, other expenses is just a -- so you have some amount of increase in expected credit loss, that's gone up by [ 325 ] because the prices were high and it is an ad valorem charge.
So naturally, the higher the price, the higher the expected credit loss. Then you have the mine closure of obligations, which have gone up by INR 49 crores. That is because we keep on reviewing our cost per tonne for mine closure obligations every year. And this year, our provisioning has increased by around -- from INR 17.10 to INR 18.45 per tonne.
As a result, it's cost of INR 50 crores extra. And CSR, of course, has been there for around INR 129 crores extra. SPV is like, again, the expected credit loss. That is an ad valorem rate when the prices went up. So natural contribution to SPV would go up.
And to that extent, RINL, we have settled our dispute that has cost us around INR 72 crores because we were having a dispute with RINL for around INR 150 crores regarding underloading and loading charges and there were discrepancies.
So we have settled it halfway with RINL around INR 70 crores to their account and INR 70 crores to our account. So these are the basic major heads where it has actually increased.
Sir, if I look at this quarter in particular, it has gone up sharply -- it used to be like 440 quarters, INR 400 crores to INR 500 crores approximately, I mean, for last several quarters, but this particular quarter, it is INR 1,014 crores. So I was wondering, I mean, that's why it has gone up.
ECR has gone up by around INR 107 crores. SPV has gone up by around INR 41 crores. mine closure obligation has gone up by around INR 37 crores. CSR expenditure in this quarter has actually gone up by INR 140 crores. So these are all the big ticket ones that have gone up, although the export duty and build rate has actually come down to 0. Previously, it was around INR 90 crores. So INR 163 crores have come down on that, but it has been more than compensated by the ECL and the SPV expected mine closure obligations around INR 37 crores in the Q4. CSR weighing around INR 140 crores and around INR 6 crores by the facilities.
[Operator Instructions] The next question is from the line of Siddharth Gupta from Voyager Capital.
Congratulations on the result. Sir, my question, yes, my question is with regard to the demerger. So we were told that the next update with regard to it would be around July. And when will the plant be commissioned? And when can we expect some further updates on it.
The next big event in the investment -- sorry, not the demerger calendar is on 7th of June, where there is a meeting of creditors MCA has given the direction that this meeting of creditors and meeting of shareholders will both be held on 7th of June. -- notices for which have been sent on 4th of May to the respective editors and shareholders.
And additional secretory MOS, Madam Ritika Chaubey has been nominated by MCA to share both these meetings. So this will be held and once that is held and passed by both the creators and the creditors only about INR 1 crores have been asked by MCA to be there for electronic voting and registration.
So after that, these are carried through in both the creditors forum and the shareholders, we will be going back to the MCA. And I think thereafter, it should take around -- once the orders are passed by the government of India, then we need to fight it back with the stock exchanges, and then we need to extinguish the shares of NMDC and MCA that issue share in the ratio of 1:1 and then list that share in the stock exchange.
So apart from listing, I should try -- my estimation is it should take around 3 months after we file the compliance or the detailed report regarding these meetings from the 7th of June. So let's see in another couple of months maybe for listing of shares of NMDC Steel Limited.
So this is so far as the demerger story is concerned. Anything you need to ask on demerger, then I'll move on to the plant commissioning...
Sir, no, sir, I want to ask about the commissioning itself.
Commissioning, as you know, we've been heating the cocoon for now 3 months. Core consignments have already arrived at Nagarnar, -- we are ready for coke pushing, but unfortunately, a major breakdown happened in the oxygen plant in the sense that one 11 kV motor got burned and our experts tell us and experts tell us that an 11 kV motor is as big as this room that we're sitting in. It's not a small motor, it's a huge motor made by BHEL.
Apparently, they have not seen such a motor burnout in their lifetime. The engineers with 30 years of experience, tell me that it has never happened in their lifetime, but that has happened in Nagarnar oxygen plant. As a result, of course, that there will be a lack of availability of nitrogen. And as you know that this cocoon is to be dry cooled, in terms the dry fencing has to be done with nitrogen.
So we are looking for alternative ways including getting nitrogen through tankers. And of course, this motor itself has already been sent to mobile works of BHEL, and they are getting it ready. So once that is ready, that should take another 10, 15 days to come to Nagarnar and get reinstalled and then we'll have a steady source of nitrogen.
But to that extent, so far because we will be doing 3 months of coke pushing to build the coke stock so that we can light up the blast furnace, 2 months. So by that 2 months, I think we should be able to arrange through tankers, it takes about 1.5 tankers per day for the coke to be quench that comes out of one cocoon battery.
And by the time we can do the second cocoon battery and those things. But this was a setback. So this was a major setback, which was there. So the heating has already reached the critical temperature. And the coke at least, I think, 3 or 4 tanks have already arrived. One shipment has arrived at Gangavaram, and I think out of that 4 or 5 have already arrived at Nagarnar. The rest will also arrive shortly. So we are otherwise ready with the first part of the thing. And then it is a chain of events that happens one after the other.
So that's unfortunate to hear about that oxygen motor. But sir, if I understood correctly, the plant should be even according to your estimates by the end of July or beginning of August, we should be able to commission the plant through other ancillary measures...
That's the current outlook, I hope by the time the BHEL motor comes back and we are able to do that because operating a full-fledged plant based on nitrogen from tankers would be a risk factor. But that is not a major problem so far as we are building up for coke stocks because the blast furnace by that time has not been lighted up. But once it is completely synchronized with the blast furnace requirement, then it is obviously that we would like the oxygen pump to supply us with enough nitrogen.
The next question is from the line of Rajesh Badri, Individual Investor.
Yes. My name is Rajesh Bandari. You just now mentioned that next year, our production could reach to something around 46 million to 47 million tonnes.
That is where we are looking at it.
Yes, sir. Yes, sir. So in this, how much will be the 64%? And how much will be the lower grade...
We don't actually get -- we don't actually mine lower grade at all. All our production is around 62% to 65%. A lot of this around 2.3 million tonnes will come from Bacheli itself because this -- you see the fifth line of screening and the downhill conveyor augmentation, which was halted last year because the consultant has gone bankrupt. That was, I think SR projects have got bankrupt as a result, we didn't have the consultant.
Now that we have appointed the consultant around 3, 4 months back and the work is done. So that will give us an incremental straight away of around 2.5 million to 3 million tonne at Bacheli itself. And the rest would be the incremental increase in the other projects.
We are also driving hard for the ceiling if it is readjusted at Karnataka, Karnataka will get another 3 million tonne out of Kumaraswamy from, it can go up to 10%. We are having our contracts in place for 10 because Kumaraswamy, as you know, is mostly private mining. We do it through raising contracts.
So we are now -- this contract would be instead of 7 million tonnes, we are already designing the contract for 10 million tonne in anticipation that sooner or later, we will be able to increase our ceiling from 7% to 10%.
So taken all of these because we deal in high grade only and low grade is sometimes only an aberration because of the geology of a particular mine, but we deal with 63-plus definitely 62-plus and mostly to 63,64, and Bacheli it is 65 also. So to that extent, yes, we are looking at some around 47 this year.
Yes. So sir, normally, it is 62-plus grade...
Great...
So -- and we do get 65 grade also...
Yes, especially from material...
Yes. And you also mentioned the 64 grade and above had normally no competition.
Yes, because most of 61, 62 most of Karnataka is 62, 63...
Out of 46, 47 million tonne production what we are anticipating, how much is going to be the percentage roughly of 64% plus where we will have not much of competition.
Yes, the Bacheli mines that produce the 64 grade and 11B that produces 65 -- sorry, deposit 5 which is 65% normally and most of the DRLs come from there and 11B in Kirandul, which is again a very high-grade mine. These 2 have taken together to produce about 50 million, 60 million tonnes in these 2 mines.
But at the time of selling, we see what sort of demand is there and if required to be banded with a slightly lower grade to get it to 64 also. If it is not that whatever we mine straight away, we sell it, some amount of limited lending to meet our customer requirement is also done at the point of dispatch.
So it really doesn't matter how much we mine -- of course, we mine around I think will be 13 million to 15 million tonnes from these deposit 5 and I think 11B which are very, very high-grade mines. And so that's Kumaraswamy and yes, in Karnataka is slightly lower grade, it's around 62, 63. But most of Bailadila is very high quality.
And our lumps as well as fines, both are normally 62-plus grade only.
Yes, yes. We don't do below this...
Normally, customers as they are all fixed customers.
70% of our sales is to 3 big customers. So that is JSW, Arcelor Mittal and Vizag. So 70% of our builds are there. And then there is a big market in dry foods that we have. That is another 10%, let us say, around 4 million tonnes at Raipur. It depends from around 3 million to 4 million tonne at Raipur. And that too is a conglomeration of many fung iron and DRI and all those things. So that would be around, let us say, Raipur and 3 main is around 70%, and Raipur would be around, again, another 15%, let us say.
15%. [Foreign language]
[Foreign language]
Just one more question. Sir, you said direct auction when you do, you will be benefited by 20%...
Straightaway.
Yes. So how much direct auction you will be doing, sir?
40 million tonnes, you'll see in Karnataka, our production is around 12% to 14%. Our ceiling is 14%, we did, I think, 13 last year. So this year, we'll definitely do 14. So 14 million tonnes, we were compulsory doing through the monitoring committee.
Now this entire 14 million tonnes we'll be doing ourselves. So 40 million tonnes for 20%. Last year, we did 12.19%, 19 million tonnes. So this entire 14 million tonnes, 20% of that would be coming to our KP, which we are otherwise losing. And that is -- if we're talking about 14 out of 46, so that's quite about 30% of that...
30%. 30% quite a good amount.
Yes, 30% to 20% it's a huge amount. It's something that's a big, big for us...
Yes, yes. So permanent customers as at 47 tons you are mining, inventory [Foreign language]
[Foreign language] because most of our mining is at hilltop. And dispatches are from the valley -- so where we get it down via conveyer belt, as you know, the value will always have a limited pace of stocking -- so there is no way that if I wish, I can stock 8 million tonne or 9 million tonnes or 10 million tonnes.
It's not a plane land like Australia mining is, right? I have physical constraint of space beyond a particular limit. Obviously, stocking of physical good not possible.
[Foreign language]
[Foreign language] 95% of the export were around below 60% and 90% was below 58%. [Foreign language] Why? Because I do not move to -- I don't get the forest clearance and another clearance for sending my tailings, there will be tailing, the more you go efficient, more the tailing.
Now where do you go to store your tailings. So you don't get a permission. So my 1 million tonne beneficiation plant in, which is a [indiscernible] pellet plant is lying idly -- and that is -- whosoever has beneficiation plant in India would be lying idle on the same account because we can't do anything to the tailing except I'm told for JSW at, nobody has operational -- I have been told this, but this has to be reverified, except for that, I don't think anybody has operational unitization facilities right now.
A lot of them might have installed beneficiation facilities. But operational, I have my experience except JSW, which does it for its own current plant within the Vijayanagara. This is what I have been informed.
The next question is from the line of Saket Kapoor from Kapoor and Company.
Sir, when we look at the cash flow, the provision for bad and doubtful advances stood at around INR 550 crores. So these are the major component of this expected credit loss only?
You see we don't sell -- we don't sell any credit -- we don't give any credit facility to any of the customers except RINL -- and with the RINL also now I've entered into what is called the bill discounting system. So I don't have -- so this is the only provision. And from next year, you will possibly not see it because we had around INR 550 crores of expected credit loss and SCV for another INR 481 crores. So these are the only provisions that are there. No other, none whatsoever.
So this line item is not going to appear next year and it is a direct gain to the...
Unless the government comes in put something else, as of now nothing.
Because the mechanism of this multicommittee gets dismantled sir, by what time do you...
Now the customers will directly pay to my bank account, rather paying the monitoring committee because we are drafting the -- I think the next option would be in a couple of days only today, only I have the proposal for auction by NMDC itself. That would be the first of the block. Let's see in a couple of days or I think.
Yes, sir, you spoke about the offtake being an issue at the Bacheli unit.
That's around 18 days, yes, because you see a lot of it also depends, as I say, the Raipur, because at that time, a lot of size ore is going to Raipur and Chhattisgarh. The thing is that people sometimes stop lifting in anticipation of a price fall that can happen here, prices will fall further, it's like by deferring buying of shares in a bear market, okay, let us follow a little bit more all the sort of things.
So there was the normal optics had actually come down in the Bailadila sector, especially from the Raipur belt. So I think now that the prices have corrected, things will improve.
So situation is still status quo as of now because the price correction has happened 2, 3 days earlier.
Yes. Now there's some amount of movement there, yes.
Okay. Sir, why have the employee benefit expenses gone up if you can explain quarter-on-quarter and year-on-year also more than 50%...
Yes, quarter, let me explain year-on-year -- so that has gone up by around INR 252 crores. But a major component of this is that there was a loss in the investment of PF trust, that's about INR 110 crores. The PF Trust -- at that point of time, had invested in ILFS and beyond housing, which were at that point of time, tripled rating, but -- and I think Reliance Capital also there was some cumulative that. And naturally, the PF trust has to be reimbursed as far as our trust loss. So that cost us about INR 100 crores.
And there was -- if you know that BA was frozen -- and when it was unfrozen, so that cost is around INR 22 crores. And then there was a wage revision provision because the workman wage revision is done every 5 years and now it is due. So we have started providing for in anticipation of -- for that because that was due for 3 months.
So the proportionate provisioning came to around INR 21 crores. And we had declared from special incentive, et cetera when we talked before at the EPO-making 40 million tonnes, so that cost us around a couple of crores. So these are the major heads where things were went up...
What would the annual number look like now moving forward?
Going forward, last time investment of INR 100 crores will not be there. The BA increase would be normal and obviously, the special incentive would not be there. But the wage revision provision of around INR 20 crores will be, on an annualized basis, be around 60 crores, INR 70 crores a year.
So out of this INR 1,300 crore annual this INR 1,200 crores should be the next year's number in terms of perspective if we remove the one-off items.
Yes, if you remove the one-off items yes, around INR 1,150 to INR 1,200 , anything between that.
INR 1,150 to INR 1,200 would be there. And sir, what is our update on the CapEx on the projects that we have lined up for this year, especially with slurry pipeline. And sir, you spoke about the pellet plant, and we have been losing money on a quarterly basis, although the year-on-year losses have come down from INR 133 crores to INR 71 crores -- but...
This year, we made a lot of only INR 2 crores in pellets. INR 71 crores has come down to INR 2 crores.
From INR 71 to?
INR 2 crores.
But in your other -- in the segment results, it is reflected pellet other minerals at INR 71 crore only.
It includes others also. You have [indiscernible] for INR 61 crores, where the minus crores we lost INR 61 crores. And then Palwancha we lost around what, Palwancha was around INR 23 crores. Pellet plant is only INR 2 crores and now there was a head office -- of course, with a profitable organization of INR 39 crores plus. But pellets plants, we made a loss of only INR 2 crores.
Okay. On the realty part, as it is now 22.5%, the additional one...
We made INR 5,084 crores on an annualized basis for the 12 months against INR 149 crores what we paid for the last 4 days of the last year.
[Operator Instructions] The next question is from the line of Muhammad Farooq from Pearl Trading.
I'm a minority shareholder, I'm holding share for the past 15 months in -- what I think like regarding the minority shareholders being misled for the past 15 months with the demerger postponing for the last 4 quarters. And again, second question is like what steps are taken by the management to improve the value or the PE ratio of the company.
If you unlock the steel plant, which is almost INR 20,000 crores, and your market cap is INR 35,000 crores, your PE is only 1.5%, which is one of the lowest in the world. So what does the management do for this?
I am holding for the last 15 months. I'm participating in all the conference call. And every time I hear the demerger is postponing by 3 months and 3 months and 3 months. I'm losing money. Can you please explain.
I do not agree with your thing that we have been taking you for a ride or something. I would strongly object to such insinuations being made against the management. I would strongly in the possible terms, I would tend to disagree the insinuations that you have been made, you have been making.
Now coming to your question, of course, as you know, that the demerger is a process. And there has been no delay in compliances of the requirements. So far as NMDC is concerned, the filing of the first appeal be it taking of the permission of the stock exchanges.
Now these organizations, whether it is MCA or the stock exchanges, they have their own procedures and own time lines of working. So finally, after pursuing MCA, we have been able to get this date of seventh of June for this next big event in the demerger calendar.
So there's no way that there has been any delay on NDMC part, if you believe whatever has come, has been one of the fastest, so far, not only in PSUs, but possibly the demerger process in other sectors.
So I would completely disagree with you that we have been postponing it by 3 months, every time. Our compliances have been there, but it does take regulatory and procedural approvals and these come from organizations, which are not within our control. And despite our sincerest and the hardest follow-up, this is the best time lines, I believe, not only in the PSUs. I do not recollect of a demerger of PSU and their time line, but in the other private sectors also, this is absolutely one of the fastest possible things.
Regarding the PE ratio, I think the company, I think it is right now at one point -- with 3.55. And of course, the market would take cognizance of the performance of NMDC and the expectations of NMDC. But I will not speculate on how my share prices would be doing.
We are -- I think, as a corporate, it's very well-run corporate. And I think if I were individual investors, the prospects of the company, as I have been explaining, both in terms of physical growth and in terms of financial growth, physical, I am saying, we are going from 35 to 47 in 2 years.
I don't think anybody else can possibly have a complaint against such a huge massive growth. And so the financial growth has been more than extraordinary going from 15,600 to around INR 26,600 crores. I'm going further with the help of ECL and others being abolished, we will be able to, I think, my own expectation is that we will be able to overcome or compensate the losses that might be there on account of a certain amount of price being on the lower side as compared to the previous 2 years.
So I think all in all, the prospects of NMDC is rather encouraging.
The next question is from the line of Ritesh Shah from Investec.
Congratulations for a good set of numbers.
Sir, my first question is if you could quantify the CapEx number for FY '23 and '24. And if you could give a broad sense of CapEx that would be very useful.
CapEx, we are actually aiming around INR 3,500 crores this year. This year, we are aiming at around -- of which around INR 1,500 crores will be regarding commissioning expenses of the Nagarnar steel plant. Now that the commissioning will kick on -- kick in rather. So there are milestone payments related to commissioning and price variation clauses that will also kick in simultaneously.
So that should cost us around INR 1,500 crores, slurry pipeline should be another INR 850 crores to INR 900 crores or anything between that because as you know, the pellet part contract of around INR 1,000 crores has already been awarded to LNP and basic design engineering work is under progress.
The pipeline laying work was about INR 1,000 crores. It was allotted about a year back and a lot of pipes, et cetera, has already been bought, that is in full swing. And the requisition of facilities had to be retendered, but that I hope it will be done soon. So let us see what -- that is another major area of expenditure which is Slurry pipeline because the works are now in execution phase.
And then as you know, that the third screening plant at Kirandule, which is another INR 3,000 crore project. That has also been awarded. The major contract of that is around INR 1,400 crores that has been awarded around 6 months back again to LNP.
So we expect around anything between INR 300 crores to INR 500 crores being spent on that contract as well. So overall, out of this INR 3,500 crores, these 3 big ticket ones would -- should cost us -- we should be able to spend around INR 2,700 crores, INR 2,800 crores of these 3 big-ticket investments.
Apart from that, we have the development for coal blocks in Rohne and Tokisud, so that should cost us around INR 200 crores, INR 250 crores in terms of various approvals and land and all those costs. And then we have machinery and expenditures rest of it, about INR 200 crores, INR 300 crores would be on the various projects that we have.
This is very useful, very comprehensive. Sir, my second question is how much is the total CapEx for the steel plant? How much of it has already been done? And the balance CapEx, how it will be funded, whether it would be a loan, NCD? How should we understand that?
This is a cumulative expenditure till date on -- and I'm talking about May, up to May, is around INR 20,420 crores, right? INR 20,420 crore has already been spent.
The estimated expenditure is around INR 22,000 crores. So that's around INR 2,000 crores more to go. And mostly, it is either commissioning-related milestone payment or a little bit of a price variation here and there. So these are the 2 basic heads the rest of the INR 2,000 crores or about INR 1,500 crores to INR 2,000 crores will be spent. We expect around INR 22,000 crores to be spent, that is the revised estimate. So that is the one. What was your second question, sorry, I completely forgot.
Sir, my question was the balance INR 2,000 crores. How it will be funded?
Oh, yes, sorry. Yes. So I do know that there is a credit line with State Bank of India or INR 4,400 crores that we have actually entered, of which we have drawn till date around INR 1,144 crores, so there is more than INR 3,000 crores, INR 3,400 crores, which can still be drawn from that credit line.
So I don't think funding is going to be an issue at all. Funding, commissioning and initial running till it's time it starts generating its own revenue. I don't think that's going to be a problem at all.
So this is very useful. Just last question, by when do we expect full commissioning of the steel plant? Any particular date, month that we have?
Yes. Full commissioning, what you mean by full commissioning, you mean by rolling out of the coils or you want the blast furnace?
Rolling out of the coils.
From the date we start, let us say, and I'm thinking aloud now. So coke pushing would be around 2 months, let us say, if you start that by June, mid, then 2 months of coke pushing and then followed by about a month of the other things.
So June, July, August, that should be somewhere around August and September. Because once you light the blast furnace, and you have hard metal coming out, you need to do -- you better have your FMS and the rolling will get because it's a single-line steel plant. I just can't do anything with the hot metal.
Correct. I presume the slab caster is already in place, right?
Yes, yes, the slab caster has been tested also is being regularly being tested also.
LE is doing that as we have been up and ready, and the SMS part is also and addressing the entire people from 5 meters are there. That problem has been solved.
The next question is from the line of Sumangal Navedia from Kotak Securities.
Sir, a couple of questions. One, I mean you shared a lot of details on the steps whether steel can demerger in eventual delisting. So if you have to conclude and summarize, I mean, what is the realistic time line? Is it fourth quarter of this financial year or FY '24? Are we looking at delisting of the plant?
No, I don't think it will be for next year because it is the seventh of June is the event. That is the main event right? Once we get it, and we'll be able to file it with the MCA for the orders of the government much within June itself. So I think thereafter right up to the listing of NMDC Steel share should not take more than 4 to 5 months. That's our estimate, and that includes listing of the shares itself.
So we have -- once we do this and then we go for the final hearing of the MCA and that the government will ultimately pass the order for sanctioning of the scheme and now since it because the government itself is following us very hard regarding the demerger process.
And [ Deepon ] is obviously pursuing this with us very, very strongly. So I would be very optimistic about government taking the least time to issue the orders once the compliance boxes have been sort of checked. And this is the one major thing event is seventh of June. So I guess then things would be expedited.
December is...
4 to 5 months max.
Okay. Okay. So by December, you are expecting it to get listed. Okay got it.
I would hope before that also. Now it also depends on what -- if they will take some time at the final stages of the stock exchanges take some time the final -- we can only follow them, but they are not under our control. So they have their own internal procedures and due diligence, all those things. But I think yes, 4 to 5 months would be fairly comfortable.
Understood. And the steel SPV, so what sort of debt will it have eventually, given we have credit lines, et cetera. So what will be the capital...
Two things we have MCB of around INR 550 crores. And we have grown about INR 1,144 crores. So if it were to be divest today, it will have a liability of around INR 1,700 crores as on date.
Understood. Sir, second question on the employee cost and the CapEx, which you shared. So employee cost, what is the guidance in the coming quarters? I mean given that there was a very sharp increase this year? So the...
About INR 100 crores was due to the reimbursement of the loss of PF Trust. So as I said in one of the previous questions from INR 1,000 crores is likely to go up to INR 1,082 crores over last year. The -- I think this year guidance would be around INR 1,200 crores to INR 1,250 crores, max. Let us say, as to onetime mix when you can like the PF Trust or the special agreement or those things will not be there.
So I think my own estimation would anything between INR 1,200 to INR 1,250 let's say, INR 1,225.
Understood. And sir, lastly, on the CapEx, if you add up all the heads which you shared, this very pipeline, INR 800 crores; pipeline, INR 1,000 crores steel plant INR 1500 crores and then screening plant, development of coal blocks and miscellaneous. I mean, it comes to around almost INR 4,500 crores.
So that when I'm saying INR 900 crores for slurry pipeline, the slurry pipeline has both the contracts of the pellet plants of INR 1,000 crores and the pipeline. Taken together, we expect between INR 800 crores to INR 1,000 crores in these 2 major contracts.
Similarly, steel plant is at about INR 1,500 crores and the -- out of the INR 3,000 crore contract, about INR 1,400 crore contract of the third screening plant. We will be spending around 400 to 500 crores.
So these 3 big ticket, as I said, is anything between INR 2,700 crores to INR 3,000 crores, these big ticket ones. The coal is around, let's say, 180 plus 60, around INR 200 crores to INR 250 crores. So that's INR 3,200, INR 3,300 of the 5 big projects. And the rest is miscellaneous.
Okay. Okay. Understood. And just one last thing, sir, this December, the Karnataka mine is -- Kumaraswamy is coming for renewal. So do you foresee any sort of disruption or a gap in production for a smooth process like...
In October, and I think now that the issue has been settled regarding the renewal premium, which is 32.5%. So now that the rules of the games have been settled, I do not see much of a challenge on that. We are doing our homework and all the applications and et cetera, have already been made and things have already been pursued. I am sure that this time, we do not expect disruption even for 1 day.
The next question is from the line of Raashi Chopra from Citigroup.
The question on the -- you've mentioned that INR 46 million, INR 47 million is what you're targeting in volume this year. From a selling perspective, do you see that this entire volume that incremental 6 million, 7 million don't get absorbed without impacting prices?
Yes. I don't think demand has still been an issue because as you -- I said in the question earlier that around 70% goes to 3 big ones that we have and around 10%, 15% to the Chhattisgarh plant, which are basically dependent on hybrid or from us only.
Considering that our great considering the requirement of our main customers, I don't see the challenge because as you know that most of our customers have their own expansion plans and have their own requirements, which is much in excess of what is our incremental production. So I don't think that is something that I would be very concerned about at this stage.
Okay. And on pricing, you anticipate that this -- we've already taken a correction of 600 to 750. Do you anticipate that there can be a further correction in June?
I will not speculate on prices. That would be suicidal for us. But let us see how -- these are early days because you see the duty imposition has only been for around 7 days. So most of the discussion in the industry and in the pink papers are more academic, and we have not seen the actual effect, the long-term effects of the things, how it depends on the prices.
So we'll give it some time, and I would not speculate on how our pricing would be in the future. So let us see the price movement of steel and other iron ore producers in the new duty regime, which has been implemented. So I keep my finger crossed and hope that the prices would stabilize around our -- what we are currently right now.
The next question is from the line of Satyadeep Jain from AMBIT Capital.
Just a couple of questions. One, on the steel plant commissioning, now we understand Nikon has been hired to -- hire people for running the plant. Where are we in that process of refining that team to run this plant when it comes only in the next year?
They have already been hired and some of them are already -- some of the boots are already on the ground. And some very senior personnel is also now a station at Nagarnar, people who have been Chairman of major steel producing company have worked with almost all steel wagers and very senior retired people who have kindly agreed to join our efforts in commissioning,
Mr. Singh -- just a minute, Mr. Sing, the ex-Chairman of RINL, I'm just forgetting his name. He is also there. So we have had some people with great experience and great standing in the steel industry who have decided -- kindly decided that they would be stationed at Nagarnar and oversee the entire process, and we are lucky to have such experienced people.
I think BN Singh sir is there already, who was the ex-Chairman of RINL and has worked almost everywhere with JSW with all the big names is in a very senior position. Apart from that, we are getting experienced hands from all over the steel industry through MECON. And a substantial part of them or few of them have already Sir BN Singh is also overseeing our efforts.
And a lot of people with adequate steel experience from various steel plants have also joined in and more are to join. Some of them have their notice periods to serve, et cetera, et cetera. And naturally, the critical stuff is already there. And those people would be joining by the time we are completely in the full role of the commissioning process.
Okay. That's good. The second question on the pricing, maybe a follow-up to Prashanth's question in the first question and then some of the other questions is the objective for Coal India is to maximize the energy security, whereas the objective for NMDC is to maximize shareholder returns.
Now NMDC is also the largest player in the merchant market. The pricing has an impact on the IBM prices also. Is there -- can we -- I just want to understand any future pricing action will be driven only by market dynamics? Or is it just market dynamics that will determine the pricing for NMDC?
Market dynamics has been the only criteria that we have followed for what we call is the -- our pricing strategy and philosophy. There is no other consideration. We cannot have any other consideration because around 80% of our sales are to private steel vehicles.
So naturally, we play by the market, they play by the market. So naturally, it's a completely market-dominated strategy on both the ends. So unlike I would not like to speculate on what Coal India does or others do.
But so far as we are concerned, obviously, it's purely market driven and has to be market-driven always because if you leave out RINL with accounts for around 20% of our consumption. The rest of the entire consumption is by private players, and we cannot have any other strategy other than those being driven by pure market conditions.
Next question is from the line of Pallav Agarwal from Antique Stock Broking Limited.
Just a question on what was the closing cash and cash equivalent, including some of the long-term liquid investments as of 31st month?
We had some 7,000 -- I'll just give you the figures. Just one second please [ INR 7752 crores ] was closing cash balance in -- on 31st of March, of which INR 5,600 crores, INR 5,500 crores were with PSU banks and around 2,097 cores were with private banks.
At that time, we had redeemed all our mutual fund of our payment of taxes, et cetera, et cetera. So around INR 2,752 crores was the cash balance then. INR 7,816 crores is what's the cash balance is right now.
And sir, this is after paying division, right? So I mean we only...
I'm talking about 31st of March when the entire dividend was already paid, and I'm talking about 24, today is 26th and -- 27, I have the cash balance as of 24, which was INR 7,816 crores.
Sir, also just could help -- I think in your presentation, there's a slide on the basic domestic price of iron ore. So if I look at that, the Q4 average was about INR 4,440 per tonne. So -- and just when you calculate the blend realization comes to close to INR 5,400. So is this the royalty thing? What else is -- how does this now add up...
This is basic -- this is basic. We do not add the royalties this is what I-chart -- so you'll have a 15% royalty over and above this, 30% or 15% of DMF and annuity and 2% of DMF and annuity over and above that. So -- but the 22.5% comes from within this price.
Okay. And sir, last question now, once Kumaraswamy also is renewed, but do we can assume a flat royalty rate and there are not really discrepancy among mines and...
Yes, definitely. Good thing about -- sorry, now that you are listening, I have forgotten to just flag another benefit for NMDC from this entire sell option at the Karnataka sector. And this is very, very important because that's going to add to our top line. In the monitoring company setup, what was happening was that the B, the royalty was being collected extra over and above our basic price with the monitoring committee.
But the DMF and annuity were being paid from our pocket. So if I collected INR 100 -- then INR 15 additional was being collected by monitoring committee out of INR 100, INR 15 was being paid to the Karnataka state government towards royalty and INR 20 was being retained by them. And then the rest INR 80 was being sent to NMDC.
Out of the INR 80, we ended up paying around INR 5 as DMF and annuity. So even after this taxation, I was less to INR 75 when I declared a price of about INR 100. Now there's INR 5 also, like in Chhattisgarh, for us, we now declare the basic price. So if I declare it at INR 100, my collection from the customer in Karnataka will be the same as collections from my customer at Chhattisgarh, it will be INR 115, plus INR 5, INR 4.80 let's take it as INR 5 from the customer. And INR 15, I'll give it to the state government as royalty, INR 5 or INR 4.80, I'll give it to the state government and trust as DMF and annuity, and I will retain INR 100.
So my retention from INR 75 actually goes up to INR 100. So that's another 5% added to the bottom line. So that's really, really a big save, and we expect that this to be -- that account for 1/3 of our production almost and 1/3 of our production and sales. That's a big, big plus point for NMDC. Sorry, I forgot to mention this earlier.
Sure, sir. So just finally our tax rate was a little higher this quarter. So for the full year, we'll probably take 25% tax rate or slightly higher than that.
25% plus what you call is the surcharge. And some amount of disallowances are there because if you see the monitoring committee expenses are disallowed, the mine closure obligations is disallowed. So all these you want to add back. CSR is disallowed by the tax authorities.
Once you add back these, then the taxes would fall in the current bucket. And as I said, as and when we realize this INR 2,848 crores from Supreme Court order. It was straightaway added to our PAT because we have already paid tax on that expenses, so we cannot be tax twice over.
So not only that will add up straight to our PAT. Hopefully, we will try our best to grow. We have not awarded for the last 4, 5 years, despite our efforts let's -- I hope that with the monitoring committe option, not giving to monitoring committee, I think I would rather hope and expect that we'll be able to realize this INR 2,848 crores, the Supreme Court would be kind enough to give some time and issue a judgment on this.
The next question is from the line of Kirtan Mehta from BOB Capital.
In terms of the steel plant, you have given a very detail about the commissioning tagline. And first, coke production you expect in sort of the July, August...
It would be more realistic July because 2 months will take to build up coke. And once we light the blast furnace than it is the express rate. So before the lighting of the blast furnace, it is more of a sort of a passenger train because you need some time to stop and build up the coke stock and all those things.
But once you light up the blast furnace then you have to hit the expressway at full speed. There's no way because we can't do anything with the hot metal that comes out unless you have the SMS and the rolling mills.
I understood that, but I had a follow-up question on that in terms of how do we think about sort of reaching to a full capacity of 3 million tonnes, what are the things that would be required from start-up to reaching the capacity of 3 million tonnes? And which are the units which will have to be steel combustion after.
I'm coming to that yes. I have been told by [ Deneli ] and other things when I have been interacted with them. And I'm not a technical person, but I'm actually -- this is what my information is when I talk to the [ Deneli ] people who have given the blast furnace when [ Deneli ] was making the since thin flab caster or Time Metals who is making the SMS and all those things.
They say because these are very state-of-the-art installations, be it 4800 MQ blast furnace and the state-of-the-art mills and SMS. The sky ramping up these are not really a big time job. They are easy to ramp up and once you have the raw materials.
Once you have the stability of operations and you've tested that commissioning that and got PE -- so ramping up is not supposed to be a challenge as used to be in the older type blast furnaces and all those mills. But this is what I've been told that ramping up is not really major challenge in cut state-of-the-art technology items.
Right, sir. That's very useful. Just are there any further downstream units, which would also have to be commissioned after this?
No, blast furnace, SMS or the BOF, whatever it is. And then this is -- the first is, of course, the coke -- and that we have already heated. I said the coke has already arrived. But for the nitrogen plant pairing, we would have started pushing coke sometime back itself.
Understood, sir. Second question was about the iron ore industry in India. In terms of you have highlighted that you would be adding -- raising capacity to 46 million, 47 million tonnes, there is 6,7 million tonne additions. As an Indian industry, which are the other iron ore capacity that those are due for ramp up this year and how much capacity addition we can expect this year?
We did as a contributed 250 million tonne or 251 million tonne last FY. So what is to be added, I think, is the OMC the new leases that OMC has got. But most of the leases that they have got is essentially running mines which were auctioned then surrendered and then alloted to OMC.
So I really do not have the reach figures how much that is going to add because those were -- some of them were inoperative for 1 to 2 years, some of them were operating a little below capacity for the last couple of years and some of them were operating at -- so I think from 250 million tonnes, not so much incremental capacity apart from NMDC and OMC is going to come.
So let's see how it does because our plans are going from the current 42 to 47, hopefully. And as I said, 3 million tonnes from Bacheli straightaway, the 2 at least from the Kumaraswamy apart from the organic growth.
Next question is from the line of Vikash Singh from PhillipCapital.
Sir, just 1 small clarification. Like we said that with direct auction, if we would not have to forgo that 20% of the...
20% and this 5% of DMF and annuity as well..
But at the same time, we are just considering 10% in ECB, we're concerning 10% of the amount which would come back here, that INR 2,848 crores.
Yes. Our contribution to FTD is nonreversible because that is a fund that has been created for mitigating the environmental damages that were there in those 3 district. So that would not never ever come back to us because that is going for that special purpose vehicle, which has been specially made for -- with a very specific purpose.
What is going to come back is the 10% that was retained on account of NMDC doing its own due diligence, which we have done and which we are sure that we have done. And now it's only -- and it is what is awaiting is the date from the Supreme Court and a couple of 1 maximum or maximum 2 hearings to get this.
Regarding the sales. So are we saying that this -- going forward, if we are doing direct sales -- so that 10% contribution, which any which way was going to be not recoverable, we don't have to pay going forward that.
As of now, we do not have any orders saying that you must sit in -- we are presuming that since the entire INR 100 that we said is going to come on to our bank. And in the absence of any specific direction that okay, out of this INR 100 you must deposit INR 10 and so and so, such and such purpose, I do not think that 10% needs to be contributed as the instruction stands as of now, because they sell whatever is itself -- that the purpose of that 10% of 1-year retention over the last 10 years is so huge that spending that itself is a fairly one challenging task.
Understood. So this is not statutory obligations. So we don't have to spend...
As of now, there are no instructions. So I have not been -- there's no instruction saying that, okay, you incur selecting the INR 100 right now directly from your customers that you need to deposit INR 10 or INR 5 or INR 7 to such and such authorities. There are none. And since there are none, we have not -- we are presuming that no further contribution is required.
And also, we have heard, as I said, there are a lot of significant amount of crocuses has already been created through this 10% of the last 10 years. So I really don't know whether further such contributions would be required or not. As per our assessment, it would not be required as of now as we -- things stand out.
So you have any closing comments?
Yes. I think our coming financial year would be at least as good as the current one, if not better. certain headwinds in terms of lower prices, et cetera, I expect to be compensated or sometimes even more than well compensated by certain other developments like taking off the monitoring committee 20% and 5%, 25% additional utilization there.
So overall, I think because, again, as I said, even in the macro basis, 58% does not really compete in direct terms with our 63%, 64% FE. So on an overall basis, I think that our performance physically will definitely be better than as compared to the last financial earlier. And even financial we'll be able to at least hold if not better our performance as last year, given the overall compensating nature of the benefits that are there as compared to the headwinds.
So we had a great exciting -- a great and exciting year behind us last year, and we expect to have a great and exciting year in front of us where the demerger is due and all those value releases will be there. So it will be overall better than a healthy balance sheet to be coming in this current financial year.
So thank you so much, Vishal and your team. And anything else, Vishal?
Thank you very much for this elaborate call. So I think a lot of investor queries has been resolved and addressed. So I hope we'll have another fantastic year next year again. Thank you very much.
Thank you, Vishal.
On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.