Jindal Steel & Power Ltd (JSPL) posted a really bad set of earnings for Q2FY20 and the market reacted to that by opening lower at Rs.130.30 from yesterday’ close of Rs.133.65; it even went down to an intraday low at Rs.129. But from there, despite the numbers, it has bounced back to Rs.135 levels and is now trading in the green – all because it also announce winning of a coal block which is expected to help it shore it margins in coming months as fuel costs will come down substantially.

First the earnings. The company’s standalone net profit plunged to a mere Rs.15 crore from Rs.383 crore, a drop of 96% (YoY). This was on a 4% drop in turnover at Rs.6573 crore.

Operating profit was at Rs.1255 crore and margins at 19%.

Its net debt at as 30th Sept 2019 stood at Rs.36,501 crore.

Now on the news which overshadowed this poor earnings. The company has won a coal block in Chhattisgarh. It was the highest bidder for the Gare Palma IV/1 coal block, with a bid of Rs 230 per tonne.

Post this, brokerage houses have put out reports which say that the company’s cost will now come down substantially by around Rs.1800/tonne, leading to a total savings of at least Rs.400 crore as coal linkages will now happen at lower rates. 25% of the coal from this new block will be used for captive consumption.

This mine has a production capacity of 6 million tonne per annum and is around 50km from the company’s power plant while JSPL’s annual coal requirement of 8.5mt for its steel plant.