The upward rally in prices of input materials continued unabated throughout the second quarter. The average LME prices of Nickel and Ferro-chrome in Q2FY22 climbed by 10% and 21% respectively over Q1FY22, which had a positive impact on inventory valuation. This, along with an improved volume mix, led to a 23% increase in EBITDA in Q2FY22 over the sequential quarter.
On a standalone basis, JSL’s EBITDA and profit after tax (PAT) stood at INR 711 crore and Rs363 crore, up by 34% respectively.
Net Lenders’ debt (excluding group company Jindal Stainless (Hisar) Limited’s (JSHL’s) debt) as on September 30, 2021 stood at INR 1,564 crore. With focused capital allocation, the interest cost during H1 FY22 reduced by 37% to INR 160 crore over H1 FY21.
All major end-use segments like process industry, Pipe & Tube, Railways & Wagons, and Metro Rail grew during the quarter keeping the stainless steel demand firm. As general manufacturing picked-up pace during the quarter, demand for special grades like duplex and super austenitic, where JSL is an established supplier, also gained momentum. Auto segment sales remained weak on account of the long waiting period necessitated by semiconductor shortage. Despite prevailing logistical challenges due to container scarcity, JSL maintained strong operational performance through advance planning and strategic sourcing of raw materials.
While maintaining major focus on the domestic markets, the agile business strategy helped the Company increase its exports percentage from 20% in Q1FY22 to 23% during Q2FY22 to counter the continual surge in imports of stainless steel from China and Chinese-funded investments in Indonesia.
Other key developments:
1. In an adverse development, the government extended the suspension period of Countervailing Duty (CVD) from China by another five months beyond September 30, 2021. The final findings issued by Directorate General of Trade Remedies, Ministry of Commerce and Industry on import of stainless steel flat products from Indonesia have yet not been notified by the Department of Revenue, Ministry of Finance. These decisions have dealt a blow to the domestic industry, which has witnessed an import surge of 115% during the April’21- September’21 period on a YoY basis. The share of imports in the domestic market in Q2FY22 stood at 40%, compared to 35% in Q1FY22. The rising imports trend hurts medium and long-term prospects of the Indian stainless steel industry and will severely hurt MSME manufacturers. The domestic industry is in constant dialogue with government on this issue.
2. CRISIL Ratings has upgraded the rating of short-term bank facilities of JSL to ‘CRISIL A1+’ from ‘CRISIL A1’ while reaffirming ‘CRISIL A+/Stable’ rating on the long-term bank facilities. The upgrade factors in the Company’s healthy liquidity profile and cash accrual as a result of strong operating performance along with deleveraged balance sheet and a minimal long-term debt obligation over the medium term.
3. Merger update: The Company’s petition for merger with JSHL is pending before Hon’ble NCLT, Chandigarh for approval.
4. Projects update: All brown field expansion projects announced in Q1FY22 are on track.