Rupee's deprecation has aided realisations and the Indian currency is likely to stabilise in range of 61-62/USD, he added.
Further, he said that the company's net debt currently stands at Rs 30,435 crore and is looking at hedging costs to zero and balance forex exposure.
Also Read: JSW Steel posts Q2 loss at Rs 115.5cr on exceptional item
Below is the edited transcript of Seshagiri Rao's interview with CNBC-TV18
Q: Your topline has beat street estimates because of higher contribution that you had from the export sales volumes, for FY14 you had a sale target of around 12 million tonne or so. Given the fact that exports are improving so much, do you think you may have to scale up that target?
A: Yes, we have already given the guidance of 3 million tonne of exports in this year as against 1.9 million tonne in the last year. So, it is almost 1.1 million tonne of more exports from India. At the same time, last year, India had exported 4.5 million tonne out of that our share was 1.9 million tonne.
First six months of this year if you take total India's export of steel, it has improved by 200,000 tonne, out of that 50.3 percent is from JSW Steel . That way, on one side India is exporting more and when Indian steel industry demand is flattish then export markets is looking better and India is competitive in terms of steel production. We are able to capture that advantage and then increase our exports. That is why one million tonne of more exports which we are talking in this year.
Q: You were talking to us also about how because of the currency you are ready to replace steel that would have otherwise been important, how much of the sales have come from that and therefore what will you extrapolate as sales growth for the second half?
A: Today imports are falling. In the first six months of this year, import of steel into India has come down by 23 percent and exports are growing. So one way is out of these imports, which are happening into India, how much is replaceable, how much is substitutable, how much cannot be substituted if you look at it - only a few elements of steel which are getting imported into India particularly high technology oriented steel are imported.
I don't think they are more than 2 million tonne out of 8.6 which were imported last year. So 6.6 million tonne of steel can be substituted subject to certain constraints majorly relating to iron ore availability. If it can be increased, Indian steel industry is quite competitive to meet the challenge and also taking the advantage of what is vacated by other countries like China is slowing down next year. This is a great advantage for India to do better and to substitute these imports and at the same time become the global hub.
We have that competitive strength, low labour cost, iron ore availability. Also, technology is coming from companies like Japanese and Koreans into India. So, we will be able to produce very high-end value added steel products and then reduce the pressure on the overall balance of payment.
Q: Tell me how you manage currency volatility, you are trying to win export orders, domestic orders over the next 12 months what you are assuming for the currency and how you are going to manage this volatility?
A: The way we have seen so far is that steel as a product is a globally traded product whether we sell in the domestic market or we export, economic exposure wise we have the dollar exposure. Whether rupee appreciates or depreciates it gets reflected by higher realisations or lower realisations in the sales. Therefore there is no need for hedging that is the view which we have been taking so far. But what it results in is there is mark-to-market (M-T-M) on the outstanding payables are long-term loans, which is bringing a lot of volatility in the earnings.
Therefore, what we have decided is that imports also we cover, exports also we cover. Thereby there is no volatility in the earnings at the same time, we need not worry about what happens to rupee/dollar. This brings stability in the cash flow and reduces volatility in the earnings. So, we are changing the hedging policy from this quarter onwards. Rupee will be stable going forward. It has already depreciated from almost 54/USD as on March 31, 2013 to 61-62/USD. So it may stabilise at that level.
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Eye 3MT exports in FY14; net debt at Rs 30435cr: JSW Steel
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