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  • Demand for steel has weakened, says Sushil Maroo, director and group CFO of JSPL . However, he said prices are stable because of low supply.
  • In an interview with CNBC-TV18, Maroo said that high input costs have impacted margins in the steel business. In the power sector, Maroo expects merchant power rates to hold up with a positive bias. He expects merchant power rates to hover around Rs 4-4.25 per unit.
  • Q: Before talking about earnings I guess your promoter was there at that meeting as well. What were the key takeaways with the meeting with the Prime Minister?
  • A: Yes, Mr. Naveen Jindal was also there along with other industrialists and the problems which the power industry is facing were discussed and the government made some promises also. It was a long meeting whole day with various ministers and the Prime Minister finally; you will come to know lot of things from the association. But I feel that in this meeting at least all the problems which power sector is facing in the country were talked about and solutions were explored.
  • Q: Aside from potential solutions, was there any reassurance from the government that they would not look to impose a tariff cap on captive coal base plant. There was a fear that might happen at some point last month and company such as yours would be most directly and negatively affected by it?
  • A: We have not heard much about it and I don't think there is any kind of serious dialogue going on, on this particular subject so there is nothing much to talk about the subject as of now.
  • Q: On the power side, numbers seem to be okay. But on steel there is little bit of disappointment both in terms of realisations and core volumes itself. For the rest of the year how do you think things will shape up in the steel business?
  • A: If you are comparing in terms of realisation year on year, then it is good this time. It is about 15% up, but the cost has gone up. So if you talk in terms of the bottomline, then yes it has gone down slightly but otherwise in terms of the production, its quite high. In fact, it is the first time the company has crossed run rate of about 3 million tonne and I feel that going forward steel will do good as steel prices have more or less stabilised, demand is coming up again and there is expectation that interest rate will go down in next three months. Also because of these factors, people have stared thinking again about investment, so I feel it's a good time ahead.
  • Q: Is demand weak though in the steel segment; are you seeing continuously weakening demand?
  • A: We have seen the weakening demand in the last two quarters and we have also seen that because of non-availability of iron ore, many of the medium and smaller steel plant could not produce to their capacity. So steel supply also has gone down drastically and because demand has gone down, the steel supply also has gone down. So the prices more or less remain stable.
  • Now what we are seeing that iron ore availability is increasing, demand is also likely to come up again because of the reasons as I mentioned now. The availability of money will also be there and people have started becoming optimistic again, so the time will be good but the past two quarters were bad.
  • Q: In the power business this time merchant power rates for the quarter were 4.2 unit. Do you expect these rates to hold out or do you see them drifting below Rs 4?
  • A: I have a feeling that these rates will hold out and there maybe upward bias in these rates because of two reasons largely; one, the rupee has depreciated a lot in the last quarter and it will have its impact on the cost of power generation and second, Coal India has also increased the prices of coal and that will have its impact on tariff. So there is no possibility of the tariff going down, there will be upward bias.
  • Q: What would you expect to see as a new range for merchant tariffs?
  • A: I feel that going forward 12 months, it should be somewhere between Rs 4-4.25, it should be around that in narrow range. There is also a problem, in fact there is pressure on power also, the demand is very high but the SEBs do not have money, so they are not in a position to buy but I feel as inflation was high in the last one year and prices of every commodity has gone up, so ultimately to make the SEBs viable they have to increase tariff going forward. So there is a possibility that the purchases will come back though the demand is there in the country, but purchases not happening. In the next one year we expect the purchases to come back so the power demand should remain quite good.
  • Q: Analysts are a bit concerned though about the inordinate delays in some of your new projects, on the second Tamil Nadu power plant, on the Odisha plant and that has pushed back earnings expectation for your company. Have things not been able to move fast enough on your plant expansion plans?
  • A: I think the delays have happened and everybody knows now and delay is not today, delay has happened in the last 1.5 year because of many issues which were well publicised and we talked about it on your channel also. But that is past and things have moved now, we have got all the necessary clearances, the work on 2,400 mw expansion has already started and its going on in full swing and we are trying to now complete the project as early as possible.
  • Talking about Angul there is no problem; there was never ever delay in our Angul project and the project is moving at full steam. In fact the best thing that happened regarding 135 mw, 10 units which we are setting up, in the month of January. We have commissioned three units so in total we have commissioned about six units so far and the left out and we are expecting them to be commissioned in the current financial year itself.So, things are moving on power front also very well. Let me tell you one more thing because we are talking about power, the first time ever Jindal Power has achieved best plant load factor (PLF) in its history of last three years 102.13%. In fact this company is doing the best and ranking first and second in India in PLF and performance.

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