Metaljunction

On the back of China’s economic data maintaining its recuperating trajectory, the metal sector has been buzzing. Group CFO and Director of the major steel producer Jindal Steel and Power Ltd ( JSPL ) K Rajagopal says that steel prices have firmed up by 6-7 percent since the previous quarter and reasonably higher on a yearly basis. The major steel producer has a high net debt with EBITDA at over four times. Its debt on books currently stands at Rs 36,000-37,000 crore. Despite being comfortable with their current debt levels, the company is evaluating few options to monetise assets in order to pare debt, he says in an interview with CNBC-TV18's Anuj Singhal and Reema Tendulkar. Below is the edited transcript of the interview:

 Q: The market is getting quite bullish about steel prices from hereon, would you share that optimism?

A: We share the optimism because the last three months prices have been firmed up, they have gone up and we believe that the rest of the period in the year also should see optimistic price levels within India. So, we believe that with the Budget, a lot of optimism will prevail and more investment should follow both in private and public sector and that should boost steel consumption and demand.

Q: How much have long steel prices gone up by in the last three months and how much you expect them to rise further?

 A: If we compare with the last quarter, it has gone up by at least 6-7 percent and compared to last year, it is quite good improvement because last year by this time, it was about 34,000 now we are about 38,000-39,000. So, it is a good improvement.

Q: There has been an improvement in the power realisation that the company has been able to sign, could you tell us currently in the merchant market, what the power tariffs are and how does it compare with on a Q-o-Q as well as on a Y-o-Y basis?

A: Currently, our average realisation is hovering between 2.10 paisa and 3.30 paisa but it is a mixture what we have bilateral and what we spell on the spot because in the last one month, the spot market was also good. So it influenced the overall average. So I think on the whole, we are happy with the prices that we are getting right now.

 Q: What is the situation in Odisha right now, the current status?

 A: You mean our Angul plant?

Q: Indeed and what about the operation at mines as well?

A: We have one mine in Toansa so that is operating. However, there is slowdown on mining operations because of this Supreme Court ban judgement etc.

Q: I mean the mines that operate and you get input out of that, I was talking about those mines?

A: The one mine that we have is operating, no issue and there are some mines with whom we have a long-term arrangements there having a problem they are shut down and we hope they will get clearances shortly but then there are mines which are operating where we are able to buy. There is a situation where the government and court have to help to open many mines and make the operation smooth.

Q: We have seen many companies who are sitting on high debt, go ahead and raise some funds. Is JSPL considering some fund raising perhaps some equity raising via qualified institutional placement (QIP) recently?

 A: As far as fund raising is concerned, currently we have a debt level, which is quite considerable significantly. At the end of March, we have about Rs 36,000-37,000 crore and in terms of ratios net debt EBITDA is more than 4.So currently, our strategy is to take the output from all our new investment projects, which we have completed that will bring down these issues because we will get more EBITDA and the debt level comparisons will be better.

But we also have a lot of other options open in monetizing various assets. Currently, we are focussing on operationalising the four projects which we have completed but then we will also keep all our options open in monetising our various assets to improve our cash flows and reduce our debt levels.

But on the whole, we are not feeling that debt level is high or burdened because these investments are all in operationalising situation and we have to only take the output of that.

Source: moneycontrol