JSPL sees average realisation improving in second half thanks to rising price of steel

Private sector steel manufacturer, Jindal Steel and Power Ltd (JSPL) sees rise in average realisation boosting its profitability in the second half (October-March) of this financial year on the back of improving demand and higher prices of steel.

In an interview with CNBC TV18, company's Managing Director and Chief Executive Officer, Ravi Uppal said its average realization per tonne of steel would improve in third quarter ending December.

"In second quarter (July-September), the operating profit was coming to around Rs 6,000 per tonne on an average and I do foresee that it should go up to about Rs 8,000 in third quarter (October-December)," the report quoted Uppal as saying.

The Naveen Jindal-owned firm had witnessed fall in its realization during the second quarter owing to weak demand coupled with fall in production. "Realizations during Q2 had gone down by nearly Rs 1,800 per tonne on an average basis. This was a monsoon quarter. All the producers were producing to the full capacity," Uppal said.

He also said that as far as JSPL was concerned, major shutdown took place in its plants in Angul of Odisha and Oman, which led to fall in production. "Therefore, we did not produce as much we should have done. Coming to third quarter, things have started looking up," he added.

On price hike in steel, Uppal said that most of it was cost pushed than driven by higher demand. "There are a lot of factors, the coking coal prices have gone up; the pellet prices have gone up. So the cost of production has gone up. Therefore, some of it has to be passed onto the market," the report said quoting the CEO of JSPL. Domestic hot-rolled coil prices, which was around Rs 29,250 per tonne in July, increased to Rs 33,750 per tonne in November owing to rise in input costs.

Meanwhile, an Economic Times report said that lenders of the company would conduct forensic audit of the firm to find out whether the company had rightly utilized the borrowed funds for projects without any diversion. The company has a cumulative debt of around Rs 51,000 crore. 

Share price of JSPL closed at Rs 74.20, up 1.50 percent at the National Stock Exchange on Friday.