Steel Authority of India Ltd (SAIL), the country’s largest steel-making CPSE, expects an improvement in bottom-line September onwards as average selling prices improve.
According to Anil Kumar Tulsiani, Director (Finance), SAIL, the average sale price (ASP) in Q2FY24 (July - September) is likely to be lower but is projected to improve “onwards the second fortnight of September”. The Q2 period generally covers the monsoon, a lean period in commodity demand.
The blended hard coking coal cost, which was around ₹25,800 per tonne in Q1FY24, is expected to reduce to ₹22,000-23,000 per tonne in 2QFY24. Benefits of lower coking coal prices are expected to come into play in the last fortnight of July–September period.
In Q1, SAIL’s cost of imported coal was ₹28,000 per tonne, while domestic coal cost was ₹12,000 per tonne. Blending was in the ratio of 85:15 (imported to indigenous).
Coal import
“So, in Q2 the cost of imported coal is expected to be in the ₹23,000–24,000 per tonne range and indigenous coal at ₹12,500 per tonne. Blended cost would be in the ₹22,000 per tonne range,” he said during the post results analysts call.
Tulsiani said SAIL wants to increase contribution from domestic merchant miners to 20 per cent (from 15 per cent), thereby reducing dependency on imports. It has approached Bharat Coking Coal Ltd (BCCL) to set-up washeries and is developing the Tasra coking coal mine, which will supply around 1.6 – 1.7 mt.
Steel prices for the CPSE was around ₹57,700 per tonne for flat products, while for the longs it was around ₹55,000 per tonne. In Q2, prices are currently around ₹1,000 per tonne lower (on an average).
“The fall (in sale prices) is a matter of concern. But we are now seeing some stability in July and also into August. There is some resistance now and in the second fortnight of September things may start looking good for us.,” he said.
Capex Plans
SAIL has set a capex target of ₹6,800 crore for FY24 and while it aims to achieve 35mt of crude steel production by FY32.
To support this, the company currently has plans to increase production via de-bottlenecking to the tune of 3 -3.5 million tonnes (mt); capacity enhancement at IISCO by 4.5 mt; and capacity increase at BSL (Bokaro) by 3 mt.
“In-principle Board approval have been received for these projects. And with de-bottlenecking on, we do expect reasonable EBITDA expansion,” Tulsiani said.
In Q1FY24, SAIL saw its EBITDA go down 28 per cent YoY to Rs 1600 crore because of higher input costs, volatility in steel prices and lower volumes that was partially offset by lower coal cost.
Debt reduction
SAIL expects de-leveraging of ₹4,000 crore in FY24, over March 2023 levels.
For Q1, the debt increased by ₹3,800 crore-odd to ₹29,400 crore resulting in an increase in finance cost. The current debt to equity ratio stands at 0.6:1.
Tulsiani said SAIL has not increased the borrowings in July and August; and “majority of the deleveraging would be undertaken in the second half of the fiscal”.