Seshagiri Rao, Group CFO, said that the company is better-positioned to manage its Rs 40,000 crore debt and steps taken by the government have helped reduce imports substantially.
The steps undertaken by the government have helped reduce imports, says Seshagiri Rao, Joint MD & Group CFO of JSW Steel . But it will be a while before imports are likely to fall further, he adds. In the recent past, JSW shut down three units where its capacity had fallen and hence the December quarter won't be impressive, he says, adding this March quarter, would be better. Rao says global steel prices have moved up to USD 100 per tonne.
But the price increase may not be sustainable, he feels. He says supply-side adjustments have already kicked in. But any rebalancing in prices will take a while, he adds. Although the company had given a guidance of 13.4 MT (million tonnes) as its volume growth for FY16, it will have to factor in a 5-6 percent, says Rao. The company is better-positioned to manage its Rs 40,000 crore debt, he feels, adding the company would be looking to ramp up capacity to 40 MT by 2025. Below is the verbatim transcript of Seshagiri Rao’s interview with Latha Venkatesh and Reema Tendulkar on CNBC-TV18. Latha: Give us a perspective of the steel sector itself. We have this minimum import price (MIP) which the government has announced and we had Aruna Sundararajan telling Shereen Bhan that they are planning more positives for the steel sector; at least the safeguard duty continues for the moment. Are steel companies like yours which are well run, at least now EBITDA positive, will you have the money to pay your interest?
A: We were EBITDA positive even in the last quarter that is the December quarter when everything was collapsing in the steel sector. If you see cumulatively, up to December 31 we had enough money to pay the interest. So, we have covered our interest fully. It was an aberration in Q3 because of shut down of three of our units where our capacity has fallen substantially. So, that was the reason why December quarter results appeared to be not okay. However, as we have been communicating that we have restarted our units, now we are fully with 18 million tonne capacity, so we are doing quite well. Similarly, the steps taken by the government of India particularly the minimum import price has acted to moderate the imports to some extent even though it is still at an elevated level of over 9 lakh tonne per month. So, if I look at the first 11 months of the financial year, up to February, the imports went up cumulatively by 20 percent even though it was falling in the month of January and February. So, still they are at a level of 9 lakh tonne plus. Similarly, exports have fallen by 31 percent in the first 11 months of the year. So, I think we need to look at these aspects where there is over supply in the international markets; they are looking for new markets.
Every country is taking steps to reduce the imports at predatory pricing so we are very fortunate that government of India has taken steps like MIP, safeguard duty and quality order to mitigate the impact and the injury to the domestic industry. So, we are seeing some moderation in the imports. I think we may have to wait for some more time to see the imports fall substantially. Reema: How has Q4 shaped up considering that steel prices have gone up on account of MIP and you have started three of your shut plants? What could we expect in the January to March quarter? A: The increase in steel prices I think is not right to attribute completely to MIP. If you look at internationally, after the Chinese New Year, restocking has happened and that is why internationally we have seen steel prices moving up from USD 260 to almost close to USD 360 per tonne. So, over USD 100 increase in the steel prices in the international markets. So, the Indian steel prices are tracking what is happening internationally. MIP to some extent helped to moderate the imports so that has helped us to bring the balance in the demand supply in the domestic market. So, the increase in domestic prices I don’t think is attributable fully to MIP. Latha: Is there enough change in the environment for this to continue a bit longer? Can you see further improvement in steel prices globally? A: Globally I don’t think fundamentally any big change that has happened but only one important point we need to note down is that January and February if you look at the overall crude steel production, it has come down by 14 million tonne which is approximately 5.5 percent.
Source: Moneycontrol