Despite demand for steel coming off, steel prices are not expected to correct in the near term, Mr Sushil K Maroo director and group chief financial officer of JSPL.
In an interview to CNBC-TV18 Mr Maroo said that “The rupee has also depreciated a lot and import has become very costly so, I don’t see much reduction in steel prices in next three months time.”
He added that further, the fall in rupee is not hurting JSPL because the comapy's short term borrowings like bank credits are 100% hedged.
JSPL is looking to raise overseas debt through external commercial borrowings to fund expansion and benefit from decline in rupee.
Below is the edited transcript of Mr Maroo’s interview with CNBC-TV18.
Q - The CRB index fell quite sharply overnight and there has been some talk that steel manufacturers locally are reducing prices in India. Is that true?
A - No, in fact there is demand pressure. Demand has gone down and the cost of steel making also has gone up but there is not much talk about the steel prices going down. This is because the cost also has gone up and margins have gone down drastically. In some product lines there maybe redemption in steel prices but I don’t think that steel prices will go down. The rupee has also depreciated a lot and import has become very costly so, I don’t see much reduction in steel prices in next three months time.
Q - At the start of December there were no price cuts from JSPL?
A - JSPL doesn’t increase or decrease prices on a monthly basis because we are in the long products where price gets adjusted almost on daily and weekly basis. That is not the way things moves in flat products. But in JSPL the price gets adjusted almost on regular basis, so there is nothing happening on December 1. But seeing the scenario in the market, though there is pressure on demand side but since raw material prices have gone up, I don’t see much reduction in steel prices.
Q - What is going on, on the foreign exchange front? How are you managing that the way rupee has moved to 54. How is it affecting JSPL?
A - Not much because all our short-term borrowings like bank credits are 100% hedged. As a matter of policy we always keep them fully hedged, so there is no impact. On long-term debt side in any case the payments are far ahead so there is virtually no effect other than the effect on the interest rate.
Since we do not have much of an import of raw material also other than coking coal so there is not much of an impact. We are trying to do some kind of ECB in a short period so we can raise some money and bring it to India for our expansion and have the benefit of lower rupee.
Q - What is happening on the power front? What kind of demand are you seeing? Where are merchant power tariffs now?
A - Power is doing okay. Merchant prices have gone up a bit because rupee has depreciated and importing coal has become very expensive. The coal availability in India has gone down, Coal India has not improved their production, so many power plant are suffering because of low availability of coal. The supply side has shrunk and many power projects which were to come up have run into various kinds of difficulties.
Because of these reasons the supply side has gone down, so merchant prices are more or less firm now. They are ruling somewhere around INR 375 to INR 425. Our power plants are doing very well, our Tamnar power plant of 1,000MW is almost at 100% plant load factor. The best thing is that JSPL was setting at 135x10MW they all were on schedule and those four units which we have completed were having some problem in the last one year in stabilisation. All those units have now stabilised, so that is quite heartening news.
Q - Everybody has been telling us that the companies are facing still lot of problems with clearances in terms of land acquisition for their projects. You also had some request pending. Have you had any clearances in recent days or it continues to be very sticky?
A - The situation has improved a lot. Land acquisition of course is a problem that’s for everyone and we all know about it but with some persistence land acquisition is possible now also. We all are waiting for the new act to come and see the effect of that. But environment approvals have started coming in.
We have received clearances for our 2,400 MW expansion that we are doing in Jindal Power and the work already has started on the site. We are also working on our two projects; 2x16 and another 2x16 in Jharkhand. For that also we are getting environment and other clearances from the government, so there is some improvement in the last six months time.
(Sourced from CNBC-TV18)
