Tata Metaliks : Investor Call TranscriptDownload

TML: 4331: 2022

Date: April 29, 2022

The Secretary, Listing Department BSE Limited

The Manager, Listing Department

Phiroze Jeejeebhoy Towers, Dalal Street,

National Stock Exchange of India Limited Exchange Plaza, 5th Floor, Plot No. C/1,

Mumbai - 400 001. Maharashtra, India.

G Block, Bandra-Kurla Complex, Bandra (E), Mumbai - 400 051.

Scrip Code: 513434

Maharashtra, India Symbol: TATAMETALIDear Madam, Sirs,

Sub: Outcome of Analyst / Institutional Investor Meeting under the SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015

This is further to our intimation dated April 22, 2022 regarding an investor con-call.

We are enclosing herewith the transcript of the same held on Monday, April 25, 2022. The same is also being made available on the website of the companywww.tatametaliks.com.

This is for your information and records.

Yours faithfully,

Tata Metaliks Limited

Avishek Ghosh

Company Secretary and Compliance Officer

Encl.: as above

METALIKS LIMITED

Tata Centre 43 J. L. Nehru Road Kolkata 700 071 India

Tel [phone] Fax [phone] e-mail:[e-mail]

CIN L27310WB1990PLC050000

"Tata Metaliks Limited Q4 FY22 Earnings Conference

Call hosted by Monarch Networth Capital Limited"

April 25, 2022

MANAGEMENT: MR. SANDEEP KUMAR - MANAGING DIRECTOR, TATA METALIKS LIMITED.

MR. SUBHRA SENGUPTA - CHIEF FINANCIAL OFFICER, TATA METALIKS LIMITED.

MODERATORS:MR. SAHIL SANGHVI - MONARCH NETWORTH CAPITAL LIMITED

Sahil Sanghvi:Sandeep Kumar:

Good evening, everyone, and welcome to the Tata Metaliks Q4FY22 Earnings Conference Call hosted by Monarch Network Capitals.

Just a reminder that all participant lines are in listen-only mode right now and muted, and request you to keep it on mute for a proper conference call to happen. And after the initial remarks from MD Sir, we will open the floor for questions.

The manner that we will follow through is that you shall have to raise your hand, and I will unmute you, and you can go ahead with the question. I request to limit the questions to three, so that everyone gets a chance.

Over to you Sandeep Sir, for the introductory remarks. Thank you.

Welcome to all the investors, the analysts. Thank you very much for joining the call. I think the quarter 4 results of Tata Metaliks has been a bit of a mixed bag. While we have achieved, I would say a higher profitability compared to Quarter 3, but we could have done much better. And I will explain to you the reasons for that.

Essentially, I think, if we look at also the overall numbers for the year, we have reached a revenue of Rs.2,746 crores, and the profit before tax of Rs.339 crores, which is the highest level of profits for the company. The second highest or the previous best was last year at Rs. 307 crores. But this also includes sale of land from our Maharashtra asset which was lying with us for quite some time, and which we had discontinued, almost about 9 to 10 years back. So, there was a windfall gain of almost Rs.30 crores to Rs.31 crores coming in from there. So, overall if you look at the profit before tax is more or less similar to what we had last year, which is, it comes to about slightly better than last year by Rs1 or 1.5 crores.

If you look at the sectoral performance, and just the highlights, we have the highest ever operational performance, the Blast Furnaces have produced maximum hot metal at 565,000 tonnes which was the highest ever.

The DI Pipe production has also been the highest ever at 236,000 tonnes. Coke plant has also been the highest ever. Power plant is also the highest ever. And of course, the sales of both Pig Iron and DIP have also been the highest ever, with the lowest ever inventory of Pig Iron and DI Pipes. Our collections have been the best. Cash position is also very robust.

So, all in all, it's been a good performance, but it's been a mixed bag in some sense, and I will tell you why. So, our profitability got impacted in Quarter 4, due to let's say three or four reasons. I) There was a huge surge in the raw material prices, particularly coal. You must be aware that the prime hard coking coal reached a level of almost $670 in Quarter 4 before coming down. So, let me say if we were to convert that into rupees per tonne, today or rather in the month of March, the prices of coal, average prices were upwards of Rs. 50,000 per tonne, compared to let's say less than Rs40,000 in the previous quarter. Coke prices crossed Rs. 60,000 per tonne. So, both coal and coke had a huge impact.

Then, though the Pig Iron prices also moved up, and particularly in the month of March, and we were able to cover our costs in Pig Iron quite well. But it took a little bit of time, in January and February, before the prices of Pig Iron could move up. So, this was one reason, so the huge jump in raw material prices is one.

II) Second reason for the profit being impacted is that our Ductile Iron prices are still, I would say, not gone up to the same level as what we would have expected, primarily because we are carrying the old contracts of FY21. And even though we have executed a very large part of it, but, it came to haunt us in Quarter 4. So, the old prices, the drag of the old prices continues to haunt us in our profitability. So, that was the second reason.

III) Then of course, the third reason is that even though we had an all round operational performance, which was the best ever, the blast furnace in particular got impacted because of the time taken to, let's say stabilize one of the blast furnaces, the bigger one, after the shutdown. And we have been facing this problem with this blast furnace for some time.

And the second blast furnace is due for major overhauling and repair, so, we can't ramp it up.

So, on the blast furnace front, we have had a problem. While coke oven, sinter plant, power, DIP all have been very, very good.

IV) And the final reason for the impact on profitability, the four key reasons as I was telling you, is the royalty that we have paid. The additional royalty which Tata Metaliks had to pay, because of the government regulation, which came in for increasing the royalty on iron ore from 15% to 37.5%, for fines and for lumps, it went up from 15% to 52.5%. So, if you buy from a captive mine owner like Tata Steel, you have to pay that much extra.

So, this also impacted our profitability. And the overall impact of this for the year has been huge, has been upwards to Rs. 150 crores. So, if you actually look at our profit before tax number, compared to the last year, we should have been higher by that number. But because of this impact, we have been lower. So, despite the brilliant operational performance all over, other than the blast furnace, we still got impacted.

On the positive side, the profitability has been helped, by as I said surge in Pig Iron prices, excellent operational performance, and of the plants.

So, this is the summary. And I will close at this. And I look forward to the questions and any queries that you might have. I will close, and I will just ask Subhra, if you want to add anything. Subhra Sengupta is our CFO.

Subhra Sengupta:

You have covered everything, but the price of other commodities like zinc, magnesium that has also got like haywire in last six months, and that DIP conversion cost, all raw material cost has got a huge push. And the coal maybe the highest impact, but the other also got a substantial impact of another say Rs. 10 crore to Rs.15 crore kind of. Other things you have covered.

Sahil Sanghvi:Dhaval Joshi:

Thank you. So, now investors, whoever want to ask a question, they can just press the Raise Hand button, and I will unmute them and they can go ahead one after the other. Yes, Dhaval

Joshi, you may go ahead and please ask your question.

There is a couple of questions from my side, first, can you give us the trajectory of how the DI Pipes sales would be for FY23? And from when or which quarter, we could see better realizations in terms of the higher price contract to flow in, to impact the profitability.

Sandeep Kumar:Dhaval Joshi:

I missed, one important point, is that the expansion project, the first phase which we were supposed to commission by March, April, is actually under commissioning. And we should start commercial production by next month. Despite the fact that the overseas engineers are not able to come in to India, because of the COVID related visa restrictions, and these are primarily from China. So, they face the maximum problem, currently they are undergoing, they are also facing this wave of COVID.

We are actually using augmented reality, a digital technology to commission the plant. And different equipments have already been commissioned, the rest are under process. So, let's say sometime next month, if we start production, then if we did, let's say about 230,000 to 240,000 tonnes of DI Pipes, this year, then in FY23, we should be able to do, let's say anywhere between 280,000 to 300,000 tonnes or even more, depending on how fast we commission and stabilize the plant.

And the second phase would then get commissioned by let's say, early next year. That's the plan. So, that's on the quantity. As far as the prices are concerned, just to give you a sense, the prices of DI Pipes, let's say in last year, if let's assume the numbers would vary, but let's say if they were Rs.50,000 per tonne, then today, those prices have moved up by at least 50% to

60%. And we have been booking orders, I would say, right throughout the year. But more, let's say more of these orders we have booked in the last three to four months.

And let's say almost 60% to 70% of our total order book in FY23 would be of these new orders. So, the old orders which come in at older prices, would still comprise let's say at least a third, if not more.

So, can we fairly assume roughly around 20% kind of increase in DI Pipes sales from FY22, with a new commissioning of the plant?

Sandeep Kumar:

I think that's a fair guess, it could be even more. See because what's happened is that since the commissioning is not being done physically by the technicians. So, there are some doubts as to how effective they have been. So, we may take a little bit more time to stabilize, that's the only concern. Otherwise your guess is actually conservative, we should actually, we would like to do much more than that. But I would like to keep that a little bit open and see how things go.

Dhaval Joshi:

And full ramp up and full benefit as of now, our WHR capacities and coke oven has been already built-in, already came in the numbers, in Q4. Is that assumption is right?