"We find that our costs have increased; the cost of raw materials such as coking coal and freight within the country has increased, some duties have increased. So, we had not option but to hike the prices of steel products we are offering in the market," Uppal said.
Also read: JSPL to raise Rs 3500 cr via bond issue: Sources
The price hike comes as a surprise, as the steel companies are already suffering from low demand due to slowdown in key consuming sectors like infrastructure and automobile. Uppal was however confident that price hike, taken over and above the changes in March is sustainable.
The Delhi based company reiterated its plan to raise USD 400 million worth of external commercial bonds to meet its expansion needs. JSPL also plans to invest Australian dollar 10 million in Australia based Apollo Mineral for acquiring 50 percent stake in iron ore assets. JSPL already owns 11.7 percent stake in Apollo Minerals.
In March, the Australian company had issued a statement saying that it plans to split its iron ore assets into a new listed company, NewCo, on the Australian Securities Exchange. JSPL will acquire majority stake in NewCo at the time of its listing through an IPO.
The Navin Jindal owned company hopes to increase steel production to over 7 million tonne in 2013-14.
Below is the verbatim transcript of the interview.
Q: Has the company taken any price hike in the month of April and how much?
A: Yes, we have increased our steel prices between Rs 500 to Rs 1,500 this month and this is over and above what we did in the month of March.
Q: Last time the price hike had to be called off pretty quickly because there was some demand resistance in the industry in general. Is the industry in a position to stomach a price hike now?
A: We did not call off any price hike. We did the price hike last month.
Q: The industry in December after a price hike saw some corrections because the price hike was not met with demand resistance we were told. This is not current hike. I meant four months ago?
A: We stayed put with the prices, we announced in the month of March. Again now in the month of April we find that our costs have increased; the cost of raw materials such as coking coal and freight within the country has increased, some duties have increased. So, we had not option but to hike the prices of steel products we are offering in the market.
Q: This price hike is sufficient to offset any increase in cost pressures, your margins will be status quo?
A: Whatever cost hike has taken place, we have increased the prices to that extent so I do not think that our margins should get affected if we are able to realise the prices that we have increased.
Q: Can you take us through your capex plans and more importantly you are planning a bond issue to finance your capex?
A: We have a major capex programme underway right now both on the steel side as well as on the power side. We have started the phase two of the Angul project so that investment is underway. That investment programme will continue right up to the end of 2015. The phase two will be done over the next two-and-a-half-three years time and in parallel with that we have expansion programme, which is going on in Oman. We are in the process of commissioning our 2 million tonne plant, which should hopefully get on stream by October this year. Apart from steel we also have major expansion programme in Tamnar power project, we are in the process of commissioning four units of 600 megawatt and I am hoping that all the four units will get commissioned during the current financial year that is before April 1, 2014. So, whatever amount of investment is residual now that investment will be made in the current financial year.
Q: Is the company immediately planning bond issuance and if yes, how much it would be and what terms?
A: In order to meet our expansion needs we will go with the bond. Tentatively we have thought that this size of the bond should be about USD 400 million. Some weeks ago we had announced our intention, but exact timing of this bond, we are yet to fix. We are making investments both in India as well as abroad. So, we have a need for investments outside India. Therefore, we are thinking of going for USD 400 million bond issues.
Q: You also bought a stake in an Australian company, Apollo Minerals. What was the amount?
A: As far as Apollo Minerals is concerned, we have invested in the iron ore part of that company. We have come to understanding with Apollo is that we will breakup the company in two parts; one of them is dealing with iron ore and second is non-iron ore minerals. Our interest is in the iron ore related where we have offered to invest about Australian dollar 10 million that will get us more than 50 percent share in that company. So, that is the offer that we have made to them.
Q: What about Orissa's mining ore? There were some news about the Shah Commission perhaps looking for limits and caps in that state as well. You have any problem with iron ore supply from that state?
A: I am not aware of anything that you mentioned just now. As far as we are concerned we are all set to get our Angul phase one commissioned, which basically means that we are waiting for our final execution list to come in our hands. I am optimistic. It is a matter of couple of weeks before we should be able to start our mining operations. I believe that is around the corner.
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