GPILNSEQ1
FY20224 August 2022 Godawari Power And Ispat limited
9,818words
163turns
16analyst exchanges
5executives
Management on call
Sana Kapoor
GO INDIA ADVISORS
Abhishek Agrawal
EXECUTIVE DIRECTOR – GODAWARI POWER & ISPAT LIMITED
Siddharth Agarwal
EXECUTIVE DIRECTOR – GODAWARI POWER & ISPAT LIMITED
Sanjay Bothra
CHIEF FINANCIAL OFFICER – GODAWARI POWER & ISPAT LIMITED
Dinesh Gandhi
EXECUTIVE DIRECTOR – GODAWARI POWER & ISPAT LIMITED
Key numbers — 40 extracted
75.64%
g towards simplification of goodwill structure and we have already increased our stake in HFAL on 75.64% to 91.82%. We have also acquired 78.96 in Hira Ferro Alloys. We have acquired the Jagdamba power
91.82%
simplification of goodwill structure and we have already increased our stake in HFAL on 75.64% to 91.82%. We have also acquired 78.96 in Hira Ferro Alloys. We have acquired the Jagdamba power plant th
25 megawatt
acquired the Jagdamba power plant through a slump sale route during the quarter and the Jagdamba 25 megawatt power plant asset has become the asset of the Godawari Power and Ispat and Godawari is running th
26%
Simultaneously with acquisition of 25 megawatt power in the subsidiary route we have tendered the 26% share GPIL was holding in Jagdamba for the purpose of qualifying for the captive user
500 Crore
y. As regards to the capex, we have already announced that capex which are ongoing and close to 500 Crores of capex is planned in the current financial year out of which we have done 150 Crores in the fi
150 Crore
close to 500 Crores of capex is planned in the current financial year out of which we have done 150 Crores in the first quarter. Despite imposition of duty and other development in the marketplace, we ar
155 megawatt
on this capex of 500 Crores during the current financial year which mainly includes setting up of 155 megawatt of solar power out of that 70 megawatt power plant has already been almost commissioned it is jus
70 megawatt
urrent financial year which mainly includes setting up of 155 megawatt of solar power out of that 70 megawatt power plant has already been almost commissioned it is just awaiting synchronization of the grid
0.4 million
re changed certain business plans and therefore we have kept expansion steel billets project from 0.4 million to 6 million tonne on hold. We are working on a revised scheme and as and when that is finalized
6 million
ain business plans and therefore we have kept expansion steel billets project from 0.4 million to 6 million tonne on hold. We are working on a revised scheme and as and when that is finalized that time thi
42 megawatt
y discussed three projects with a total capacity of 155 megawatt. This 155 megawatt capacity plus 42 megawatt of waste heat recovery plus 8.5 megawatt of biomass power plant in Hira Ferro and 1.5 megawatt of
8.5 megawatt
capacity of 155 megawatt. This 155 megawatt capacity plus 42 megawatt of waste heat recovery plus 8.5 megawatt of biomass power plant in Hira Ferro and 1.5 megawatt of windmill with all this commission our ex
Guidance — 20 items
“This entire power of 25 megawatt will be consumed captively in house.”
“Due to some static reasons we have are changed certain business plans and therefore we have kept expansion steel billets project from 0.4 million to 6 million tonne on hold.”
“We are working on a revised scheme and as and when that is finalized that time this expansion of capacity will be taken on due course and will be updated to the investors accordingly.”
“As regards to the update of the Greenfield power project, we had announced certain plan for expansion of the capacity in the Greenfield project.”
“This investment will be taken up in due course of time once all these processes are completed including environmental approval and land acquisition and the exact investment will be announced that will be purely based on the evolving market conditions and the future cash flow of the company.”
“Wire utilization will increase going forward.”
“As regards to the iron ore pellet already announced cut down in the production guidance Russia and Ukraine iron ore supplies are already reduced.”
“Some support has also come from the improvement in the domestic demand of steel due to which increased take of intra project going forward improvement in the iron ore and the pellet prices will depend on the export duty however downside is largely projected at the current volume level at the selling prices.”
“Sir just some questions firstly what will be the quantum of export of pellet in 1Q FY2023?”
“Going forward what is your guidance on exports for FY2023 overall?”
Risks & concerns — 6 flagged
We are required to import the coal for sponge iron plant at a substantially higher price and to some extent on the inflationary pressure on the procurement on the other raw material consumption item.
— Dinesh Gandhi
We do realize that in these markets it is difficult to procure prime quality thermal coal so we have changed our strategy and now we are trying to import good quality cheap cargo so from RB1 we have shifted to RB3 levels so going forward we should be buying RB3 coal which is basically core MCV coal.
— Dinesh Gandhi
On a fair side, in terms of evaluation it is difficult to ascertain we are sitting in a commodity market and at the moment everything said is demand and supply so it is difficult to ascertain how prices will unfold going forward so at least on the revenue side we do not have control but in terms of cost margins we are working very minutely on each and every cost and we are hopeful that we should be able to maintain the current margins.
— Sanjay Bothra
Sorry to interrupt and we are seeing despite imposition of export duty at least the impact of export duty is much higher on the short product but so far as long product is concerned you are seeing that after imposition of the export duty the long product prices has been slightly better than Q4 FY2022 versus Q1 FY2023, so we are higher prices on sponge iron, steel billets even for that market H.B.
— Dinesh Gandhi
As I said in my opening remarks the international iron ores are likely to hover between 100 to 125 dollars and if that remains then the pellet prices in my opinion will not go down below Rs.1000 a tonne temporarily it can go but only on average realization on medium to longer term basis I think Rs.8000 to 9000 is a base mark where the prices should thread in the market in normal circumstances and we will see a major impact of this after the monsoon.
— Dinesh Gandhi
Right now thermal coal is a big, big issue so operating plants which are coal bases becomes difficult even challenging so depending on the current market scenario we keep changing the charge mix because of which the portion keeps changing.
— Dinesh Gandhi
Q&A — 16 exchanges
Q
Good morning Sir. Congratulations on good set of numbers considering the current environment. Sir just some questions firstly what will be the quantum of export of pellet in 1Q FY2023?
Dinesh Gandhi
Bothra Ji you know of how many consignments have gone in Q1 FY2023? I will give an update on that. On the exports side in Q1 it is about three shipments, 150,000. Who is bearing the export duty? The seller. If we happen to export now then we have to bear the export duty. How much export duty would have been borne in 1Q FY2020? Nothing. So by the time the duty was imposed we only had shipment which is pending and with the long term realization we had with the buyer so that contract was amicably cancelled so we did not export after the duty was imposed. Going forward what is your guidance on exp
Q
Congratulations on good set of numbers in spite of tough situation. In case of your iron ore pellet since our product is high grade pellet do we have a better realization that what the domestic prices I just wanted to know?
Sanjay Bothra
Just to give you a certain base, see definitely we do get a premium over and above the domestic market but at the moment what is happening is since we got totally in to exports and we were doing little bit of domestic as well. Now I am scouting for new buyers who can realize, the actually value of the product so at the moment we are getting about Rs.1000 more compared to the domestic market and going forward once we are able to establish our quality at different plants I am confident we will get better premium going forward. You have given guidance as per your investor presentation around 2.4
Q
The question is if I could see we have increased our realization in almost all of the products from Q4 if you say in this quarter so going ahead how do you think we will be managing regarding the commodity price etc. Where will be? Will we be able to stay above the current realization levels and margin levels or will we see a softening in that and if I consider a two or three year period where do we see Godawari growing back some light if you can throw on it?
Sanjay Bothra
On a fair side, in terms of evaluation it is difficult to ascertain we are sitting in a commodity market and at the moment everything said is demand and supply so it is difficult to ascertain how prices will unfold going forward so at least on the revenue side we do not have control but in terms of cost margins we are working very minutely on each and every cost and we are hopeful that we should be able to maintain the current margins. Demand is going up in domestic market. Sorry to interrupt and we are seeing despite imposition of export duty at least the impact of export duty is much higher
Q
Congratulations on a good set of numbers. The question which I had was in relation to the capex allocation. After a long time we are seeing a net cash balance sheet and we continue to generate cash more than the capex obviously there is room to leverage up a little bit more as and when capex programs are finalized so are you thinking of a large distribution back to the shoulders given the bonanza of the last couple of years?
Dinesh Gandhi
So far as I understand we have rewarded investors in last year’s substantially by way of distribution of dividend and dividend again we will be disturbing about 115 Crores once the year is over so distribution will continue to be there but then we have to look at the growth as well. The cost reduction improving profitability whatever this capex money we are using is primarily coming from my divestment of stake in the solar thermal power plant which we divested in the last quarter. Depending upon the cash flow of the company and the near term plan or obviously medium term plan will drive our di
Q
First question there was mention that we are getting Rs.1000 premium so this is on Rs. 8800 to Rs.8800 the realization that you have indicated equally the premium you are getting?
Sanjay Bothra
See the prices when the duty was imposed had gone down to about 7500 so that time we were getting 8500 levels and now with the current market being stabilized we are confident we will get over and above the current levels of 8500 level. That is what the government is mentioning one is to contain inflection; secondly they want more evaluation to happen so hypothetically assuming that for little longer time the duty remains, they are coming out with alternate plan. One is the government gives some reserving behind this and reduces the rate on the export duty but for example copper price has not
Q
Sir thanks for the opportunity. I have question on the beneficiation part if could share a bit more details in terms of the economics this project that we are taking up for example what would be the beneficiation cost per tonne and in terms of the increase in production that we had mentioned how much of that could be because of the beneficiation and not actually increase in mining.
Abhishek Agrawal
At Godawari complex we have already achieved the rate capacity of 3.2 million tonnes of beneficiation, the new beneficiation plant is coming up, because the main reason is to reduce our incoming cost in mines because right now whatever we get from mines we are beneficiating in Godawari facility in which about 20% of wastage is generated which is of no use to us so we are basically losing 20% on account of freight. So if you say the freight about Rs.1000 so 20% cost is going up on account on freight to save that cost we have taken a decision we have taken a decision to install a beneficiation p
Q
Hello Sir good morning and thank you for your time. Couple of my questions on my side given the incidence of export duty one would have imagined the realizations would take a material impact but that has not really played out to an earlier comment where it was indicated that we are already sitting at about 20 to 25 million tonnes of pellet surplus so just wanted to understand how things played out on the ground and why we have not seen the impact. It does not seem like we will see the impact in Q2 also in terms of whatever external data that is available so just wanted to get a sense how thing
Dinesh Gandhi
I would like to correct what you just said because the prices before this duty was imposed was hovering about 9500 in Orissa and 10,000 in Raipur sector so from Rs. 9000 the prices had already gone down to Rs.6000 x plant Orissa and about 7500 x plant Raipur. The only thing which played in our favor was the monsoon. With the onset of monsoon sponge is preferred to use pellet over lumps and the production of mines still goes down at India level where there is NDC or ONC being the biggest miners in India at the moment so availability of lumps has gone down plus during monsoon most of them prefer
Q
Thanks for the opportunity. Sir can you throw some light about what would be the conversion cost from let us say per ton of pellet things because as we are seeing prices of iron ore are going down and like currently if we look at the difference between the landing cost and the cost of iron ore in the market the difference comes to around Rs.5000 a tonne so can you just highlight about what could be the per tonne cost of conversion from iron ore to pellet?
Dinesh Gandhi
See for us most of the materials come from mines so the prices are going in the domestic market it does not change our conversion cost being captive miner. Currently with the coal prices hovering all time high and even the oil towards all time high about the crude, currently the conversion first from iron ore to pellet is about Rs. 1800 a tonne. Okay Sir. Thank you.
Q
Sir just a followup question are we looking at inorganic growth because we have heard that units who are exporting have shut down so are we looking at inorganic growth.
Dinesh Gandhi
On the pellet side we have no intention of doing that. I will tell you even for the units the duty imposed by the government it is also imposed on those plants as well. For example KIPL is shut although it is EOA unit because even he has to pay 45% duty for exporting pellet so does not make sense. Got it thanks.
Q
Do you have any constraints on expanding at current rate at least with the new products?
Dinesh Gandhi
We have limitations on account of not land but primarily because the current area where our plant is treated it has been designated as CPA critical polluted area by government of India by central pollution India so any expansion in this particular depends on the conversion of energy so anything related to coal we will not get permission from the pollution board to install the unit so there are limitations in this premises. My next question just wanted to get a sense on why the steel billets expansion was put on hold so is it steel billets capacity a bottle neck for more downstream project like
Q
Just wanted to understand Sir compared to Q4 FY2022 and in Q1 FY2023 how was the EBITDA per tonne for pellet moved.
Dinesh Gandhi
We do not have the number ready. But would it be correct to say the entire dip basically in NSR the dip that we saw Rs.3000 is the dip in NSR in pellet that will be the dip that we have seen in EBITDA per tonne level or there is some volume impact? The volumes were a bit much higher than what it was in Q4. So far as incurring cost as Abhishek has already mentioned in the call is Rs.1300 a tonne plus cost of iron ore. This is what the cost of the pellet is. Sir my second question is on thermal coal. Do we have the numbers what was the average thermal coal cost for Q1 FY2023 and how do we see th
Q
All my questions have been answered. Thank you so much. Congratulations to the team.
Q
Can you just give a brief sense of what would be your current cost of pellet production?
Dinesh Gandhi
1800. So totally around Rs.5000 including all the cost, all taxes? At the moment it will keep varying between 5500 plus minus 10% because of the coal use, or we have to use oil for availability and others, all the cost has gone up so I would say 5500 plus minus 10% would be a decent number. Do you expect any reduction in terms of the cost of production going forward because you mentioned regarding some royalty that you have to pay? Going forward with iron prices going down domestically we expect a reduction in royalty about Rs.250 a tonne so that will straight away add to our cost going on the
Q
So total coal price last quarter it was around Rs.400 plus odd now it is Rs.200 odd. Does it affect our pellet premium?
Dinesh Gandhi
To be honest since we are out of the export market and domestically I do agree at a certain point of time it does impact our pellet premium on the high grade but with the current scenario the more start buying the premium product we will revise the actual value rate so I am confident it will not impact to very great extent. We should be able to get the desire premum going forward. What has happened in India because of low availability of iron ore which is about 63 earlier now everybody in India is making a pellet of 62, 62.5 that is the benchmark in India for pellet makers so when it goes down
Q
Sir during the call you had mentioned domestic players to use our hybrid pellet you will require cooking coal prices to remain high now that cooking coal prices are expected to come down significantly in the second half of the current fiscal. What is your view?
Dinesh Gandhi
As I said earlier also I am confident because of the overall pellet quality in the domestic market going down from 63, to 62 and pellet being 65 so I am very hopeful we will still get the same premium which we desire in the export market. I do not see an impact happening on that side. Eventually people have to compare absolute numbers versus the other raw materials available compared to our pellet so the moment we are getting a desired premium and I am confident that we will be able to continue to do so in the near future as well. Okay thank you Sir.
Q
Thank you ladies and gentlemen for joining the call to discuss the Q1 FY2023 numbers of Godawari Power and Ispat Limited. I hope we have been able to answer to your satisfaction. Any further clarification you can always get back to us our investor relations agency, GO India Advisor. Thank you very much.
Opening remarks
Sana Kapoor
Thank you Nirav. Good morning everybody and welcome to Godawari Power and Ispat Limited Earnings Call to discuss the Q1 FY2023 results. We have on the call, Mr. Abhishek Agrawal, Executive Director, Mr. Siddharth Agarwal, Executive Director, Mr. Sanjay Bothra CFO and Mr. Dinesh Gandhi, Executive Director. We must remind you that the discussion on today’s call may include certain forward looking statements and must be therefore viewed in conjunction with the risks that the company faces. May I now request Mr. Dinesh Gandhi to takes us through the company’s business outlook and financial highlights subsequent to which we will open the floor for Q&A. Thank you and over to you Sir.
Dinesh Gandhi
Thank you Sana and good morning everyone. I welcome you all to this conference call of Godawari Power and Ispat Limited to discuss the Q1 FY2023 results and the way forward. I am sure that you must have looked at the result and presentation uploaded on the exchanges and the company website. I will briefly discuss the results and then we can have the Q&A and some of the developments taken place during the quarter. We had a good start of the financial year 2023. Then I will discuss the quarterly performance in detail and before that there are few recent developments and strategic initiatives, which the company has taken. I am just updating about that. Just commented in last call GPIL is constantly working towards simplification of goodwill structure and we have already increased our stake in HFAL on 75.64% to 91.82%. We have also acquired 78.96 in Hira Ferro Alloys. We have acquired the Jagdamba power plant through a slump sale route during the quarter and the Jagdamba 25 megawatt power