“Leaderview Call on Jindal Steel & Power” · judgement, it was basically an indictment of the...

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“Leaderview Call on Jindal Steel & Power”

September 25th

, 2014

Leaderview Call on Jindal Steel & Power

September 25th

, 2014

of 24

SPEAKER: Management of Jindal Steel & Power

Moderator: Good day, ladies and gentlemen. I am Sourodip Sarkar, the

conference coordinator for today’s session. Thank you for

standing by and welcome to the Leaderview Call on Jindal

Steel & Power today. At this time, all the participants will

be in listen-only mode and post that we will have a Q&A

session. And now, without further delay, I would like to

hand over the proceedings to our first panellist for today,

Mr. Rakesh Arora. Thank you and over to you, sir.

Rakesh Arora: Thank you everyone and good afternoon and thank you for

dialling in at a short notice. We are honoured to have the

management of Jindal Steel & Power Mr Ravi Uppal, MD

& CEO, Mr Rajagopal, Director & Group CFO and Mr.

Balasubramaniam, Head of IR. So I will hand it over to,,

Bala to take it over from me and we can have the

management comment first before we open up for question

and answer. So Bala?

D. Balasubramanyam: Good afternoon, everybody. At the first instance, thanks a

lot for dialling in to this conference call. The agenda is

with regard to the verdict that has been given by the

Supreme Court on coal allocation case. We have today with

us our MD and Group CEO, Mr. Ravi Uppal, along with

him Mr. K. Rajagopal, Director and Group CFO. Without

wasting time, I would request our MD to give his opening

remark. A few request for all the investors and analyst.

Please try to restrict your questions to one or two so that we

are able to address as many questions as possible. And in

the end, if there are people who are left in the queue, they

can always write back to the investor relation team and we

will answer it back. The duration of this call will be

approximately 45 minutes to one hour. Thank you. So over

to Mr. Ravi Uppal.

Ravi Uppal: Okay. A very good afternoon. My dear friends thank you

for joining us on the short notice. The reason for asking for

this conference is basically that we want to stay connected

with all our very, very honoured investors. We never

wanted you to feel that, you know, after the Supreme Court

judgement that the JSPL management have not, you know,


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spoken to you or have stayed connected with you. That’s

the reason for this call.

I want to first of all allude that the Supreme Court

judgement which was delivered yesterday it is actually

sequel to what was first announced on 25th

of August and

then deputations were made to them by all the private

producers of the power and then, of course, the Supreme

Court according to their risk term adjustment have taken

the final decision. Number one, we are very deeply

disappointed with the judgement that has been made by the

Supreme Court. You know, if you recall the 25th

of August

judgement, it was basically an indictment of the decision

making at the government level. It was not a condemnation

or any kind of strictures against any one of the

entrepreneurs, , that who had invested in these projects

along with the captive coalmines. And, you know, if you

recall that in 1993, the mining act was amended because

government wanted to bring more, , the growth into the

sectors of steel, power and cement. And with that, when

made, , the government had offered captive coalmines to

the developers. That definitely had a salutary effect on the

growth of the sectors. The sectors did get lot of investment

and so these mines were, you know, this allocation process

started way back in 1993 and the growth, continued. I

would like to mention here, a mine that you get its

development might cost you between 800 to 1000 crores

depending upon the size of the mine or the kind of

investment which is behind, , and the captive industrial

units is running into thousands of crores. A 1000 megawatt

power project cost, 6000 crores and a million ton steel

plant 6000 crores. So, therefore, government’s larger

purpose in inviting private sector was to bring stimulus to

the growth of this core sector which it did succeed. I mean,

in fact, companies like JSPL, have put a huge amount of

investment and today we have of a capacity of 7 million

tons of global class in steel alone and power we have

capacity of 5200 megawatt. Things have been done in the

exemplary way. World-class plants have been set up,

highly efficient, they are iconic in their own class and JSPL

paved the way for the private sector participation in the

power generation in this country and we are very proud of


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it. So, therefore, 25th

of August was basically enactment of

procedural lapses, on the governmental side, but not of

developers. But the judgement becomes more of a

punishment given to developers because government

doesn’t get affected at all. So we therefore are very

saddened by this kind of decision, but, if the decision has

been taken, we have to, stand up to it, we will devise our

own ways to see how best we can overcome how our plan

B and plan C will work to overcome the situation. As the

matter stands right now, after the decision we are obviously

sort of going to make a review petition with the

government at the same depending on how government

wants to act for the cancelled mines. If the government

goes for bidding and offers it to private sectors, we would

definitely participate. We are absolutely convinced that the

mines which are captive for JSPL no one who is more

competitive to get those mines back than us because our

power plants and steel plants are located right at the

pithead. We have full knowledge of those mines. We know

how to operate them, so therefore I think we should be very

competitive if it comes through auction.

If government goes to any other option, which remains to

be seen because still not made public what government

intends to do, we will also handle in the best of the ways.

I just want to assure you that, , the JSPL when it first went

to Raigarh site 25 years ago, there were, it was a very

difficult terrain. There were no resources available, but we

made this kind of titanic plant at Raigarh and we built it up

to its present status in a space of last 25 years and it’s one

of the best performing plants in the country and it has won

several accolades. Same is the case with Tamnar , which

was the first mega plant in this country and there again has

a kind of mine which was given to us after post 1993. They

were of very poor quality. The ash content was anywhere

between 45 to 50%, but by developing that mine, we also

made a business sense into that mine. And we have been

running our Tamnar phase one unit based on the coal that

we extracted from those mines. We are running our steel

plant at Raigarh with the coal coming from the same class

of mines which were basically D and E, F kind of mines.


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So I think we have tremendous resilience in the company.

We have always been very innovative. I want to assure you

that we have huge, innovative capability, huge resilience in

the company and a very large management talent pool there

with us who are constantly looking at ways to make sure

that JSPL has never found wanting on any score. You

would recall that the JSPL has always been a leader in the

matter of giving the returns to their customers, to their

investors. Our EBITDA levels have been all-time high.,

even in phase of the adversity and our unsettled situation,

you will recall in the first quarter our JSPL standalone

posted the highest EBITDA level. You know, it is not only

because of the external factors, but by way of focusing on

the productivity, doing projects in time, doing the projects

to the lowest cost, being efficient, the capital management

all of them have combined together to bring JSPL into that

committed position. So I want to assure you that you need

to harbour no anxiety. as far as JSPL performance is

concerned, you know, that our team and the workers are

like soldiers. They work with the absolute unflinching

attention to the task that is signed to them. In days or

weeks to come, we will spare no effort to make sure the

JSPL continue to perform at the levels that are the

benchmark level that we have established in the past. Now,

we will wait for government to decide because the ball is

now in the government side. They have to decide how they

want to go with these mines. They have promised the

Supreme Court yesterday that, they will find a solution with

the space of six months in a way that the industry doesn’t

get sort of disrupted in any way. And we from, of course,

the industrial side will give full cooperation to the

government to make sure that the issue relating to these

miles is amicably resolved.

And in the meantime, we also have a plan B to maintain

continuity of the plants. We are sort of, importing coal

wherever required from outside and we have also been

buying them in auction wherever it was possible and

therefore for the next six months in any case we have no

issue. The operation will go on as usual, so right now we

are planning beyond six months. So for next six months

you can be rest assured that JSPL would deliver to you a


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steady performance as they have done in the past, beyond

six months we are working out plans to ensure that the

plants continue to operate without any interruption. So you

are rest assured, you know, that JSPL will not let down our

investors. We will do our utmost to see that the

performance of the kind that we delivered in the past.

That’s all I wanted to say. May I request my colleague, our

CFO, to add few words.

K. Rajagopal: Thank you. So I thought let me also explain somewhat on

the question you may have in mind, financial question. But

I must also be honest to tell you that all answers may not be

available immediately, while the broad direction is

available because many things are still developing at this

time. . You know, the first question will come that what is

the impact of the levy of Rs. 295. And as Mr. Ravi Uppal

explained, so this 295 and also the time period when to

pay, we will be exploring all legal and administrative,

remedies and possibilities available to us. So as I said, these

are still in legal consultants, so we will not be able to

immediately comment on this. It will take some time, but

we are exploring the legal and administrative possibilities

to decide 295 impact and also on in case it is to be paid and

what is the time within which we have to pay because the

three months’ time may not be the correct time that it

should be paid as mentioned the court. So we will have to

examine this.

And, as I said, the impact on the current year profit and loss

account is also to be at a time on the basis of how this 295

if at all levied will be calculated because we believe that we

are still in a possibility in questioning this 295 in course of

the time as I mentioned. And also then how this has to be

calculated, so that amount has to be paid. . So this is still in

early stage, even though the newspapers and investors

having their own calculations of a huge amount.

And also and if at all there is whatever cost comes, how we

have to treat in our P&L for this year is also is under

discussion which will take sometime to consider because

there are several opinion that we have to take at one stroke,


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there are several or different opinion from different people ,

so these are all still under evaluation.

And there will be a question on the, if at all, the company

has to pay whatever be the amount, whether we are in a

position to pay and also how does it affect the balance

sheet, so let me assure you that the net worth of JSPL is

about 21,000 crores plus at the end of March and also we

already declared net profit in the first quarter itself. So it’s

almost 22,000 net worth on the balance sheet. So any cash

flow or the P&L impact on this is not the one which will

come and destabilize operations of this company and we

have a very strong balance sheet and I think if at all you

have to pay; it’s an impact, but not an impact which is

really seen in a way that it will disrupt the company.

And other questions will come will be whatever time limit

available to us whether three months or extend the time,

whether company will be in a position to raise money and

I want to assure you that you can see even in the balance

sheet of March we had about more than 700 crores for cash

and so we believe that we are in a strong position to raise

money and pay if at all any amount to be paid on this.

Next question also comes that what does they have impact

on their debt level. So when there is a payment level what

we’ve determined and there will be impact on the debt

level. And that we will have to see how exactly it will

impact and how we can contain through our other

monetization programmes as well as the capital expenditure

reduction programme, but there will be some impact and it

will increase more than what we’ve been planning so far

and that also will be established we will take some time on

this. See, there will be always question on what impact on

the future viability on their future cost of production and

productivity of JSPL. Here, also I think within a day we

should not jump in the conclusion because the important

aspect of judgement is the court has given a cancellation or

a levy, only on the ways of government assurance or a

statement made by them that they are in a position to make

all arrangements to support the operation. So we believe

that we expect the government will come with solutions in


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terms of linkages, in terms of making a coall available at

the correct level of cost which support the correct cost of

production. Expecting that, as per our calculation, because

we have several types of calculations that is whether we

ourselves did the auction or with that linkage 100% or we

get particular level of linkage, particular level of e-auction,

particular level of import, so there are other several

possibilities are emerging and which I think to be

premature estimate right now, but there will be an impact .

But according to our calculation, in many of the various

situations it is not that it will come and hit a big hit, so

there will be some hit. Maybe, we need some more time to

come to an understanding of this and then do all this. So on

the overall basis, as I said, that the balance sheet of the

company and the cash position of the company is quite

strong any amount if it all required to be paid, while

company will explore all the legal and administrative

remedies available on challenges of 295 or determine the

295 or determine the time amount within which you had to

pay. And the company will also take steps to review that

CapEx plans and to adjust in such a way without

jeopardizing our productive capacities what we planned.

But in order to ensure, there are short-term impact coming

from this cash flows and some EBITDA reductions in such

a way that our overall long-term and medium-term object

on the net debt EBITDA and the debt equity are not of the

mark than what we are planning. So this is what I thought I

must tell you and we are ready to take some questions.

Rakesh Arora: Mr. Sarkar, can we open the floor for questions and

answers?

Moderator: Sure, sir. So participants with this we are going to start the

Q&A interactive session. Should you wish to ask any

question, you may please press “0” and “1” on your

telephone keypad and wait for your name to be announced.

So participants should you wish to ask any question, you

may please press “0” and “1” on your telephone keypad

and wait for your name to be announced. We have the first

question from Mr. Somil Mehta from IDFC Securities.

Your line is unmuted. You may go ahead and ask your

question, sir.


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Somil Mehta: Yeah. Thanks. Sir, if I assume, we have a total capital

mining capacity of 12 million tons, so, you know, starting

1st of April any expected arrangement what we have done

to, you know, source that kind of a huge coal quantities

whether it’s going to be imports and do or boilers are

configured to take, you know, higher proposition of

imported coal assuming that the coal domestic supply will

not be sufficient enough?

Ravi Uppal: Yeah. You know, the total requirement, as you said 12

million, right now we have a good back up on imports. We

are importing the coal from Indonesia under a medium-

term agreement. We are also getting the coal from

Mozambique and Australia. And also from the next 6

months in any case we don’t have an issue. You know, we

have the coal suppliers which are well set up and, of

course, we are going to see that if the auction process starts

which we believe that if it starts in the next 8 to 10 weeks’

time that we participate in those and bring them to finality.

There’s also a provision with the precedent in the past that

if the government on that that we might also ask for our

extension of the 6 month’s time limit that the Supreme

Court has stipulated as of this moment. If you recall, this

was done also in the case of the 2G Spectrum where 6

months was extended to 12 months. So we will keep a close

watch in the situation .

Somil Mehta: Sir, you know, in terms of imported coal, you know, how

much proportion can we use in terms of boiler

configuration 30, 40 or even if we can go as high as 70 or

80% just in the worse case?

Ravi Uppal: Yeah. But, you know, imported coal depends on the quality

of the coal. If you get a 6000 kilo calorie GC coal, then,

you know, you bring that coal and, let’s say, quantities

import and then, you know, you also have the rejects and

which are available locally you mix up with that and you –

Because normally the border intake there is anywhere

between 3300 to 3500 kilo calorie. So the extent of coal

that we will import depend on the grade of coal. Actually

right now we have a medium-term contract signed with

Indonesia and also with the Mozambique from where we


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are getting coal with the GCv anywhere between 4200 to

6000 kilo calorie.

Somil Mehta: Okay. Sir, my second and last question is in terms of our

debt covenants do we have covenants on net debt to

EBITDA and probably if yes what would be the approx

range as an, you know, should we not reach 4.5 times or 5

times or any number would be great?

K. Rajagopal: The financial covenants have its own calculations in each

of this agreement. Actually, even in March 31st 2014, we

have not Breached the covenant except in one place with a

very small amount . So we believe that it should not breach,

but we even in last year we have proactively appraised the

banks that why we are capitalizing various assets. If there is

any breach, so they should allow us the breach for some

time before the operation which was very favourably

considered by all the banks, but fortunately and finally we

did not have any much breach. And so we also believe that

this is the action happened beyond that and I am hopeful

that we still we are not breaching most of them. But if there

is any breach somewhere, we will be in a strong position to

request them to wait for a particular time.

Somil Mehta: So then if I assume that as on March 14 consol level would

be about, you know, 5.5 times what the net debt to

EBITDA was, so we have sufficient room for the next two

years or is that a fair assumption and in that case, you

know, CapEx curtailment would not be very high?

K. Rajagopal: As I said, CapEx will calibrate and the net debt EBITDA

for the balance sheet calculation and the financial

calculation has a little bit difference because they also give

reduction of several short-term loans. So that’s why it is not

always exactly as per the balance sheet. And, as I said, that

we will calibrate the CapEx.

Somil Mehta: Sure, sir. That answers my question. Thank you so much.

Ravi Uppal: Let me just add to what Mr. Rajagopal said. You know, we

have just concluded our major CapEx programme which

was related to the phase one of Angul plus upgradation of


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Raigarh is also over, so therefore we have built up a

considerable amount of CapEx both at home as well as in

Oman. And in any case, our focus at this moment has been

more to sort of sweat the assets that we have built up. So

therefore we are not contemplating any other major CapEx

in the near future.

Somil Mehta: Sure. Sure. Thank you very much.

Moderator: Thank you very much. We have the next question from Mr.

Giriraj Daga from Nirmal Bang Securities. Your line is

unmuted. You may go ahead and ask your question.

Giriraj Daga: Yes. Sir, good afternoon. Thanks for doing the conference

call. Sir, I have two questions. Firstly, Supreme Court has

mentioned that the PPA need to be signed for the

independent power producer. So for JPL what we

understand is somewhere near 75% we are sending in the

merchant market. So are we looking to sign a long-term

PPA with the state government and distribution announced

there?

Ravi Uppal: Yeah. That has been our effort. You know, we have been

trying very hard for the last one year, you know, to see how

we can quickly sign up the PPAs. And if you recall that, it’s

out of that effort that we signed the 400 megawatt PPA

with Tamil Nadu, but then there was a period in between,

but we didn’t have many PPA inquiries, but we see once

again resurgence of PPA inquiries. This seemed to be

coming up and therefore it was made our endeavour to see

that we can sign as many PPAs as possible.

Giriraj Daga: But it has to be done for the Tamil Nadu one also for 1000

megawatt?

Ravi Uppal: Tamil Nadu one, yes. There, again, we will sign.

Giriraj Daga: Okay. And my second question is that what we are hearing

that land is belonging with you, so will you protest that

because our land is also gone? So will you not get

compensation for land also? And where you can appeal

against this like Supreme Court has given a decision, so


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where you think you will appeal and at what court level

you will appeal this?

Uppal: Well, you know, as I mentioned earlier that we will file a

review petition. With that, you normally do with a Supreme

Court itself or once the Supreme Court gives decision, then

you go to the SC review bench only.

As far as land issue is concerned, you know, these all kind

of issues on which you will take a viewpoint once we know

how government wants to go. So I think that the ball is on

their court at this moment we will respond because there

are so many combinations which are possible. It’s very

difficult to, you know, give you a position from our

viewpoint or from our end at this point of time.

Giriraj Daga: Okay. Thank you from my side, sir.


Jigar Mistry from HSBC. Your line is unmuted. You may

go ahead and ask your question.

Jigar Mistry: Yeah. Good evening, gentlemen. Mr. Uppal, you

mentioned that you expect the auctions to go ahead in the

next 8 to 10 weeks. Now, you know, one question that even

the previous participant asked was that the land belongs to

the company; what the government gave was only the right

to mine. Now, any coal-bearing areas could be acquired by

the government under the coal-bearing areas acquisition

and development act and therefore for the auctions to go

through, you know, if the government were to auction any

of these coal blocks, don’t you think they would have to be

the owner of not only the right to mine, but also the right to

own that land and hence the auction cannot proceed unless

the land has actually and physically been acquired?

Ravi Uppal: You are right. As I mentioned earlier, we are less than 24

hours from the time the decision was delivered. It remains

to be seen what the modality government wants to adopt,

you know, that there are few ways to do it. Number one is

that they go for auction. In that case, , if they go for

auction, the land may still remain with a company like us as


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they can take surplus mining rights. So that could be one

way to do it. The second way it could be that they give us a

proposal for adequate compensation and then we might

transfer the title of the land. You know, so that can be

several combinations. So it remains to be seen how

government wants to proceed. We don’t know their minds

yet.

K. Rajagopal: Government itself has to find out transfer for all the things.

But the only thing they made the statement in the court

actually they will make all steps to do this. So we have to

wait.

Jigar Mistry: All right. All right. Thank you so much.


Bhavin Chhedha from Inam Holdings. Your line is

unmuted. You may go ahead and ask your question, sir.

Bhavin Chheda: Yeah. Good afternoon, sir, for lot of clarity on the call. So

first I understand that you said that the review petition

would be made by you after government coming out with

steps. Is it the review petition dependent on what does the

government wants to react because government may not

react for next three to four months in the penalties due in

next three months, so what is the procedure followed by

you?

Ravi Uppal: No. No. No. We are not going to wait for government

response. We know that the judgement has been made, so

we will do, you know, as a sequel to the judgement, we will

make our review petition

Bhavin Chheda: Okay. And you will be making a review petition for lot of

things to either like penalty getting extension and clarity on

how the auction persist or separate review petition needs to

be filed for each clarification what you want?

Ravi Uppal: No. I think we will file – As I understand, we are still in the

process of discussion with our lawyers, but my initial

response would be that we will file a common petition


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where we will take up all the issues what we think we have

valid grounds.

Bhavin Chheda: Okay. And, sir, in such type of cases I am not very much

aware of the telecom case. Does the review petition will be

filed by the individual companies or association will also

file a joint review petition?

Ravi Uppal: It can be both. This is something which we are still

studying. We have not come to – Now, we have 30 days’

time for us to, you know, file a review petition.

Bhavin Chheda: So you will file it in 30 days?

Ravi Uppal: Within 30 days. So we will certainly do it in a good time.

Bhavin Chheda: Okay. And, sir, my last question. Since this case has been

going on for last two months and there was a very high

probability of the blocks been cancelled, you will have

evaluated what kind of CapEx JSPL would undertake in

next two years taking the current exceptional

circumstances, so if you can clarify on this stand and what

the JSPL’s ongoing projects for next 2-3 years would be

delayed or how the CapEx run rate should we assume for

next 12 to 18 months still there is a clarity on auction

process?

Ravi Uppal: Well, as I mentioned earlier that, you know, we have just

finished our major capacity additional programme both in

the steel as well as power space and we were actually in the

process going a bit slow with the further investments

because we are very occupied harvesting the gains of the

investment that we’ve made and trying to sweep the assets

that we built. So that in any case our decision regardless of

what the outcome was yesterday. But for the rest of it, we

will once again, for whatever the amount we intend to sort

of invest, we will set our priorities and go little more tight-

free state for any new expenditure.

Bhavin Chheda: Okay. Thanks a lot, sir.


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Prasad from Edelweiss Securities. Your line is unmuted.

You may go ahead and ask your question, sir.

Prasad: Yeah. Thanks for taking my question. I definitely

appreciate the call. One question on this aspect of takeover

of the mines by Coal India what exactly do we understand?

So does it mean that Coal India is becoming the new mine

owner or is it simply like a operator of the mine and

transfer of ownership or as such has not happened to Coal

India? And how will this process happened? We have

existing employees, land, infrastructure, et cetera, so how

will this happen? You have two parts of my questions.

Ravi Uppal: It’s not clear yet what government intends to do. If they

feel they are quite ready with the process, they might take

that option. But in case they feel that is going to be long-

drawn affair and after 31st of March they want interim

arrangement in terms of ownership, then they might

consider passing it on to Coal India or any other

government agency, so it is still unclear. And depending as

to what the exercise, I think the modality will be sort of

discussed for that and the scope of what they want to do

whether they will become only owner and they want us to

continue mining them as an MDO and just sign an

agreement under which they sell the product to us at the

Coal India rates, there are lot of open issues there. I think

the owners for this entire decision-making lies with the

government. And, you know, whatever decisions they take,

you know, our response will be in the best interest of JSPL.

K. Rajagopal: Maybe, I can also add here because the history is the

government what suggesting that these 40 coal blocks we

left with the current owner, so it is the government’s own

suggestion. The government also can continue to give these

mines as a linkage basis to these people till such time they

come with a more clear action. That is what I feel that can

happen because that is what we believe because in six

months they can’t find answers to all. So since government

themselves suggested that 40 should be left with the current

owner, so I think they may come with a solution that it is

given to them on a linkage basis, maybe, owned by


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government or coal India , but without disturbing. So it is a

positive solution.

Ravi Uppal: Mr. Prasad, the task becomes somewhat easier because

that we are talking about 218 blocks to start with, out of

which 40 blocks, you know, have been given to NTPC and

all of this, so we are talking about our 204 blocks, out of

which the operational blocks are only 40 and so, therefore,

the task becomes much simpler for government for 40 to be

decided. If at all the question of about 218 functioning

operating mines that the scale would be a different kind. So

in my thinking, you know, managing 40 mines auctioning

process relatively this year are all manageable. But, you

know, still it’s a government’s evolution and it’s their

choice what they want to do.

Prasad But I think they will be very careful not to disturb the

production even after 31st.

Ravi Uppal: That’s the assurance that was given to the Supreme Court

that they will take action to make sure that there is no

interruption to the economic activities covered by these

industries depending on these mines.

Prasad: Understand, sir. Sir, just to follow on to that, so can we also

be assured that whatever form Coal India is taking over

these mines, I mean, until March 31st 2015 all that output

will come to us only and that stands 100% of that output

will come to us because the challenge is that Coal India has

its own demand requirements, it has signed certain FSAs

with certain coal demand requirements, so it is facing its

own need. So can we be assured that as Coal India takes

over these mines, all of it will come to us?

Ravi Uppal: Sir, let me share that for the next 6 months nothing

changes. We are going to operate the mines this was amply

made clear by the Supreme Court. It’s only after 6 months

it needs to be decided what the government does vis-a-vis

about say this mandate to – accordingly as mandated to do.

So 6 months, nothing changes as if this is residual.

Prasad: Understand. Sir, all the best. All the best.


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Ravi Uppal: Thank you.


Paresh Jain from Max Life Insurance. Your line is


Paresh Jain: Yeah. Good afternoon, sir. Sir, payment of penalty, is that

finalized or can you appeal against that also?

K. Rajagopal: Payment of penalty is also can be a ground in this review

earlier petition because, if you see, even the Supreme Court

order itself various ordinance were given by the Coal

Producer Association how the Rs. 295 is not a bad amount,

but Supreme Court has considered all the decisions, then

they passed this order. But according to us, that is also

another can be a ground for writ petition But as Mr. Ravi

Uppal explained, so we are in discussion with a very senior

lawyer and to try in the ground what we can put for review

and how it can help us. So, yes, that is definitely in our

mind.

Paresh Jain: Okay. So it is not necessary that you’ll have to pay by

December 31st?

K. Rajagopal: You know, that is what I said; only the proportion is 295

itself And, also, it will also be if at all to be paid the time

three months is being also – give a lots of requests that

more time to be given; not three months is not the correct

one, which I think will be considered.

Paresh Jain: Okay. Fine. Thank you. Thank you, sir.


Kamlesh Jain from Prabhudas Liladher. Your line is


Kamlesh Jain: Yeah. Thank you for the opportunity. Sir, I have just one

question regarding your 2 of the coal mines like 3 of the

coal mines. Sir, what is the grade of coal in these mines and

what is the cost of operation or production at these mines?


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Ravi Uppal: Well, the grade that we have these are F or G grade, you

know, all the two mines that we have been operating so far.

Kamlesh Jain: And regarding cost of production, sir?

Ravi Uppal: Well, you know, it varies, , during a lifetime of the mine,

you know, it changes because sometimes you are doing at

the surface and at another time, , you go much deeper, your

steep ratio keep changing, so therefore it’s very difficult to

put a number at the point of time.

Kamlesh Jain: Okay. But like, sir, if we are going to get the coal from

Coal India post like, say, 31st March 2015, like Coal India

have a different pricing for non-power and power, say, it is

going to be supplied to our standalone operations where we

are operating our units and other ancillaries. So in that

particular operation how much impact would be there .

Ravi Uppal: The fact, you know, that this whole thing depends on what

is the form in which they give this to us – is it the form of

linkage or they will auction the block to us and the mine to

us. I think both areas will be different. Of course, you

know, the government has different rates for different

segments of application. They have one rate for the power

under the linkage and they have another rate for the

industry including steels, cement, et cetera there’s another

rate. So if it comes in the form of linkage, it will be one

scheme of rates. If it comes under the block, then, of

course, it is going to be our own mining cost.

Kamlesh Jain: So like, sir, if it’s non-power, then how much could be the

impact like, sir? Would it be feasible to calculate that

impact or?

K. Rajagopal: Like I said in the opening comments I mentioned, there are

different forms in which the coal will be available. We are

sure coal will be available, but there is 100% linkage or

some percentage linkage and some through e-auction or

some linkage e-auction, some about import. So all these are

through the auction we get and we pay some levy. So there

are 4-5 permutation combination and we have estimated

that we find that overall impact is not that is going to


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impact very much. So since we do not have all the

situations in clarity, then we should not put the number, but

I must assure you it’s not a big impact.

Kamlesh Jain: Okay. Great, sir. Thank you very much.


Vivek from Atlantis. Your line is unmuted. You may go

ahead and ask your question.

Vivek: Hi. I just wanted to check. Most of the questions have been

asked that I wanted to ask, but the F and G grade what is

the price that Coal India is selling coal at for these grades

right now?

K. Rajagopal: Right now It is ranging from Rs. 500 to 800; average would

be 560.

Ravi Uppal: About 560. Again, we have one of our colleagues in coal

business here and he says that is about Rs. 560 to 600.

Vivek: So in that case the number of 295 of penalty doesn’t make

sense, right?

Ravi Uppal: That is what we have been contending all these prices

because, you know, our senior lawyers in Supreme Court

made the same position and he told them very clearly the

two things. Number one, , talking about Rs. 295 the basis

has been the coal india , the price at which they were

selling and corresponding to grade A and B largely,

whereas, you know, secondly they are very currently rich.

When we are talking about our operation, for example,

started 8 to 10 years ago, so therefore they are asking us to

pay at the rate of Rs. 295 from the start of the operation.

It’s absolutely ridiculous. And our grade has always been F

and G. The cost, as you just said, they are still in the Coal

India’s price itself so long as 560 even till today. So you

can imagine 8 to 10 years ago what it was like.

K. Rajagopal: It was less then 295.

Ravi Uppal: Yeah. It was less than 295.


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Vivek: Yeah. So for anybody else to take over the mine it doesn’t

seem like a very cost effective proposition because you

would have your infrastructure to kind of seeing the coal

and use it in your mine because it is at the pithead, so if

there is auction, then there is high possibility that you

would be able to win that auction?

Ravi Uppal: That is our belief. You know, we have our plants, our units

are located right on the pithead. We have developed the

mines. We know how to get the productivity out of these

mines. Our logistic costs are very low. Anyone who, you

know, takes up these mines other than us for M-Logistic

cost, you know, these industries are very major component

and there are, of course, they are not aware about the mine.

They haven’t worked on it and these are mines of which are

operative, some of them have been used to the limit of 50%

of capacity. So I think, you know, we would be well

pleased to, you know, get these mines back with us if the

auction process is initiated.

Vivek: Yeah. Okay. That’s all from me. All the best. I’m sure, I

think, we will be seeing all these pretty soon. Thanks.

Moderator: Thank you very much. We have the next question.

K. Rajagopal: Last two questions.

Moderator: Sure, sir. We have the next question from Mr. Sanjay Jain

from Motilal Securities. Your line is unmuted. You may go

ahead and ask your question.

Sanjay Jain: Yeah. Thanks. I would like to know by 31st March 2015,

how much of coal would have we mined ever since the

mining operation started in all the three coal blocks put

together?

Ravi Uppal: Well, I don’t have the numbers to give you, but I would say

that, as I mentioned earlier, all these mines that Gare palma

4/1 and 3/4, you know, we have fairly advance stage, you

know, more than 50% in some of these mines. I don’t have

a rate percentage to give you right now.


September 25th

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Sanjay Jain: Okay. You would have those numbers that you would have

submitted because the

K. Rajagopal: That time we all have. You can have them and call IR team.

Sanjay Jain: Okay. Thank you.

Moderator: Thank you very much.

K. Rajagopal: Last one.

Moderator: Sure, sir. We have the next question from Mr. Pawan from

AnandRathi. Your line is unmuted. You may go ahead and

ask your question.

Pawan: Thanks for taking my question. My question is very much

on macro and I think some of those questions have already

been answered, but just if you can throw some light on? Do

we have any sense on the process of reallocation and if that

happens, would it be purely be on competitive bidding or

like we would have first write-off bidding for our own

blocks?

Ravi Uppal: But, you know, different suggestions have been made to

government, you know, that in one of them we said that

they should go for the bidding process and whatever is the

highest bid the existing mine operator should be allowed to

match the highest bid. That is one of the suggestions made.

And then, of course, other people have said, “No, the

highest bidder should be given the mine.” So I think there

is a lot of lack of clarity at this point of time. So I think we

need to wait for another couple of weeks before the

government release, picks out these mines. So until then, I

think anything we say would be hypothetical.

Pawan: Sure. And the second question was again on the basis for

295 penalty, so is there any calculation that the government

has submitted to you and other companies or it’s just a

random number because we’ve been like told that there’s

no basis on that?


September 25th

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Ravi Uppal: This number, to our mind, has been picked up from the

CAG report where, you know, this number was mentioned

the Rs. 295 should be the average extent of loss suffered by

government that should be made good. And later on,

government, the Attorney General, Rahim, is in deputation

in the court. He once again dropped this number, but this

number there is nothing that is sacrosanct. And as I said the

295, a number taken with the sale, you know, as a

reference, is not valid for most of the miners because the

great number of coal that we are mining were F and G

which is far remote from the kind of coal that is produced

by coal India.

Pawan: Sure. Sir, my last question is slightly hypothetical. So if we

have to cut down on CapEx, so can we assume safely that

it’s going to be on the international resources projects and,

you know, our Indian expansion would be pretty much on

track?

K. Rajagopal: You know, as I said, we will have to calibrate, so which

one we will go ahead with the ones which will give faster

cash flow and we might get it postponed, delayed the one

where the cash flow is delayed. So that’s where the

evaluation is on.

Pawan: Sure. Thanks. Thanks and all the best.

Moderator: Thank you very much, sir.

K. Rajagopal: Sourodip?

Moderator: I’m sorry, sir. Please go ahead.

K. Rajagopal: Yeah. I want to give some concluding remarks again to re-

track what we’ve said that we are exploring the legal and

administrative remedies available to us with regard to Rs.

295 and also the time limit within which we have to pay, as

I said. So if anything that, so that’s why we didn’t quantify

the amount and we did not say what is the impact on our

cash flow and P&L this year. And if at all any amount to be

paid, how it should be accounted in our P&L, that

evaluation is still in progress. And if at all any amount to be


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paid, I said that we do not have any problem in arranging

for that amount. We have enough cash even in the balance

sheet of March and our net worth is 23 to 22,000 crores and

we are not affected. And then going forward, we said that

on various combination of coal availability and making

available to us we have established that it’s not going to

make a large difference in terms of EBITA in future, let’s

say, next year. And in terms of debt level, it will hit for

some short-term till we are little more operationalized but,

however, we calibrate with the monetization program and

CapEx to see that how it is in manageable level. So this is

our overall message. The company is not affected to the

extent that it has to change course, but it has its own course

and it will calibrate and it has a big balance sheet systems

and core management stuff and we also believe government

has all the intention to ensure that the form is given by

them to the court to ensure how the coals are made

available to all these captive coal blocks are operated so

that production is not affected. So that is a message I want

to give.

Ravi Uppal: Just one sentence I want to add to what my colleague

Rajagopal has said, I think, I will urge all the investors to

have full confidence in the JSPL management. Here, we

have countered many pressure tests in the past and we have

come victorious. We are the company that has created

benchmarks in performance in the past and I want to assure

you will do the same and we’ve got a very, very dedicated

team both in operational level as well as the strategic

management level. And we will definitely, depending on

what government does, because right now the board is with

the government side. We are just waiting to see what kind

of actions they are taking to ensure the uninterrupted

supply of coal to the EUPs and because that’s what they’ve

assured the Supreme Court about. And depending on what

they do, we will immediately act very swiftly, but on the

other hand we are making sure that our operations remain

uninterrupted before 31st of March. We are tapping every

possible option which is there, so be rest assured and we

would urge you to keep confident in JSPL and stay

invested.


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K. Rajagopal: Thank you. Thank you very much.

Rakesh Arora: Thank you, Mr. Uppal and Mr. Rajagopal. I think the

message is loud and clear and, I would like to thank all the

participants for joining in. Mr. Sarkar, we can now close

the call, please.

Moderator: Thank you very much, sir. With this, we conclude the

conference for today. You may all disconnect your lines

now. Thank you very much.

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