In a position to recover cost increase in exports: JSPL's V R Sharma

"We are going to increase exports from 25 per cent to 35 per cent of production and even more if need be," said Sharma

Amid rising input cost, Jindal Steel & Power (Mauritius), a wholly-owned subsidiary of Jindal Steel & Power (JSPL), has prepaid $357 million to its lenders as part of its target to be net debt free in FY23. In a conversation, JSPL Managing Director, V R Sharma, tells Ishita Ayan Dutt that the company is looking to secure fluctuations on the raw material side and stepping up exports to mitigate the impact of rising cost but not at the cost of domestic customers. Edited excerpts:

What is the net debt of JSPL after prepaying $357 million?

After the prepayment, overseas net debt will be $113 million and in India, it will be less than Rs 8,000 crore. The company has a target of 15:15:50 – Rs 15,000-crore-plus EBITDA, less than Rs 15,000 crore debt and over Rs 50,000 crore sales turnover – and it will be achieved by March 31, 2022.

What is the impact of rising input cost on JSPL?

Rising input cost is an issue. But we are getting a good advantage in the spot international market. The spot prices in the international market are very good. So we are in a position to recover the cost increase through exports. We are going to increase exports from 25 per cent to 35 per cent of production and even more if need be.

Which countries are you exporting to and what are the products?

We are mainly exporting to Europe and MENA countries. The major products that we are exporting are plates and wire rods apart from round billets.

Are these new markets for JSPL?

The markets are not new, but volumes have increased because Ukraine is unable to supply. Mariupol, the steel city, is totally devastated. Even after the war stops, they will not be able to supply steel because first they will have to build their own country. So the next 6-7 months will be good for the Indian steel mills to export to the EU and MENA countries.

What is the difference between domestic prices and prices in these export markets?

The difference is about $200 a tonne for MENA countries and $300 a tonne for Europe.

You have increased exports, so has domestic demand slowed down due to the sharp increase in prices?

It has not slowed down. Infrastructure projects are going on very well; by and large demand has not reduced. But we have increased exports since we are getting better realization.

Given the increase in input cost, do you envisage a production cut?

No, we are fully booked and not looking at a production cut.

Are you looking at reworking contracts in the wake of the increase in input cost?

We are working in a responsible manner. Our first priority is to supply to MSMEs at the fixed price that we had discussed. The second priority is our long-term partners – we are discussing the impact and telling them to factor it in for future orders. And whenever input costs go down, we can reduce the prices.

Have you already asked for an increase in long-term contracts?

Yes, we have. We have an open book system and share with them the last three-month trend of iron ore, coal, ferroalloys and oil prices. We work on that formula but sometimes we don’t get the exact increase that has happened.

In India, we are unable to pass on the entire price increase. But in spot export markets, we are in a position to push prices to a level where we can trade-off the India supplies versus the export supplies.