Steel Authority of India Ltd Q4 FY2024 Concall Summary

Key Takeaways

• Best-ever volumes, EBITDA up 31%: Record physical performance drove EBITDA to INR12,280 crores, helped by a INR903 crores raw material benefit that more than offset a INR894 crores NSR decline.
• Debt swelled on trapped inventory: Net debt rose INR3,000–3,500 crores as railway receivables stalled and inventory piled up in a weak Q3; management expects both to unwind this year.
• Long products are running, flats are waiting: Long prices jumped ~INR4,000/ton mid-quarter on cost-push and infrastructure demand, while flat prices stay pinned by Chinese imports.
• The capex super-cycle is now approved: IISCO expansion got Board nod, with commissioning targeted for 2027–28, as part of a INR1–1.1 lakh crore push to 3.5 crore tons by 2030–31.
• What to watch next quarter: Whether the railway price settlement materializes, whether inventory days retreat from elevated levels, and whether flat product prices find a floor against Chinese imports.

Volume & Cost Performance

• Record output, lower employee cost: SAIL delivered its best-ever physical performance while employee costs fell 17% YoY, driven by a 3,000-person annual headcount reduction and an actuarial gain on leave encashment.
• Raw material tailwind: A INR903 crores QoQ benefit from raw material usage included INR452 crores from coal and INR196 crores from other raw materials; the coal gain came from a better blend and improved techno-economic parameters, not just lower prices.
• NSR headwind offset the gain: Net sales realization fell INR894 crores QoQ, nearly wiping out the raw material benefit at the EBITDA line.
• Value-added mix rising: Value-added production was ~0.95 crore tons in FY24 and is expected to rise to 1.1 crore tons going forward.
• Mill ramp-up in progress: Universal Section Mill at Burnpur is at 70% utilization, Medium Structural Mill at 55–60%, with foreign technology spares now available to aid the ramp.

Nigam: "The policy is that till the price are given by the CA costs. And thereafter, the approval of the CRB is given, all the billing is done based on the provisional prices only."

Inventory & Debt

• Inventory ballooned in FY24: Inventory days, which ran at 18–20 days in FY22 and FY23, increased substantially; management called it a concern and is focusing on bringing it down.
• Two drivers of the debt build: Borrowings rose to INR35,000 crores because railway realization was not available and inventory piled up in Q3 due to low demand.
• Debt reduction promised: Management expects borrowings to fall below INR30,000 crores by FY25-end, helped by inventory regulation, railway price realization, and lower coal prices.
• Debt-equity guardrail: The company will maintain a 1:1 debt-equity ratio through the expansion cycle.

Nigam: "We are expecting, by the end of this particular year, our debt will be substantially lower to 2023-24. That is INR30,000 crores."

Product Markets: A Tale of Two Segments

• Long products surged on cost-push: Long prices moved from INR54,000/ton mid-quarter to ~INR58,000/ton, driven by a INR2,000/ton increase in domestic coal prices (from INR9,000 to INR11,000/ton) that lifted secondary market prices, since secondary players control ~70% of long products.
• Infrastructure demand underpins the move: Robust infrastructure spending is sustaining long product demand, and management expects positive sentiment to persist through the remaining months of FY25.
• Flat products are import-pinned: Flat prices are primarily determined by Chinese and other imports, so they are not rising the way long products have; management expects them to remain at similar levels.
• China risk is acknowledged but not feared: Management sees a likelihood of Chinese steel pressuring Indian prices but remains hopeful that domestic consumption growth of 12–13% will absorb the country's own production.

Management (Marketing): "Secondary prices have gone up primarily based on cost push because of domestic coal prices increasing by around INR2,000 per ton from INR9,000 to INR11,000 per ton. So that is the main driver of the prices in the long product segment."

Expansion: The Decade-Long Buildout Begins

• IISCO is the first mover: Stage 1 Board approval is in hand; the tendering process is ongoing with a party expected to be finalized by October, commissioning by 2027–28, and the full facility by 2030–31.
• The full ambition: SAIL plans to grow from 2 crore tons to 3.5 crore tons by 2030–31, at an estimated cost of INR1–1.1 lakh crores, executed in phases.
• Next in line: Pre-feasibility reports for Bokaro and Durgapur expansions are complete and moving to Stage 1 Board approval; Rourkela and Bhilai will follow.
• Near-term capacity adds: A new cluster at Rourkela will add 1.4 MT, a blast furnace upgrade at Durgapur will add ~0.9 MT, and new coke ovens at IISCO will add 0.4 MT.
• Bhilai caster progressing: A 0.8 MT caster capable of beams and blooms has commissioned the beam portion; the bloom portion is under trials, having run normal steel and now testing with real steel.
• Rourkela casters are expected to come online in FY25.
• DSP TMT still unfrozen: Two proposals are under process, one on a comp basis and one MEP (0.1 crore ton on MEP, 0.4 on home basis), but neither is finalized.

Costs & Outlook

• Coking coal cost tailwind: Coking coal costs are expected to be roughly USD30/ton lower in the current quarter versus Q4.
• Employee cost guided: Employee cost for FY25 is expected at INR11,000–11,500 crores; management declined to isolate the savings from headcount reduction alone, citing the offsetting effect of DA increases.
• Production and sales targets: Production is targeted in excess of 2 crore tons, with sales of 9 crore tons; next year's plan is 2.01 crore tons, with a further 0.04 crore tons from the RSP addition.
• Rail price optimism: Management expects a price better than the provisional price given by the railway, though the booking rate per ton was not disclosed on the call.
• Steel demand forecast at 7.7% for CY24, driven by infrastructure, residential, private investment, capital goods, automotive, and consumer durables.
• Decarbonisation commitment remains alongside priorities of capacity utilization, value addition, and cost competitiveness.

Nigam: "There are every likelihood that steel from China will come to India and might put pressure on our Indian steel also. But the kind of growth which we are seeing as far as our - Indian steel consumption is concerned; we are still hopeful that whatever we are producing will get consumed within the country."

Guidance & Commitments

Key Metrics