The company, part of the diversified JSW Group, reported 36 percent decline in net profit at Rs 162.59 crore in Q2FY14 versus Rs 254.04 crore (Y-o-Y), mainly hit by forex losses. It raked in a total income of Rs 2,024.63 crore in Q2FY14 compared to Rs 2,076.53 crore in the same period a year ago.
But the company didn't see any uptick in power demand during the state assembly elections, since all the four states Delhi, Rajasthan, Chhattisgarh and MP, which have gone into elections, have surplus power, Joint MD and CEO Sanjay Sagar told CNBC-TV18 in an interview.
However, he is hopeful of demand firming up in the last quarter.
Merchant realisations have been steady in southern India, but have been subdued in the West and North, he added.
The company has been guiding for overall realizations of 4.25-4.50/unit on an average and hopes to be able to sustain with the same guidance.
Also Read: Overhaul of 2 units led to generation decline, says JSW Energy
Below is the edited transcript of Sanjay Sagar's interview with CNBC-TV18
Q: We haven't had a chance to interact with you after your Q2 results, but what was the reason for the low volumes that we saw in Q2, was it largely because of monsoon or is it a weak demand scenario, traditionally your volumes have remained a little resilient in previous monsoons, haven't they?
A: It is a combination of both; one is the extended monsoon then the series of cyclones that we have had in the southern region. As well as subdued overall demand. There is subdued demand in the industry. Because of the extended monsoon and the rather generous monsoon this year, even the agricultural demand is subdued. It is a combination of all these reasons, which is manifested into a subdued demand across the country.
Q: Last time around elections, power demand saw a big surge, is the scenario different this time, how is the outlook on demand going into Q3 and actually into the second half of FY14 as a whole, we are getting closer to elections?
A: We have gone through the elections now. All the four states, which had gone through the elections, are surplus in power. So, we didn't see the normal scramble for purchase of power that we tend to associate with elections. Going forward, the last quarter always sees a firming up of demand and maybe we are hoping that we will have a better quarter than what we are seeing now.
Q: What are the trends that we are witnessing on the merchant realisations front and what is the outlook panning out, the second half of this fiscal year?
A: Merchant realisations in the south have sort of held up and in the West and the North they have been subdued as you would be aware. That is primarily because of this subdued demand, which led to low rates in the exchange and lower merchant realisations. As far as the overall realisations are concerned, we have been giving the guidance of 4.25-4.50 on an average, which I think we should be able to sustain and we should be able to continue with the same guidance.
Q: Your company is dependent on imported coal for sourcing a large part of your fuel cost, now with the currency reversing its trajectory and coal prices hitting up, how will the margins get impacted?
A: As far as our long-term contracts are concerned, we have a complete pass through on both the coal costs and the rupee. As far as the merchant tariffs are concerned, we have to take into account both, the movement of coal prices and the rupee. What had been happening earlier was with the rupee strengthening, the coal prices had been going down, so the two had almost balanced out each other. We are seeing a little firming up of coal prices over the last two-three weeks, which is coupled with strengthening of the rupee. It will even itself out, one of them. The two of them put together are going to even each other out.
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