Sterlite Industries (India) Management Discusses Q3 2013 Results - Earnings Call Transcript

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 |  About: Vedanta Ltd (VEDL)
by: SA Transcripts

Sterlite Industries (India) (SLT)

Q3 2013 Earnings Call

January 29, 2013 7:30 am ET

Executives

Ashwin Bajaj - Senior Vice President of Investor Relations

Mahendra Singh Mehta - Chief Executive Officer, Member of Finance Standing Committee and Chief Executive Officer of Siil

Sushil Kumar Roongta - Managing Director of Vedanta Aluminium Limited, Chairman of Talwandi Sabo Power Limited and Vica Chairman of Bharat Aluminium Company Limited

Din Dayal Jalan - Chief Financial Officer, Principal Accounting Officer, Whole Time Director, Member of Shareholders' / Investors' Grievances Redressal Committee and Member of Finance Standing Committee

Analysts

Pinakin M. Parekh - JP Morgan Chase & Co, Research Division

Prasad Baji - Edelweiss Capital Ltd., Research Division

Sanjay Jain - Motilal Oswal Securities Ltd., Research Division

Saumil Mehta - IDFC Securities Ltd., Research Division

Ram Modi - Dolat Investments Ltd., Research Division

Bijal Shah - IIFL Research

Tanuj Rastogi

Giriraj Daga - Nirmal Bang Securities Pvt. Ltd., Research Division

Operator

Ladies and gentlemen, good day, and welcome to the Sterlite Industries Third Quarter Financial Year 2013 Results Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I would now like to hand the conference over to Mr. Ashwin Bajaj. Thank you, and over to you, sir.

Ashwin Bajaj

Thanks, operator. And good evening, everyone. This is Ashwin Bajaj, Director of Investor Relations. Thanks for joining us today to discuss Sterlite's results for the third quarter for the financial year at 2012, '13.

From our management team today, we have with us Mr. M.S. Mehta, CEO of the group; Mr. D.D. Jalan, Group CFO; Mr. Tarun Jain, Director of Finance; and Mr. S.K. Roongta, CEO of our Aluminum and Power businesses.

I will now hand you over to Mr. Mehta to take you through our results, and then we'll be happy to take your questions. Mr. Mehta?

Mahendra Singh Mehta

Thank you, Ashwin. Good evening, ladies and gentlemen, and thank you for joining us for the Sterlite Q3 results call. This has been another good quarter for Sterlite, and we delivered a strong financial performance with a net income of close to INR 1,191 crores, 30% higher compared to the last year.

We delivered strong operating performance across our commodities with significant production growth in copper, silver, zinc, lead, mined metal, aluminum, resulting in a strong and stable revenue of INR 10,700 crores during the quarter. Improved operational efficiency, marginally higher metal prices and premium and improved sales realization due to rupee depreciation, partially offset by the lower by-product realization resulted to an EBITDA of INR 2,375 crores.

Other key highlights are strong balance sheet with cash and liquid investments of over INR 23,000 crores, mined metal production up by 11% and silver production up by 8%, next phase of growth of mining production to 1.2 billion tonnes announced at Zinc India, strong operational performance at aluminum smelters, producing above-rated capacity and Vizag Coal Berth obtained provisional Commercial Operations Declaration and expect to commence operations in the current quarter.

While we shall discuss the results in detail, I'd like to provide an update on an important treaty [ph]. On Sesa-Sterlite merger, the transition received limited approvals. At this moment, we are awaiting approval from Madras and Goa High Court. Hearing at Madras High Court has been completed, and order is awaited. And order at the Goa High Court is in progress.

I will give you a brief business update about Zinc India. At Zinc India, as you might be aware, we announced next phase of growth. The growth plan includes increasing mined metal production to 1.2 billion tonnes. The projects will be completed in 6 years, and benefit of growth project will start flowing in from the third year onwards, even as projects will continue until financial year 2019.

Annual capital expenditure for these projects will average around $250 million a year over next 6 [ph] Years, totaling approximately INR 8,000 crores. Zinc India's metal production was 11% higher during the quarter and 22% higher compared to Q2. As guided earlier, we expect higher mined metal production during the current year as compared to the last year.

Our current quarter's volume performance largely reflects the mine plan for the year. We had said earlier that we expect strong volume upswing in the Q3 and Q4, and we're seeing that happening at this moment with the results of Q3.

Our integrated silver production at Zinc India was 8% higher in the quarter due to ramp up of production at SK mine and high utilization of lead-silver refining capacities. We expect to produce around 300 tonnes of integrated silver in the current financial year.

Zinc India EBITDA for the quarter was 8% higher, which reflects essentially high refined lead integrated volume, silver volume, higher metal prices and appreciation of Indian rupee, which were partially offset by lower zinc volume as planned earlier and lower by-product credit.

Profit after tax at Zinc India was 27% higher, primarily on account of higher investment income. We expect to produce about 190,000 tonnes of integrated zinc and about 35,000 tonnes of integrated lead in the current quarter. Going forward, as we look into the next financial year, we are ready to produce 1 million tonnes of mined metal as for the capacity of the company.

Turning to Zinc International, the division has delivered stable performance with a total production of 104,000 tonnes of refined zinc and mined metal during the quarter. Zinc International EBITDA for the quarter was 18% higher, mainly due to higher zinc and lead prices and lower CoP. As we stated earlier, we expect to produce 420,000 tonnes in the current financial year. And going forward, we anticipate a production volume of around 400,000 tonnes in the next year.

Copper India, copper cathode production was 9% higher at 92,000 tonnes, and mined metal production at Australia was in line at 6,000 tonnes during the quarter. EBITDA was lower on the account of lower sulfuric acid price realization and lower contribution from phosphoric acid operations besides marginally lower Tc/Rc.

At this moment, we expect Tc/Rc to be higher in the rest of the 2013 and going forward in '13, '14 financial year as compared to the last calendar year, largely because of demand-supply tilting in favor of the smelters. We are a bit cautious about the acid price scenario in the near term due to subdued demand from fertilizer sector, partly seasonal, partly due to subsidy issues.

As you're aware, we commissioned the 80-megawatt power plant recently, which has now stabilized and currently operating at 80% PLF. We expect to synchronize the next unit, the second unit, in the first quarter of the next financial year. This, as you're aware, is expected to reduce our cost of operations with reduce power cost and also provide us an opportunity to sell surplus power into the grid.

Moving down to the aluminum. Now both Vedanta Aluminum and BALCO aluminum smelters are operating at higher than their capacity during the quarter. And BALCO EBITDA for the quarter was higher due to higher premium as we continue to convert all our production into many different products, which has more than offset the impact of lower aluminum and higher alumina cost besides the increase in coal cost due tapering of coal.

Now coming to Lanjigarh, during the quarter, due to lower availability of bauxite, we temporarily suspended the refining operations in Lanjigarh. We are in active dialogue with various concerned authorities to ensure availability of sufficient quantity of bauxite from Orissa and other states to restart the refinery operations. At VAL Jharsuguda, we had an excellent production performance with their aluminum production higher by 21% during the quarter on account of full capacity utilization and much improved operational efficiencies.

EBITDA for the quarter was significantly higher on account of higher volume, [indiscernible] cost performance, higher metal premiums, higher conversion of metal into value added products [ph]. Vedanta Aluminium CoP for the quarter was stable on account of the superior operational efficiencies, reflecting lower power consumption and lower coal cost, despite the increase in cost of alumina.

This, as you're aware, has allowed us to maintain our position in the global cost curve, and we remain very firmly in the second quartile of the global cost curve.

On the project side, first 300 megawatts unit of BALCO captive power plant is awaiting regulatory approvals. We plan to tap the first metal in the new smelter 325 ktpa at Korba in Q1 of next financial year. This smelter, the new smelter, will initially be drawing power from the existing 810-megawatt capacity power plants.

At the BALCO coal block, we received the second stage forest clearance during the quarter, and we're progressing well towards commencing the mining in Q1 of next financial year. We continue to evaluate startup of 1.25 million tonnes smelter at Jharsuguda. We seem to be now reaching a point we can take this decision very soon. Until then, we'll continue to sell power in the maintenance period.

On the Power. Our power segment sales for the quarter fell by 4% on account of continued evacuation limitations that were enforced after the Northern and Eastern grid failure in August 2012. Evacuation capacity has marginally improved with the charging of a new 1,000 megawatts shared Raipur-Wardha transmission line in January 2013, and PLFs for the 3 commission plants are expected to be around 50% in the current quarter. The fourth unit is under stabilization. We expect to stabilize the operations by end of current third quarter.

EBITDA for Q3 was marginally higher due to lower generation cost at SEL despite lower sales realization.

Work at the Talwandi Sabo project is progressing well, and we expect the first unit to get synchronized in Q2 of next financial year.

On the port, as I mentioned before, Vizag Coal Berth obtained provisional CoP and expect to commence operation in the current quarter. As you're aware, it is a 30-year concession to upgrade the coal berth at Vishakhapatnam Port to a 10 million tonne capacity and operate it. This is being implemented at a total cost of $150 million.

With this, we'll look forward to a stronger performance in Q4 of this financial year and a stronger performance going forward at the back of -- record [ph] of continuous improvement and achievement of million-tonne capacity in the [indiscernible] significant part of Sterlite.

With that, Ashwin, we can take their questions.

Ashwin Bajaj

Yes. Thanks, Mr. Mehta. So operator, we can take questions now.

Question-and-Answer Session

Operator

[Operator Instructions] The first question is from Pinakin Parekh from JPMorgan.

Pinakin M. Parekh - JP Morgan Chase & Co, Research Division

I have 2 questions to start with. So first, can we get more details on this BALCO coal block in terms of what kind of production should we expect to start with, how would it ramp up, and where will this coal go, to which power unit, the 1,200 megawatts or the 810 megawatts? My second question is on the VAL start up. You did -- you have mentioned that we should be close to a final decision. Just trying to understand the thought process over here because premiums have remained very, very strong for more than 2 years now. Effective realizations are north of $2,200, and you have shown in this quarter that even with bought out alumina, that the cost of production remains at 19, 19.50. So just trying to understand the dynamics of how should we see this 1.25 aluminum smelter as and when to enter production.

Mahendra Singh Mehta

First, on the smelter start up, I think you are exactly thinking the way we would analyze the whole situation and in line with our consistent mention that we need to evaluate our options between power selling and delivery making. The premiums started going up in last 2, 3 quarters, thus we see consistency in that. Aluminum prices, also, we see some, I would say, recovery in the last few months. The key would remain how do we balance between the sale of power and the aluminum making contribution. So the parameters have not really changed. The dynamics or the methods [ph] remain same or similar as in the past. Maybe because of the factors that you mentioned before, and I share your same thoughts, we might be closer to taking a decision in the near future.

Pinakin M. Parekh - JP Morgan Chase & Co, Research Division

So it's like can we expect any volumes in FY '14 or any decision would impact on FY '15 onwards?

Mahendra Singh Mehta

No. I think this is very typical that once you start a smelter, you start commissioning the parts. You can do commissioning of 2 to 4 parts per day, typically in that range, and ramp up starts. Typically, as you're aware, that the aluminum smelters, the new parts take about 60 days to stabilize. So just like any other smelter start up, so we'll follow the same sequence. And from the time we go, I don't think we should take more than 1 month or 2 months to start the smelter. So in terms of our preparedness, I think we're well prepared for that. And lastly, commercial decision we need to [indiscernible] and take it.

Pinakin M. Parekh - JP Morgan Chase & Co, Research Division

Sure. And Sir, on the BALCO coal block?

Mahendra Singh Mehta

Yes, I would request Mr. Roongta to add his comments on that.

Sushil Kumar Roongta

BALCO coal block, as mentioned by Mr. Mehta, that we received second stage forest clearance during this quarter. So our all major regulatory approvals are in place. That is the environmental clearance, as well as second stage forest clearance. Now we are in the process of signing the lead agreement, and the rest of the process will follow. And we expect to start mining some time -- to commence some time in quarter 2 of next financial year. And initially, next financial year, we will be able to mine about 1 million tonnes, which we will take to 3 million tonnes, and this coal is meant for existing CPP [indiscernible].

Pinakin M. Parekh - JP Morgan Chase & Co, Research Division

Sure. So for the 1,200 megawatts you will still have to rely on linkage?

Sushil Kumar Roongta

Yes, that's true.

Pinakin M. Parekh - JP Morgan Chase & Co, Research Division

And this will ramp up to 3 million tonnes, eventually?

Sushil Kumar Roongta

Yes, yes.

Operator

The next question is from Prasad Baji from Edelweiss Securities.

Prasad Baji - Edelweiss Capital Ltd., Research Division

Just some follow-up questions on the coal block. One, what is the land acquisition status? Second, what kind of cash cost landed to the power plant can we expect? And third, is the capacity 3 million tonnes ultimately or that's just in FY '15, but what's the capacity of the mine as such? So just 3 questions on the mine, there are a couple of others as well.

Sushil Kumar Roongta

As far as land acquisition is concerned, after the formal lead agreement is signed, then land acquisition process will start. So we are waiting for the formal signing of the lead agreement with the state government. And capacity, as I said, from 1 million, we will take it to 3 million tonnes and we will, I suppose, explore the possibility of ramping up the capacity further beyond 3 million tonnes also. And what was your...

Prasad Baji - Edelweiss Capital Ltd., Research Division

Landed cost of the coal at the power plant.

Sushil Kumar Roongta

As cost to -- well, it has -- it will depend upon what is the burden in the coal, and we are evaluating our cash cost, because some contract agreement we have finalized and additional contract agreement we have yet to finalize. So on brief estimate, you can say that cash cost for coal landed at our plant will be in the region of INR 1,500 to INR 2,000 per tonne.

Prasad Baji - Edelweiss Capital Ltd., Research Division

INR 1,500 to INR 2,000 are the cost?

Mahendra Singh Mehta

And this is also a function that when you open a new mine, you might have some fluctuation in the [indiscernible] the wall tunnels that need to be done. So it might have some stabilization period until we get into full 3 million-tonne capacity level. Ultimately, as you can imagine, that is a large capacity coal block of 210 million tonnes. As a potential, gross scale beyond 3 million tonnes and the large cost is largely stripping in the transportation. So there are no surprises, just the very typical method and some sequences to the mine plan.

Prasad Baji - Edelweiss Capital Ltd., Research Division

Okay. Just a couple of other questions as I mentioned. On the Sterlite Energy part, earlier we had mentioned in the previous phonecall with the coal sourcing improving and the grid issues getting sorted out, we should go towards 75% PLF. I think in the December quarter, the grid issues have continued. But from an overall perspective, in January, you have commissioned additional grid capacity as well as I think some of the restrictions are getting lifted. So are we still looking at a similar kind of PLF? Or is there some change in where we will end up on a steady state basis?

Sushil Kumar Roongta

Well, as you have mentioned, this transmission capacity has got augmented by commissioning of this Raipur-Wardha double circuit line synchronization in June -- in January this year. And well, we expect that on 3 unit commissioned on a working basis, our PLF will be around 50% as compared to just about 35% in Q3, or less than 35%. To that extent, it is definitely going to be a significant improvement over Q3 and Q4. And going forward, in FY '14, we can expect further improvement in PLF.

Prasad Baji - Edelweiss Capital Ltd., Research Division

What is the kind of target that we have set for FY '14 for PLF?

Sushil Kumar Roongta

From there, we have some additional transmission line capacity, which is under construction, which will come by September 2013, which will augment our capacity for the state grid. And we are working out our plan for FY '13, but I can hardly say that it will certainly improve our Q4.

Prasad Baji - Edelweiss Capital Ltd., Research Division

Our understanding is that...

Mahendra Singh Mehta

Those cannot be in our hands, but I think our dialogues with the grid authorities is to permit more evacuations through that corridor. I think we expect that also lead some possible result in increasing the volume in the restriction imposed post August 2012. So it's a function of removal of the restrictions, addition of more capacity as Mr. Roongta mentioned. So at this point in time, the decision is hinging up on the removal of the restrictions by the grid authorities. It's difficult for us to put a timeline and the new capacity we add in September '13.

Prasad Baji - Edelweiss Capital Ltd., Research Division

How will this 1,000 megawatts, my understanding is that our transmission capacity is around 2,800 megawatts. Is that right?

Sushil Kumar Roongta

This 1,000 megawatts is not our exclusive transmission. This is -- power grid has commissioned an additional Raipur-Wardha double circuit line, which gives addition 1,000 megawatts evacuation from that area for the National Grid. So that's an addition 1,000 megawatts available for open access sale. And so we are also one of the beneficiary, including BALCO, because of this additional capacity in evacuation. And grid authorities are continuously reviewing their restrictions on the line capacity. So if they come forward and lift those restrictions, then to that extent, additional evacuation will be available. So since we are not able to forecast or anticipate to what extent they will lift the grid restriction capacity, that's why I am not able to tell you the PLF going forward in Q1 of next year or so.

Operator

The next question is from Sanjay Jain from Motilal Oswal Securities Limited.

Sanjay Jain - Motilal Oswal Securities Ltd., Research Division

My question relates to the Power segment of press release Page #8. There is a table on which we are talking about the average power realization in the third line from the bottom, where we are talking about average realization at INR 3.35. And in the same table, if I compare from the second quarter, this has come down by 10 paisa per unit. But there is a much sharper drop in the revenue, indicating a sharper drop in the realization when you divide with the volume. So, I mean, where is the disconnect?

Mahendra Singh Mehta

Maybe, Sanjay, we'll park this question, we'll look at it. In the meantime, if you don't have any other questions, we'll come back to you, and we can take the question in the meantime for the management of time.

Operator

The next question is from Saumil Mehta from IDFC Mutual Fund.

Saumil Mehta - IDFC Securities Ltd., Research Division

Just 2 questions. One, is for this particular quarter, our entire sourcing of alumina will depend on imported or third party for Lanjigarh refinery. I was just thinking, are -- what are the cost efficiencies going to be because you will have a significant increase in cost of production? So will efficiencies offset those costs or you will see, starting Q4, assuming there is going to be no resolution on the hearing, so imported or bought out alumina will continue to prevail even in FY '14?

Sushil Kumar Roongta

Well, for FY '14, we can always expect that there will be resolution of refinery issue and we will operate our refinery. Just talking of the current quarter or Q3, certainly, operational efficiencies will relatively offset any additional costs we may be incurring on account of imported alumina instituting our Lanjigarh Alumina.

Saumil Mehta - IDFC Securities Ltd., Research Division

So if I do a rough math of the [indiscernible] of $150 to $200 per tonne increase of cost on alumina, so will cost efficiencies play out those or no?

Sushil Kumar Roongta

Well, I think increase is not to that extent on account of alumina. And this quarter, we expect much better operational efficiencies, including our power cost is going to come down significantly because quarter 4, we are modeling test coal, as well as operational efficiency in terms of power usage also is improving considerably. So these 2 factors will [indiscernible] commodity prices are also slightly lower in this quarter as we move to Q3. So all these factors should offset any impact of -- any adverse impact on the terms of higher imported alumina in this quarter.

Saumil Mehta - IDFC Securities Ltd., Research Division

Sure. Sort of my second is just a bookkeeping question now. What is the average linkage coal we got for BALCO as well as VAL for this quarter and how it has changed for -- on a q-on-q basis?

Sushil Kumar Roongta

Well, the [indiscernible] situation, it keeps changing. The average linkage coal for VAL, it varies for CPP as well as IPP because different configuration in terms of linkage. But on overall basis for VAL, you can say that our linkage is in the range of about 40% to 45%.

Saumil Mehta - IDFC Securities Ltd., Research Division

40% to 45%. So is this for quarter 3 because...

Sushil Kumar Roongta

For this quarter you are talking.

Saumil Mehta - IDFC Securities Ltd., Research Division

So what would the number be for BALCO?

Mahendra Singh Mehta

And BALCO linkage coal will be roughly about 45% to 50% roughly in the current quarter.

Saumil Mehta - IDFC Securities Ltd., Research Division

45% to 50%. And can I just have one last question? On Zinc International, we've seen volumes getting very stagnant. In fact, they have come down when you compare with the last 3, 4 quarters. So just wanted to get a sense how will -- do we see any improvement going next year or -- unless or until we prove the results, volume in Zinc International will continue to be at about 0.1 million tonnes quarterly run rate?

Mahendra Singh Mehta

Well, I think it is a fair estimate of 0.1 million tonnes quarterly run rate. This is flat to what you mentioned earlier, that 428 expected the current year, and we expect 400,000 in volume next year, largely reflecting the slight change in the grid performance in the mines. There will be mine metal production as many [ph] good and stable. But we would not rule out any opportunities if we come across after 1 or 2 quarters of performance in next financial year like what we did this year also. We increased our estimate in the middle of the year. Operations are in good shape. We are anticipating certain mine plan. Based on that, we are projecting 400,000 volume.

Operator

The next question is from Ram Modi from Dolat Capital.

Ram Modi - Dolat Investments Ltd., Research Division

Just wanted to know for that land acquisition for the mine at BALCO, is it a government land, a forest land or we need to do it from the large part of habitation? The application needs to be done there?

Mahendra Singh Mehta

Yes. A large part of it is forest land, which while second-stage forestry approval has already been given for diversion of that forest land. And also some part is also the forest land.

Ram Modi - Dolat Investments Ltd., Research Division

So for an anticipation of in over the next 5, 6 months, we will be able to complete this land acquisition and straight and to start mining?

Mahendra Singh Mehta

We don't have to complete the entire land acquisition to start mining as per our mining plan. Even we'll start acquisition of the land, we can start -- commence the mining. We will complete the acquisition in due course.

Ram Modi - Dolat Investments Ltd., Research Division

Okay. So the acquisition will be completed in Q4. Second thing, I just wanted to check in if that our addition of around 1,000 megawatts of grid capacities to state was supposed to start in March '13, and now you've postponed it to September '13. So any major delays happening there?

Mahendra Singh Mehta

No. There are some issues with regard to the state of our date with regard to [indiscernible]. There are some local issues. So this is now in September. And eventually, this will not add to the capacity of 1,000 megawatts because we are, in any case, already evacuating. So it will be a shared line, but we will have the preferential use for this land.

Ram Modi - Dolat Investments Ltd., Research Division

Okay. And just wanted to know about our fourth unit at SEL. It's long been into stabilization. So almost I believe it's almost now 8, 9 months. So when can we expect this unit to declare the COD?

Mahendra Singh Mehta

The unit had declared COD, but unit has not achieved the reliabilities and the PG test. So it is undergoing now reliabilities and PG test. And this, we expect to complete this quarter.

Ram Modi - Dolat Investments Ltd., Research Division

Okay, because what we see into our quarterly release is that the run -- the state on the 456 million units were under the trial run. So if that would have been -- it should have not been, if the unit would have been at COD, it would not have been under trial run?

Mahendra Singh Mehta

No. Reliability run and PG test can take place after COD. So we had yet to complete the PG test around certain deficiency, which CPC contractor is attending now. And we expect that PG test in good time.

Ram Modi - Dolat Investments Ltd., Research Division

Okay. And last question is with the completion of, this September, this upgrade of grid, can we expect then, if the color already is there, that we can ramp up this to 80%, 85% of PLF, all of 4 units?

Mahendra Singh Mehta

Well, it gives us additional revenue to evacuate full power to the state. Right now is going about 400 to 450 megawatts. We will be able to do additional of power evacuation to the state and as well as to the central grid through that line. So certainly government's our capacity, but I can't link it to -- say that it leads to 85% of PLF.

Sushil Kumar Roongta

A couple of plants are in good shape, a couple of moving parts out there. Our own additional capacity addition, the restrictions in post with the grid authorities, which we thought were temporary and should get removed. And if we paint a scenario with a smelter startup, the whole thing will change significantly because then there are no issues of the power evacuation. So this is -- if you could imagine a couple of moving parts out there, so difficult to give one single number.

Ram Modi - Dolat Investments Ltd., Research Division

Okay. And just last question is regarding, as mentioned in the press release, that we will be withdrawing power from our -- for our BALCO unit from our existing unit. So are we expecting a very slow ramp up or a stabilization period for our 300-megawatt power plant?

Mahendra Singh Mehta

No. That is basically a segment that this can start irrespective of the 300-megawatt unit, and we have the power available from 270, which is surplus which BALCO's selling in commercial market as of now. It's more like a backup plan. It's not really the plan A. It's more like a backup plan.

Ram Modi - Dolat Investments Ltd., Research Division

What are these regulatory approvals which are actually needed for this 300-megawatt unit power to start up? Because we have been continuously postponing this commissioning.

Mahendra Singh Mehta

Well, this is a consent to operate the final approval we are awaiting, and that, of course, all regulatory approvals will be with us.

Operator

The next question is from Bhavin Chheda [ph] from Enam Holdings [ph].

Unknown Analyst

So what is the gross debt number?

Mahendra Singh Mehta

Yes, Bhavin [ph], the gross debt number as of 31st December for Sterlite was INR 18,600 crores.

Unknown Analyst

INR 18,600 crores. And company-wise, breakout, if you have it, mainly how much in BALCO and Sterlite Energy?

Din Dayal Jalan

It is basically about INR 4,000 crores in BALCO, INR 2,000 crores in Sterlite Energy, INR 3,800 crores in TSPL and about INR 8,000 crores in Sterlite.

Mahendra Singh Mehta

If we can go back to Sanjay, there was a question on the power reconciliation. So we are ready to answer that point, in case we can get Sanjay back in the call. Otherwise, I'll request Ashwin to offline response for Sanjay. Let's continue with the call and give a chance to Sanjay, so they join back and get response to his query.

Operator

Sanjay Jain.

Sanjay Jain - Motilal Oswal Securities Ltd., Research Division

Yes.

Din Dayal Jalan

So, Sanjay, I think if you just read the footnote #1, which is below the table wherein it is said that 456 million in Q3 is on trial run. So if you subtract this from 1,916, you will get the answer.

Sanjay Jain - Motilal Oswal Securities Ltd., Research Division

No. Still, I mean, when I compare from the second quarter, I'll see -- okay, you're seeing that. Just give me a moment. You have done this also. Yes, see, if I do that, then...

Mahendra Singh Mehta

The accounting, you can do offline, yes?

Din Dayal Jalan

If there's anything, then we can further try to expand it. I think that is what is the broad answer to the question.

Operator

The next question is from Bijal Shah from IIFL.

Bijal Shah - IIFL Research

Two questions. First on your comment that, I mean probably which is as still that you are likely to start aluminum smelter at Vedanta Aluminium. So I was just doing some math. If I assume that you continue with $1,900 of cost and which itself could be a tough task given that alumina would be bought out going forward, and INR 2,200 of realization, you would make around say, INR 15,000 per tonne. And for that, you will be consuming around 14,000 units of electricity, where also we are making more than INR 1. So why you are seeing that it is easier call now? I think it remains a tough call at this point in time as well.

Mahendra Singh Mehta

Yes, you're right. We will have to take a very considerate call given time to time. But obviously, in a dynamic market, aluminum realized units improve and power tariffs have come down compared to a scenario maybe 1 year ago but tilting this more towards aluminum. But obviously, the right moment will take the call through proper arithmetic, that's for sure.

Bijal Shah - IIFL Research

Is it indicative of some issue probably or some market-related thing which you are thinking of, of Power business or probably realization or probably power evacuation from that place over medium term?

Sushil Kumar Roongta

No, I don't think our evacuation we've foreseen 1 year ago when we said that we will weigh our options and take the right call in the interest of shareholders. So that time, there was no power evacuation issue yet, which was to make that position.

Bijal Shah - IIFL Research

No. Now, I mean when you are seeing -- so now, is there something you've seen with respect to your outlook for power evacuation, as well as power price in that market? Because, I mean, overall profitability for both options still look very similar, and it is not like 1 day you can switch smelters, switch on the smelter, another you can switch off the smelters. So I'm coming from there, actually.

Sushil Kumar Roongta

I mean, I don't wish to start pulling an aluminum price, but I think we all understand the direction of aluminum price due to the dynamics globally in Northern India. But despite all the handicap, we are fulfilling pressurized and second quartile of cost curve. The last capacity globally is right now bleeding in the form of having cash cost much higher than aluminum price. So it would be like it's back directionally aluminum price for cost to be superior, as compared to the direction of power tariff meter.

Bijal Shah - IIFL Research

Okay, okay, that is very helpful. Now just small related question on that. Your capacity is 1.25 million, and let's assume that you probably ramp up it over 1 year's time. That would mean -- I mean, you will need around 3.5 million tonnes plus alumina from the open market. For a while, let's assume that refinery and related issues may not get sorted out. I mean, assuming that, do you think that so much of -- I mean, if you go with such a large quantity in alumina market, you yourself can lead to an increase in alumina price?

Mahendra Singh Mehta

I think globally, additional alumina capacity is getting installed, already in the 2 new refineries that have commenced operation in Australia. Then that is also increasing their alumina capacity. So the outlook on alumina front is that alumina is going to be there level. And then we are not discounting that the refinery will commence production. So I don't see alumina being an issue. And by share, our presence in global alumina market will have significant impact on the alumina price.

Bijal Shah - IIFL Research

Okay. Second question is on BALCO. I was just going to report on BALCO mine. It says that you were around 100 hectares to acquire from government around 365, which is the forest land, which also will come from government. Then, it says that there's 600 hectares of other land, which is with private parties. So can you give us -- give me some idea whether that 600 hectares, what amount we acquired or not acquired? That is one. And secondly, even without acquiring that, we can start coal production. So basically what I'm asking is that is the large part of full reserve is only in the government land and the forest land, which you will get in any case?

Din Dayal Jalan

Well, we have -- I can -- to give answer to your last question first, we have not acquired private land yet. So we have to acquire the entire tract of the land, including forest, government and private land. And well, as far as the mining part is concerned, it will have to be seen, I'll answer offline, that looking at the mining plan, that which portion of the government land and private land falls in our initial mining plan program.

Sushil Kumar Roongta

Just to give you a view, I don't think we need a large tract of private land to start mining operations. It is all project [ph] life cycle land requirements. So that can happen as you go along.

Operator

The next question is Dhawal Doshi [ph] from PhillipCapital [ph].

Unknown Analyst

Sir, just a question on the BALCO power plant. Sir, there was news some days back, probably last month or so where in it's in the [indiscernible] government has suspended the factory license for the new 1,200-megawatt power plant. Just wanted to know what is the issue all about and what is its current status?

Mahendra Singh Mehta

Yes. There is a temporary suspension of factory license for that power plant, and I suppose we are fulfilling their requirements and due to which the suspension has been done, and suspension can be restored. It's not the case in this. It is only a temporary suspension.

Unknown Analyst

So how long do we expect? And is that one of the reasons why the commissioning of that unit is probably getting delayed and we'll be sourcing from the existing 810-megawatt plant?

Mahendra Singh Mehta

No, that is not the reason. That is not the reason because that does come only very recently. And as I already answered that question, that watt regulatory approval mean.

Unknown Analyst

Okay. So how long do we expect the suspension to be vacated?

Mahendra Singh Mehta

Well, I suppose that this is not a metal issue. The suspension will get vacated. And I suppose it is a separate issue altogether. It is not linked to the regulatory approval, which we are waiting to commence the operations.

Unknown Analyst

Okay, And sir, secondly, can you just help me out with the average cost of coal for both BALCO as well as your VAL for the current quarter?

Mahendra Singh Mehta

Realized cost for coal for -- you want to know for VAL or...

Unknown Analyst

For VAL, as well as for BALCO.

Mahendra Singh Mehta

Well, for VAL our cost, roughly a total cost of realization you can say has been roughly about 2.35 to 2.40, including the coal cost. So coal cost has been roughly about a little over INR 2.

Unknown Analyst

And coal cost is a little over INR 2. And for BALCO?

Mahendra Singh Mehta

BALCO, so the actual coal cost is 2 rupees, 6 paise for BALCO.

Unknown Analyst

2 rupees, 6 paise per unit for BALCO. And sir, absolute, if it's fine with you, absolute cost of coal? I mean is it a burden cost of coal?

Din Dayal Jalan

I think [indiscernible] may vary so...

Mahendra Singh Mehta

Production of cost will depend upon where the quality of the coal. So you have done, you have to see the cost of coal particularly.

Unknown Analyst

Okay. So not an issue. At least you can give me the cost of production for BALCO?

Mahendra Singh Mehta

The cost of production for BALCO is about 2.65.

Unknown Analyst

Okay. So it's more or less the same for VAL as well as for BALCO?

Mahendra Singh Mehta

Yes.

Operator

The next question is from Tanuj Rastogi from MSFL.

Tanuj Rastogi

Just one question. For the Lanjigarh refinery, what are the probable options are you looking for?

Sushil Kumar Roongta

For Lanjigarh refinery? Yes, for Lanjigarh refinery, you may be aware a comment of Orissa has constituted a high-powered committee headed by the finance minister, retail industry minister and mines minister also to look into arrangements for making the mineral ore available for steel and aluminum industry. That's iron ore, manganese ore and bauxite and chrome ore. And this high-powered committee has already held its sessions with the steel industry. And we have also met them and some more submissions they asked, which we are submitting to them. So the committee separately looking to how to make bauxite available to the operating refineries within the state. And, of course, we are -- we have been sourcing bauxite from other states including BALCO has been sending bauxite for tolling basis, but that option remains with us. And we are engaged with government of Orissa how in short term and medium term we can source bauxite from Orissa. That is our primary objective.

Tanuj Rastogi

So the process itself seems to be very time-taking, very long term. So there is no immediate interim relief for the government of Orissa?

Din Dayal Jalan

Well, one of the mandate to this committee is to look for immediate measure, and I believe that government of Orissa has asked its mining department also to look into what immediate measures can we take into make supplies of bauxite to Lanjigarh refinery because that's -- it's right now not operating for want of bauxite. But then you understand the process after all. Governmental process takes its time, but I suppose there is quite a seriousness on the part of government and on this issue.

Tanuj Rastogi

Okay, sir. So any update on the Reichel [ph]?

Mahendra Singh Mehta

Well, Reichel [ph] also they operate in consideration of government of Orissa, and we expect the approvals from them.

Operator

The next question is from Giriraj Daga from Nirmal Bang Equities.

Giriraj Daga - Nirmal Bang Securities Pvt. Ltd., Research Division

And so my question a little first, what is happening on the Manipat part of bauxite mine? Is there any update there?

Mahendra Singh Mehta

Yes, Manipat bauxite mine for, well, for approval of operations pending further approval. We have to approach Appellate Court for the relief. It was granted to MALCO. So we are approaching the Appellate Court for that relief. After that, we can get the temporary working permit for 1 year. And in the meanwhile, we'll complete [indiscernible].

Giriraj Daga - Nirmal Bang Securities Pvt. Ltd., Research Division

Okay. So the second last question further bauxite sourcing. Do we have like in India steady mines, you're saying the committee has been formed, but what they will do? They will locate new mines to you? Or is there already some mining happening, and they may look at that portion of the mine out to you? If the new mines happen, then what about output time it would take? It may take around 12 months to 18 months also.

Mahendra Singh Mehta

We already have MOU with the ones here and know that MOU there, they're supposed to supply us 150 million tonnes of bauxite. So even if they don't allocate the mine to me through [indiscernible] they can meet bauxite next in the shorter term.

Giriraj Daga - Nirmal Bang Securities Pvt. Ltd., Research Division

But where they will get it? That causes me to be...

Mahendra Singh Mehta

There has been some mines, operating mines, which are in close. Plus, there are some small mines. They are looking at all options, we believe.

Giriraj Daga - Nirmal Bang Securities Pvt. Ltd., Research Division

Okay. So do you think that these mines can make the numbers to where we can operate such adequately?

Mahendra Singh Mehta

Yes. For a shorter duration, yes, it can because there may be mines, they are not with large deposits but so they don't sell long-term needs, so it's the same basis. But for a short-term duration, yes, we have the solution.

Giriraj Daga - Nirmal Bang Securities Pvt. Ltd., Research Division

Okay. And this 1,200-megawatt BALCO pop and roll, so is evacuation a problem? Or it's in different locations of mineral growth?

Mahendra Singh Mehta

No. It is in the same, but as I said that additional capacity has got -- commissioned capacity and both commissioned in January. That has improved position for BALCO also, and it is in the same zone.

Giriraj Daga - Nirmal Bang Securities Pvt. Ltd., Research Division

Okay. My last question is there's a news that law ministers of the [indiscernible] ended in BALCO stake sale [ph]. So is there any communication or any note with the company has gotten from the ministry or from anybody saying -- or what is the company take on that?

Din Dayal Jalan

I mean, as far as commission is concerned, we have a fully keen to complete this [indiscernible] file. And we had given the offer also. We remain engaged with the government. Like you, we also read something about this law ministry or that angle of metal corporation. But as you also might -- are aware, that similar point was also raised in some matter that was decided at the Supreme Court recently, and Supreme Court viewing that what happened was fine. So if you draw any inference on that, then we don't see using that inference, there's to be a significant point.

Operator

The next question is from Satya Murti [ph] From Sunna Mutual Fund [ph].

Unknown Analyst

Just a couple of data points. Could you give us the current sulfuric acid and phosphoric acid realizations and the Tc/Rc for current quarter?

Mahendra Singh Mehta

Sulfuric acid is typically around INR 2,000 at this moment in that part of South India. And phosphoric acid is about INR 45,000?

Unknown Executive

INR 35,000.

Mahendra Singh Mehta

INR 30,000, INR 45,000 at this time. But phosphoric acid prices are determined, as you're aware, by the fertilizer association. So we will get enough of time to time. Caution is phosphoric acid price would be the offtake in the industry at this moment because we have committed stock and less offtake. So that's the reason phosphoric. It's actually a good business price can set up against the rock phosphate that is important and mineral parity between phosphoric is rock phosphate. So that's not the issue. It's dynamic but linked together.

Unknown Analyst

Okay, and the Tc/Rc?

Mahendra Singh Mehta

Tc/Rc one should ask in a broader term not quarter-to-quarter because the mix may change in the quarter-to-quarter. But on an annual basis, as you're aware, 80% are long-term contracts. And we expect long-term contract for 2013 to be significantly higher than setting for 2012, as I mentioned before, because of supply demand balance tilting into smelters. So we expect them to be higher, significantly higher. Actual numbers are getting thrown, but I think it will get shaped next couple of weeks now.

Operator

Ladies and gentlemen, that was the last question. I would now like to hand the conference back to Mr. Ashwin Bajaj for closing comments.

Ashwin Bajaj

Yes. Thank you. Thanks, ladies and gentlemen, for joining us today. And if you have further questions, please contact us at Investor Relations. Thank you.

Mahendra Singh Mehta

Thank you.

Operator

Thank you very much. On behalf of Sterlite Industries, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.

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