Steel Authority of India Ltd Q1 FY2025 Concall Summary

Key Takeaways

• Steel price rout overwhelms operations: Realizations fell sharply through July and August, with Q2 NSR set to drop another ₹1,000–₹1,500/ton or more, while coking coal cost relief is delayed by inventory buildup.
• Bokaro outage made a soft quarter worse: Q1 is seasonally weak, but the Bokaro hot strip mill disruption delivered a material hit to both volumes and the product mix, amplifying the EBITDA decline.
• Balance sheet stretched on working capital: Net debt rose to ₹35,659 crores from coal stockpiling and higher inventory; management targets a ₹30,000 crore year-end exit through stock liquidation and better cash generation.
• Expansion pipeline advancing, costs under review: IISCO received stage-1 Board approval with tendering imminent, but Bokaro and Durgapur capex estimates were sent back to consultants for being too high.
• What to watch next quarter: Whether the Q2 NSR decline bottoms out, the pace of coal inventory liquidation that determines when cost relief actually lands, and any concrete capex figures for Bokaro/Durgapur.

Steel Pricing & Realizations

• Q1 was already under pressure: Softening international steel prices, driven by China's real estate demand weakness and EU's 10% YoY production decline, pulled down domestic realizations through the quarter.
• Q2 shaping up worse: NSR declined a further ~₹500–₹600 in July, and management expects an additional ₹1,000–₹1,500 or slightly more drop in August, meaning Q2 realizations will be lower than Q1 with no improvement in sight.
• Long vs flat divergence: The long segment should recover as government infrastructure spending picks up, but flats face headwinds from imports pulling down market prices.
• India demand story intact: Finished steel consumption grew ~15% in H1 FY25, and India is projected to grow steel demand at more than 8% in the near future, remaining one of the strongest global drivers since 2021.

Tulsiani: "We have not assessed that immediately. And again, I was telling you, because of this changed scenario where suddenly these prices have come down and the margins have come down. So we will have to hear on work on that actually."

Costs & Margins

• Coking coal relief delayed by inventory: International coking coal prices have declined, but SAIL's landed cost fell only ₹2,000/ton QoQ (₹26,500 to ₹24,500) because of customs duty, port handling, and freight. Coal accumulated in Q1 at higher rates will be consumed in Q2, keeping costs flat.
• Q3 is the earliest window for benefit: If spot rates sustain, some reduction could materialize in Q3, depending on August and September finalization rates.
• Operational efficiencies progressing: Steady reductions in coal-coke consumption, higher CDI use, lower specific energy consumption, and improved blast furnace productivity are underway. CDI rate is expected to rise by at least 10–12 kg in coming months from new supply sources.
• Coke rate target likely to slip: The FY25 target of 440 may not be achieved; management expects a further 6–8 kg of coal reduction during the balance period.
• Exceptional items hit the bottom line: ~₹300 crores of exceptional items explain why EBITDA held up better than PBT and PAT.

Tulsiani: "This year we have targeted 440, but we may not be able to achieve that. We may not be here. But I'm sure that another you can say 6 to 8 kg of coal will be during the balance period."

Operations & Product Mix

• Bokaro disruption was the swing factor: The Bokaro hot strip mill not working drove the adverse variance on the EBITDA bridge, hurting both volumes and the product mix. Q1 is normally a weak sales quarter, but this made it materially worse.
• Semis reduction on track: The proportion of semis in saleable steel production is at 15% through conversion services, with semis share in sales lower at 7%. Management targets a reduction to virtually zero in ~3 to 3.5 years.
• Q2 volumes should improve: With the Bokaro plant now operational, sales volumes in Q2 are expected to be better than Q1. The full-year target is crude steel production of 2.09 crore tons and sales volume of ~1.93 crore tons.
• Sub-grade iron ore fines held back: Quality is very good and there are plans to use them in steel plants; SAIL is in no hurry to sell unless a good price is available.

Tulsiani: "It will come down to -- you can say, virtually zero level."

Balance Sheet & Working Capital

• Debt build-up is working capital, not capex: Net debt rose from ₹30,593 crores (March) to ₹35,659 crores (Q1) primarily because SAIL accumulated coking coal stocks under long-term agreements with miners who had shutdowns in H2 FY25, plus higher finished inventory.
• Year-end debt target of ₹30,000 crores: Management expects to bring debt down through stock liquidation of ₹3,000–₹4,000 crores and better cash realization over the coming nine months, with gradual reduction by December or January.
• Peak debt for expansion not yet assessed: The highest projected debt-to-equity for all expansion is 1.1x, but management has not estimated the absolute peak debt number, citing the need to rework figures given the changed price and margin scenario.
• Finished product inventory disclosed: 0.18 crore tons, per an analyst's query.

Expansion & Capex Pipeline

• IISCO advancing to tendering: The Board has accorded stage-1 approval; tendering will start in a month or two with finalization in 6–8 months. Initial capex payments begin from end of calendar year 2025, with the majority of expenditure from 2027–28. Stage-2 approval will come once major packages for BOF, BF, and SMS are finalized.
• Bokaro and Durgapur costs under re-evaluation: The consultant's cost estimates appeared too high and have been sent back for reworking; nothing is concrete at this point. The expansions remain at the discussion stage and will be put to the Board shortly.
• Other projects progressing: The Bhilai caster is already under trials; the Rourkela caster is two years out; the BF-3 Durgapur revamp order is to be placed with an 18-month timeline from placement. The pellet plant at Gua Ore Mines (0.4 crore tons) is 3.5–4 years away, while the COM plant is 2–2.5 years out.
• Tasra mine ramping up: Already producing limited quantities with an MDO contract awarded; expected to reach ~0.4 crore tons per annum, including ~0.2 crore tons of coking coal.
• Real capex jump from FY27 onwards: The meaningful ramp-up in capital expenditure is projected from 2026–27. Management confirmed expansion continues irrespective of market conditions.

Tulsiani: "the cost given by the consultant appears to be on the higher side. So we are having it evaluated again."

Regulatory & Tax Environment

• Jharkhand imposes new levy: A ₹100 per ton tax on iron ore and coal was recently announced, adding to the cost base.
• Odisha tax exposure contained: No claim has been made by the Odisha government after an earlier ruling in SAIL's favor, and no contingent liability has been provided. Other companies provide for it, but SAIL's position rests on the favorable ruling and absence of a subsequent claim.
• RINL/NMDC merger speculation dismissed: Management stated it is not aware of any reports regarding a merger of RINL or NMDC steel with SAIL.

Guidance & Commitments

Key Metrics