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“Director of MSP Steel & Power, Saket Agarwal spoke to CNBC-TV18’s Sonia Shenoy and Reema Tendulkar about the latest happenings in his company and sector.
Below is a verbatim transcript of the interview. Also watch the accompanying video.
Q: There is a buzz which is doing the rounds of an impending steel price hike very soon. Is that something MSP Steel is considering?
A: Steel price has been slightly stable for the past two or three weeks. As the monsoon season is getting over, we are looking at upswing in the steel prices. Most of the primary steel producers are already talking about increase in prices. Our prices are also being slowly inching upwards. Probably from September onwards we are looking at slightly better realization in terms of prices of steel.
Q: In a percentage term could you quantify that if a steel price hike does take place what would it be?
A: Should be anything between 5% to 7%, not much more.
Q: What about the entire power business? That’s expected to be a big kicker from here on. You do have a power plant as well which gets operational, next month. Could you walk us through what rates you would be selling power at and what kind of revenue accretion that you are expecting eventually?
A: This is typically an 18 megawatt power plant which is from a mix of waste heat recovery and our rejects which are generated from a captive washery. For this power plant practically the fuel cost is very nominal and we are looking at selling close to 15 megawatts surplus power from this power plant. The realization we are looking at anything between Rs 4-5 for the next six months, given the fact that the third and fourth quarter prices of power, are always better off as compared to the first two months.
Q: Next couple of quarters of good power generation then. Any capacity expansion plans that you have outlined for the same?
A: We are looking at another power plant of 34 megawatts going on stream in the second quarter of FY12. That will be adding to revenues. We will be looking at sale of around 30 megawatts.
Q: What would all this mean in terms of an FY11 and then in FY12 revenue generation for the company?
A: We will be looking at revenue of close to around Rs 650 crore to Rs 700 crore for FY11, given the current prices of steel and power. For FY12 we are looking at touching more than Rs 1,000 crore. We have also two direct reduced iron (DRI) plants under expansion and further pellet plant under construction. These projects will also be commissioned phase wise in 2011-12, the revenues of which will be commencing in 2011 and partially in 2012.
Q: That’s a huge jump that you are talking about, because in FY10 you did revenues of about Rs 400crore. What is the outlook on the margins and bottomline?
A: We are looking at stable earnings before interest, tax, depreciation and amortization (EBITDA) margins of around 25% to 28%, which we have been maintaining in the past couple of years. Going forward, we would be looking at maintaining the margins.
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