GPILNSEQ2 FY23November 11, 2022

Godawari Power And Ispat limited

9,282words
155turns
13analyst exchanges
1executives
Management on call
Abhishek Agrawal Director Mr. Sanjay Bothra Officer Mr. Dinesh Gandhi
EXECUTIVE DIRECTOR.
Key numbers — 40 extracted
38 megawatt
e capacity of another solar power project which is under construction, which was only mentioned as 38 megawatts against 25 megawatts. So, capacity continues to remain at 25 megawatts. I will briefly discuss
25 megawatt
solar power project which is under construction, which was only mentioned as 38 megawatts against 25 megawatts. So, capacity continues to remain at 25 megawatts. I will briefly discuss the result and then w
2.4 million
n control authorities have granted us the consent to operate for the enhanced pellet capacity from 2.4 million tonnes to 2.7 million tonnes. We are revising our guidance for production of iron ore pellets from
2.7 million
ave granted us the consent to operate for the enhanced pellet capacity from 2.4 million tonnes to 2.7 million tonnes. We are revising our guidance for production of iron ore pellets from 2.4 million tonnes to
2.4 million
tonnes to 2.7 million tonnes. We are revising our guidance for production of iron ore pellets from 2.4 million tonnes to 2.6 million tonnes in FY23. For the H1 FY23 GPIL is already 50% of the revised targeted
2.6 million
tonnes. We are revising our guidance for production of iron ore pellets from 2.4 million tonnes to 2.6 million tonnes in FY23. For the H1 FY23 GPIL is already 50% of the revised targeted capacity and producing
50%
ore pellets from 2.4 million tonnes to 2.6 million tonnes in FY23. For the H1 FY23 GPIL is already 50% of the revised targeted capacity and producing about 1.31 million tonnes of pellets. Our CapEx g
1.31 million
in FY23. For the H1 FY23 GPIL is already 50% of the revised targeted capacity and producing about 1.31 million tonnes of pellets. Our CapEx guidance continues to remain at about INR500 crore for the current y
INR500 crore
d producing about 1.31 million tonnes of pellets. Our CapEx guidance continues to remain at about INR500 crore for the current year. We have already incurred INR179 crore in the first half of ’23. The guidance
INR179 crore
guidance continues to remain at about INR500 crore for the current year. We have already incurred INR179 crore in the first half of ’23. The guidance continues to remain the same, despite imposition of export
INR5.50
ted. The solar power project will help us improve our cost of power, grid power which is more than INR5.50 per unit. Against that, our generation cost will be hardly at operating level at about 30 basis poi
30 basis point
han INR5.50 per unit. Against that, our generation cost will be hardly at operating level at about 30 basis point, 35 basis points. Similarly, the displacement of turbine will improve the power generation at the
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Guidance — 20 items
Dinesh Gandhi
opening
“And number two is, the capacity of another solar power project which is under construction, which was only mentioned as 38 megawatts against 25 megawatts.”
Dinesh Gandhi
opening
“We are revising our guidance for production of iron ore pellets from 2.4 million tonnes to 2.6 million tonnes in FY23.”
Dinesh Gandhi
opening
“Our CapEx guidance continues to remain at about INR500 crore for the current year.”
Dinesh Gandhi
opening
“The guidance continues to remain the same, despite imposition of export duty and this projects are primarily related to the cost saving and efficiency improvement related.”
Dinesh Gandhi
opening
“The solar power project will help us improve our cost of power, grid power which is more than INR5.50 per unit.”
Dinesh Gandhi
opening
“Against that, our generation cost will be hardly at operating level at about 30 basis point, 35 basis points.”
Dinesh Gandhi
opening
“November 11, 2022 Godawari Power & Ispat Limited The only project which we have kept on hold is the Steel Melting Shop where we are still working on the revised capacity and the products to be manufactured and after that we will make a suitable announcement in due course of time.”
Dinesh Gandhi
opening
“Regarding the Greenfield Steel project, which the company had announced earlier, the status is, it continues to be, we have not yet been able to acquire the land and the land acquisition is getting delayed.”
Dinesh Gandhi
opening
“And we have filed for the environmental approval for the project which is under consideration of the central ministry.”
Dinesh Gandhi
opening
“Once the land acquisition is done and environmental approval is received, we will be able to freeze our investment plan and we will guide the market accordingly in due course of time.”
Risks & concerns — 15 flagged
And if you take the impact of the reduction in pellet selling price from what INR11,500 to INR8000 something, INR3,500 into 550,000 tons of pellet, comes to about INR200 crore and to the extent that there is fall in EBITDA of the Company and the fall in pellet realization, as you are all aware, is on account of imposition of export duty.
— Dinesh Gandhi
Also, import of iron ore pellet of China is reduced by 33% in January to September 2022 compared to same period last year because of the sustained crude steel production cuts and weak domestic outlook.
— Dinesh Gandhi
Going forward improvements in the prices of iron ore and pellets will depend on the impact of the export duties.
— Dinesh Gandhi
So, at the moment I will see Pellets prices will be under pressure for sure.
— Abhishek Agrawal
So, see, we usually import on monthly basis or 45 days basis because we want to go with the market because the market is very volatile.
— Abhishek Agrawal
So, for us on a demand side of pellets, we have no concern at all.
— Abhishek Agrawal
So, on the pellet side, we have no concern at all.
— Abhishek Agrawal
And sir, during your discussion with your key major customers, wherein we are saying that's a definite slowdown on Europe side and China to some extent.
— Mitul Shah
So overall global demand is under pressure.
— Mitul Shah
So, I don't see any concern going forward as well.
— Abhishek Agrawal
Have they stabilized or still continue to decline in November also?
— Mitul Shah
See, it is very difficult to ascertain what prices should go up but I think as Dineshji mentioned, we feel the prices have bottom out to certain extent.
— Abhishek Agrawal
So, just to clarify, it will be difficult to answer that directly.
— Abhishek Agrawal
If we look at the impact of dollar movement on your business, is there a connection between the dollar, overseas price you're saying $80 to one $120 is what you expect it to trade at.
— Jatin
So it's difficult who you know, give us we know one particular answer.
— Abhishek Agrawal
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Q&A — 13 exchanges
Q
Hello, sir. Good afternoon and thanks for the opportunity. I really appreciate the very detailed presentation and the data pack that you gave. It is like one of the best in the sector. Sir, my question is regarding your view on iron ore pricing, generally internationally and in India and to that extent, pricing of pellets, assuming, if remove the government angle aside? Just based on the current dynamics, what is your view and how do we see this from here, sir?
Dinesh Gandhi
So, it looks like the international prices are at about $80 is almost bottomed out to some extent. If the demand and China stimulus comes through then the prices should improve from here on rather than going down from here. The $80 should be the lower prices of this iron ore international market. Got it. And sir, your view on the domestic side, pellet side? Can we largely say they have bottomed out after this government intervention? Steep fall. Steep fall has already happened in pellet prices. Rest of the steel prices, as you may be aware, in long product, the prices are more or less stable,
Q
Hello. Good morning, sir. I have three questions. One is, looking at your consol numbers, I guess there are losses in your Ferro Alloy business. In case how do you look at the demand and supply scenario of this segment, Ferro Allow in India? Shall I go ahead with the other question? The second is, as you’ve mentioned, that you will be doing a CapEx as per the plan. Are you confident that you will be able to achieve the guidance of INR500 crore, because in H1, you have done around INR180 crore. Please let us know your plans regarding the Greenfield Steel Project. And third is on your coal sourc
Abhishek Agrawal
Dineshji, let me take this question. Good morning, ma’am. So, on the first question of Ferro Alloy, see, we need to understand India is a big exporter of Ferro Alloy, whether it's zinc- manganese ferro or any kind of, right and primarily biggest market is Europe and you all understand because the energy crisis in Europe and Ferro being quite an energy intensive industry, so, a lot of capacities have gone in steelmaking. I was reading an article yesterday, so Arcellor Mittal itself, you know alone as a group has reduced their production by almost 10 million tonne across Europe, entire Europe. S
Q
Thank you for taking my question. Sir, compared to Q2 how has been the trend during this October, November in terms of the demand situation? And also, if you can give us some details on the thermal coal price trend in current quarter compared to Q2?
Abhishek Agrawal
Yes. So, demand in terms of key or overall demand on in terms of pellets? Overall demand and specifically in terms of pellets are our pellet is relatively better quality compared to… Ok. Right. So, on the overall demand side, see that the demand has really little on the sluggish side because of the monsoon. Usually, steel industry, the demand is always on the sluggish side because of the monsoon season and thus there were a lot of correction because of the import and export duty. So, there were a lot of changes in the supplier and buyer side. Everybody was concerned about the prices further go
Q
Good afternoon, sir. Sir, I just wanted to understand that at the high inventory high cost inventory, the entire impact has already been taken by 2Q or some of the impact would flow into the 3Q and how the blended price you are expected to move in 3Q?
Dinesh Gandhi
So, most of the inventory related is already taken because we had an inventory loss on manganese ore prices only. Rest of the prices are mark-to-market and I don't think there's any major inventory loss is there in the company. So, it is mostly covered into Q2. So the imported thermal coal, which would have come at a higher cost that is also mark-to- market by 2Q and 3Q we won't see any inflation because of that? No, we won't see that. Understood sir. My second question pertains to net cash. So if I just do the math, we would have earned some cash during first half, but our net cash position k
Q
Thanks for taking the question on the call. On the power saving, you said 70 megawatts and the other 25 megawatt plant, there will be 4.5 megawatt which will effectively be produced. So, this is, while in megawatts terms, it is fine, but how many megawatts were actually produced? Megawatt hours were actually produced? For solar power, in a month, how many hours and how many days is it operational?
Abhishek Agrawal
No, no. So, just to clarify, it will be difficult to answer that directly. You can consider a17% PLF on annual basis. For example, if it's a 70-megawatt solar power, so, 70 megawatt into 117, so 12 megawatts will be your generation throughout the year. So, 12 megawatts into 365 into 24? Exactly. Into 1000. So, basically, it is 12 into 24 into 365 into 1000 means about 10 crore unit annually. 10.5 crore unit annually. That is how the calculation is done. November 11, 2022 Godawari Power & Ispat Limited So, basically you are saving, INR3.5 to INR10 depending, and this 4.5 megawatts is already ta
Q
It's regarding the cost of iron ore in a presentation your maintenance INR 2900 quarter on quarter. So I want to understand that this is including royalty, the cost should have gone down quarter and quarter considering the fall in the market price of iron ore. And royalty is a function of to a certain extent, the prices of the iron ore, don’t you think that cost would have fallen by INR 200 INR 300.
Abhishek Agrawal
This is just to just to clarify, you know what happened at we are supposed to pay royalty basis guided which have been published. So right now IBM has printed the price of month of July. So there's usually a backlog of three months. So right now the royalties been paid, which is the IBM price for the month of July, we are seeing in October. So we expect as we move forward and the prices come down so that there will be saving on account of royaly. And what kind of reductions do you foresee in that? Because that will convert -- they're converted into our EBITDA in one way or another. See the sys
Q
Thanks for the opportunity. Just one question on your restructuring that we were doing so we had bought in the assets from Alok Ferro Alloys and HIRA Ferro alloys. So just going to your group structure. So in Alok Ferro Alloys we own around 79% And then another 8% 9% is owned by HIRA Ferro Alloys.And 12% 13% Ardent Steel.HIRA Ferro Alloys is a subsidiary and Ardent is an associate. So are we further looking to simplify the structure and bringing the remaining stake from Ardent and HIRA also into GPIL directly.
Dinesh Gandhi
Hira will remain as it is, we don't intend to buy that in GPIL. And, Ardent yes, we intend to buy it at some point of time, we'll do the transfer. But we're not in a hurry that is within the group only. November 11, 2022 Godawari Power & Ispat Limited Got it. Also Ardent Steel will continue to maintain this 37% 38% Do we intend to sell this. No we intend to maintain the stake. We will continue with it. One clarification, a lot of has been discussed over your power investment. Yes, I think a lot has been discussed on your power investments and all the cost savings effort that you're taking. So
Q
Thanks for the opportunity, can you please throw some light on the domestic market, like post imposition of the export duty, the pellets are being sold in the domestic market. And generally you're highlighted in your previous calls also that higher grade pellets of 63% to 62% don't have much takers in the Indian market. So, what has changed and like how are the pellets being consumed by the domestic market or the domestic takers some highlight on this? On a pellet side what has happened is as you must be aware, as we go ahead, the quality of iron ore India is going down, Orissa being one of th
Management
Q
Just one question in the breakup of power, how many units of power do you use in the mining operation for which you pay you know, INR 11.5 and INR 12 just trying to get a sense of what the theory on the mining side will be.
Dinesh Gandhi
About 5MW.
Q
Yes, looking to the course saving and better realization of our product pellet and all that, can we safely assume that in quarter three and four the profitability will be better than Q2?
Dinesh Gandhi
It is very difficult to predict the profitability, but yes, the range would be you know, somewhere closer to this, but there could be some variation here and there. If the situation maintained the same that about export and all? But some or the other input costs keep fluctuating, so, it may not be exactly same, but the range will be closer to here, at this level.
Q
So, congrats on a good set of results, given the circumstances, and thanks for taking my question. So my first question is in the previous quarter, you know, since the imposition of the export duties, the fall in realizations for pellets was a lot more than that of sponge iron. So, management had guided that we would try to sort of push more volumes on the sponge iron front rather than pellets but I have seen that we've sold a lot more pellets whereas sponge iron volumes have slightly come down. So, could you throw some light on that?
Dinesh Gandhi
No, no, no, no, we have a pellet capacity of 2.7 million ton and sponge iron capacity of 0.5 million only. So, we cannot change the mix lightly, you know, you can do some arbitrage, but you know, whatever responder and we are purchasing we are operating plant at 100%. So beyond that we cannot increase or the pellet sales will continue, to the extent of 500,000 tons per month per quarter that will continue. November 11, 2022 Godawari Power & Ispat Limited Okay, thank you. My second question is, so, you know, on the pellet front, we're doing you know, 65% of high grade pellets, and we're selling
Q
Thank you for the opportunity. So I'm looking at the corresponding quarter two years back to Q2 FY ‘21 We made a similar EBITDA at that time also with the same similar amount of pallet sales. But the gap between our iron ore costs and the pallet cost then compared to now we have 1000 rupees more per tonne. So what I'm trying to understand is the profitability though the gap is 1000 rupees more is the profitability the same or similar because of higher inputs. And what are the input costs just want to understand that?
Dinesh Gandhi
You have to reframe your question you're trying to ask because our profitability has gone down in the quarter it is not same as last quarter or the same quarter of last year. Same quarter two years back I'm just trying to think if the input cost is -- input costs have rose? I got your question. I will tell you why. Although we are 1000 per ton, but in addition on the energy side because of you know higher input prices for a DRI and about the thermal prices for power plant, the input cost side had gone up so that has utilize the saving which is on the pallet on the iron ore side. So do we see t
Q
Ladies and gentlemen, thank you for joining the conference call of Godawari Power & Ispat to discuss Q2 results. We have tried to answer all your questions but if anything is remaining or somebody has anything, you can approach our IR for further clarification if required. Thank you very much.
Management
Speaking time
Dinesh Gandhi
38
Abhishek Agrawal
36
Jatin
17
Moderator
15
Mitul Shah
14
Yogansh Jeswani
8
Vikas Singh
6
Prashant Kumar
4
Jyoti Singh
4
Chintan Mehta
3
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Opening remarks
Sana Kapoor
Thank you, Aman. Good morning, everybody and welcome to Godawari Power & Ispat Limited Earnings Call to discuss the Q2 and H1 FY23 results. We have on the call, Mr. Abhishek Agrawal, Executive Director; Mr. Sanjay Bothra, Chief Financial Officer, 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 take 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. Good morning, ladies and gentlemen, and thank you for joining with us on the earning calls today for Godawari Power & Ispat Limited. I trust you all had a look at the revised earnings presented uploaded on the stock exchange and the company website. The presentation was required to be revised primarily on account of two errors in the presentation. One is relating to the H1 average selling price of the pellet sold, which has been revised. And number two is, the capacity of another solar power project which is under construction, which was only mentioned as 38 megawatts against 25 megawatts. So, capacity continues to remain at 25 megawatts. I will briefly discuss the result and then we can have the Q&A session after this. Before I discuss the quarterly performance and H1 performance in detail, I would like to discuss on the few strategic updates. As you are all aware of the state pollution control authorities have granted us the consent to operate for the enhanced pellet
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