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Gujarat Mineral Development Corporation Ltd
Earnings Call Analysis
Q1-2024 Analysis
Gujarat Mineral Development Corporation Ltd
The company begins with a robust cash balance of INR 2,000 crores, indicating a strong liquidity position to support its operations and strategic initiatives.
Coal mining expansion remains in the preliminary stage with assessments and regulatory approvals pending. The ability to ramp up production is linked to securing long-term offtake agreements. The enterprise faces pricing pressures due to falling imported coal prices coupled with operational limitations at its mines, impacting profitability and capacity.
With declining imported coal prices, the company has already adjusted lignite prices and is prepared for further corrections if necessary. Profit margins are expected to be under stress from these corrections; however, plans to expand capacity might counterbalance declining profits.
To dilute the impact of volatile coal markets, the company is doubling bauxite production from last year to over 5 lakh metric tons. Despite this aggressive production increase, the contribution to overall revenue remains in single digits and is not projected to significantly impact the current year's revenue figures.
Realizations per tonne may come under pressure but are expected to stay close to INR 3,000, contingent on international coal market trends. Current market stability suggests this level could be maintained, but an exact prediction remains speculative due to the inherent volatility of coal prices.
The company has earmarked its most ambitious CapEx plan to date at INR 2,900 crores. This includes boosting the capacities of existing projects, developing new mines, and investing in power plants, with significant investments in both thermal and coal mining operations across different regions.
Recent legislative amendments liberalizing mining to private operators do not directly impact the company's strategic mineral interests. The company views the changes as positive for the country's economic development and will provide specific impacts on its operations when it is better positioned to do so.
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Good afternoon, ladies and gentlemen. I'm the moderator for this conference. Welcome to the conference call of Gujarat Mineral Development Corporation Limited, arranged by Concept Investor Relations, to discuss it's Q1 FY '24. We have with us today Shri Roopwant Singh, IAS, Managing Director; Shri L. Kulshrestha, Chief General Manager and Chief Financial Officer; Shri H.K. Joshi, Senior General Manager, Technical; Shri A.K. Makadia; Senior General Manager, Technical; Shri R.K. Dash, General Manager, Marketing and Sales; Shri Swagat Ray, General Manager, Project Planning and Development; Smt A.K. Iyer, General Manager, Accounts; Shri J.N. Dave, General Manager, Power; Shri P.R. Shah, General Manager, Geology; Shri A.K. Sharma, Advisor Cement; and Shri Joel Evans, Company Secretly.
[Operator Instructions]
Please note this conference is being recorded. I would now like to hand over the floor to Shri Roopwant Singh, Chairman and Managing Director. Thank you, and over to you, sir.
Thank you, Gaurav. So we welcome all our friends through this analyst call. And we look towards fruitful and engaging discussion today. And this is -- this meet is after almost a gap of 6 months. So there are issues to share, and you have questions to ask. Thank you so much. We may begin. Gaurav, please begin.
[Operator Instructions] Our first question is from the line of Pritesh Chheda from Lucky Investment Managers.
Sir, can you give some color on the realizations in the Lignite side in quarter 1 this year, quarter 4 last year, if you could -- and the current year?
So question -- any other questions?
My second question is what kind of volumes do you expect in Lignite for FY '24?
Okay. Okay. Can I have your name, please?
My name is Pritesh, I'm from Lucky Investment.
Pritesh, I would request Mr. Dash to take the question on realizations from Lignite.
This is R.K. Dash, Marketing and Sales. And answering your first portion that the realization for the quarter 1 is close to INR 3,200 and earlier, it was -- during last year, it was around INR 4,000. And regarding the volume, we are trying to surpass last year's production. So we are targeting around 8 million metric tonnes for this year.
So -- and the realization for quarter 4?
The realization for quarter 4 was close to INR 4,000.
Okay. Just second -- one more question is sir on the volume side. If I recall last year, we were looking at 8 million and was supposed to then go to about 10 million tonnes. I understand that last year, there were rains and some mine issues for which the volume ever reached 8 million. But this year, 8 million tonnes number. So what happens to that 10 million tonnes guided or thoughtful number that you had?
So actually, we are facing certain technical issues at one of our major projects in South Gujarat. And one -- another project in Gujarat is on the verge of completion. So those are the challenges. So nevertheless, we are targeting it and we're pretty confident that we can achieve this 8 million target this year.
and we're pretty confident that we can achieve this 8 million target this year.
[Operator Instructions] Our next question is from the line of Harsh Vasa from SBI Cap Securities.
So actually, I actually wanted to know the story regarding the rare earth materials. So when do you expect the unlocking of that?
Okay. Harsh, any other question?
And secondly, sir, you were bidding for the coal mine for Gujarat, like there -- there is a reserve of around 1700 million tonnes. And you're going to incur like around INR 5,000 crores on the CapEx part. So any development on that side?
Okay. So I'll answer the second question first. The coal mines are not in Gujarat, they are in Odisha. And GMDC has already secured these 2 blocks. And CapEx of INR 5,000 crore will be over a lifetime period of the mine. Yes, the significant amount will be going upfront. And GMDC now is in active stage of operationalizing these line for that studies, permissions, and organizational setup is being put up on fast track. And for the RE story, we will let you know as we get some clearance and as it's the regulated sector, we will let you know at the appropriate time ourselves, kindly bear with us.
[Operator Instructions] Our next question is from the line of Dipen Shah who is an investor.
I had a couple of questions. Firstly, on the overall CapEx, which you have planned for the current year as well as the next year. I understand the rare minerals CapEx also would be incurred. So if any ballpark figure is there, then you can give us that number. And the second number is as far as the coal mine is concerned, what could -- what is the capacity of the coal mine? And when do you expect revenues to start accruing to GMDC?
Okay. I missed your name. Can you -- have your name, please?
Dipen, Dipen Shah.
Thank you Dipen. So I'll take the first -- second question first. Operationalization, we have a 4.5-year time line in which we have to operationalize both these blocks. One is in Angul district and one is in Sundargarh district. Their accumulated annual capacity is significantly less. It is in the range of 21 million to 23 million tonnes, depending on our downstream market tie up that we do.
And as I had answered in the previous question, we are going to be -- we are in the advanced stages of operationalizing. So the entire effort of the top management is to crunch this 4.5-year timeline to as short as possible. And for the Lignite, I would request Mr. Swagat Ray to take that question. Could you repeat the question on Lignite, please?
I just wanted to understand what's the kind of CapEx you are likely to incur on the Lignite business as well as, if at all, any on the rare earth mineral?
Okay. Rare earth, we will recuse ourselves from answering. But for Lignite, Mr. Swagat Ray will give you a very good answer.
For Lignite operation in this financial year, particularly in FY '24, we have measured CapEx expenditure towards land acquisition. Land acquisition will be done in the existing Lignite projects, particularly in Bhavnagar. And for the other new projects [indiscernible] as well as in [indiscernible]. So we [indiscernible] INR 800 crores for this fiscal year for the new Lignite process land equation and around thing INR 650 crores for the existing Lignite project in Bhavnagar.
Okay. And sir, one last question. What should be the cash balance with the company currently as in June?
So I request Mr. Kulshrestha to answer that question.
At present, we are having INR 2,000, crores cash balance, INR 2,000 crores.
[Operator Instructions] Our next question is from the line of Nalin Shah from NVS Brokerage.
At the outset, let me congratulate the management for continuing to maintain the good progress on the results, Q1 results. My questions are a couple of questions. One is that since the Lignite prices have taken a little between the realization, so our profitability could be a little under pressure compared to the previous year. So how do you propose to I think the maintain or better the profitability? If you can throw some light on the -- last year we had discussed about that we are already reading for a bauxite major material. And that some contribution in the current year. How that is going to span out if we can get some idea of what are the volumes and what are the pricing and what kind of profitability and margins will do we maintain from that? That would be ideal.
Secondly, you mentioned about that coal mines you are trying to cut down the -- I mean the time lines from 4.5 years to as early as possible. But if you could throw some idea that internally, what is the target, whether it is from the financial year '24, '25 or '25, '26 or what is the ideal kind of a thing and on the overall performance of the company going forward in the current year?
Okay. So I'll begin with answering your last question for the coal mines. It is contingent on 2 factors. One is a number of studies have to be done. Number two, we still have to get a lot of regulatory approvals. We -- and these are the 2 proximate things. And our capacity play, how fast we ramp up will depend on our long-term offtake agreements. So all these things are work in progress. And we shall be able to answer this, how much the time line would be current in 2 to 3 quarters from now, where we expect to have a lot of tasks covered under our build.
For Lignite pricing, I would request Mr. Dash to give you a view on the pricing. And Ms. Anupama Iyer to give you an idea on the kind of profitability we'll be looking at. But the broad strategy of the organization is we are facing challenges on 2 sides. One is the declining price of our arrival material that is imported coal and serious operational issues at slower mines, restricting our capacities. So first is beyond our control. So we will keep on correcting our prices but focus on uptake. And at the same time, since the market has slightly softened, we would work on expanding our -- not expanding, restoring our capacity to what it was 1.5 to 2 years ago. So I hand over the phone to Mr. Dash to give you a flavor of a few numbers and then Ms. Iyer.
Yes. As mentioned by MD sir, actually, the imported coal prices have fallen down, and it seems correcting very fast. But I believe that during last right from June time, the C&M prices are fairly stable. So in that case, so it is a presumption that the prices will not fall down further. Nevertheless, we used to supply in Gujarat market as a subsidiary with respect to the prices, landed prices of imported coal [indiscernible] So in that case, if there will be any corrections, they're bound to take corrections. And at the same time, during the last few days, we have taken certain corrections. And if required, then more corresponds can be undertaken on I mean there is a project basis or on overall GMDC's, I mean to say that in all projects or in individual projects.
Okay, Anupma. you give us flavors?
Yes. As we do, if we have to take the price correction, no doubt profit compared to last year will be under pressure, but then also we'll try to make it by expanding our capacity. So it actually depends on how the market behaves, if the price of imported call comes down, definitely, we have to take the correction. And accordingly, profit will be -- means margin will shrink accordingly.
Okay. But are we in a position to, I mean, balance it out with the bauxite and maybe some other minerals which you might have in mind?
Yes, of course. There is a plan to ramp up this bauxite business because during last year, the production was 2.54 lakh metric tonne. And this year, we are targeting to multiply at least 2x from this last year's production. We are targeting to actually produce and say more than 5 lakh metric tons of bauxite. That's an aggressive plan indeed. But again, to be very realistic, actually, the contribution of bauxite sales to the revenue is -- that is in single digit lever. So that is -- that will not significantly add to our revenues in this year.
Our next question is from the line of Shashank Kanodia from ICICI Securities.
First thing on realization. Sir, do you expect decisions for the full year to be below INR 3,000 to a tonne is my first question, given the fact that you alluded to this fact that they are on the downward trajectory?
Yes. Any other question, please?
Yes. Secondly, sir, on the CapEx part. So you alluded to this fact that we will be spending INR 1,450 crores for Lignite. But I think we also [indiscernible] something in the power plants as well as coal mining in Odisha. So in some total, what will be the total CapEx outlay? And thirdly, sir, the government has recently passed this Mines and Mineral bill, right, which [indiscernible] the mining to the private operators as well. So in a way, that kind of takes away exclusivity. So in a way, is it something which is negative that we perceive?
So I'll start with your second question, the CapEx plan. GMDC in this financial year has on [indiscernible] it's most ambitious and aggressive CapEx plan ever. And this is the range of INR 2,900 crores. Out of this, a significant amount is going towards the ramping up capacity in our existing projects in Bhavnagar. Then ramping up capacity in our existing Project [indiscernible]. Then further to take care of new mines and most prominently Lakhpat and Valia, which have recently been granted to us --
Further, there is a INR 300 crore CapEx on putting the ATPS thermal plant -- power plant back on track. And finally, there is a INR 400 crore CapEx -- approximately INR 400 crores CapEx to put the Odisha project on track. So this is the most ambitious CapEx plan. As far as realizations, I would again request Mr. Rajat Dash to give you a flavor. Yes, it is a very complicated question to answer, and we don't know how the future unfolds, but we have certain scenarios in mind. Mr. Dash, if you would like to answer this?
It will be quite speculative and premature to actually [indiscernible] whether this realization will go below INR 3,000 or not. But again, the international coal prices are quite volatile and the prices are quite dynamic. But as I said earlier that ever since June 2023, the CLM prices are stable. And generally, the demand used to be subdued during monsoon period here and internationally. So in that case, I believe that the demand will be pushed during subsequent quarters. And the prices will -- there will be an upward rise in the prices. And I believe that the prices of international coal is at it's rock bottom. So in that case, in my personal capacity, I believe that the realization will remain close to INR 3,000. But again, it will be quite difficult and speculative to answer in a very specific kind of objective manner.
And I'd like to answer on the recent amendment. Well, it's a more broad-based amendment covering critical minerals, and it is a welcome move to take care of the new economy and the issues that the nation is going to face. So it's a wonderful development. And as far as the GMDC play is concerned, so our play is in the minerals, which are slightly different from the mineral being covered there. But then again, more specifics as we are in a better position to share with you.
Sir, just one thing, sir, on the lithium side. So we got in India tourisms, one in J&K and second Rajasthan. So are we actively looking at those exploiting those? Or this is something not [indiscernible] for us?
So GMDC has adopted an open mind policy towards exploring business opportunity in adjacencies, that means what it does well. So we have moved out from Lignite move -- beyond Lignite to coal. And we are in the metal space also. And if this resource gets available in the market, and we will definitely be looking at examining each and every opportunity on the table as the market. And we have a very thorough system of internal and external checks before we take a plunge. So we -- but I can assure you, we will be looking at all opportunities that come up.
Our next question is from the line of Siddhant Shah from Corporate Database.
Yes, am I audible?
Yes, Siddhant.
I have a couple of questions. One is like you mentioned that you are going to be spending INR 300 crores on the thermal power station. So just wanted to know by when can we expect a turnaround in that? That is one. The other was -- sorry, I missed the opening remarks, so I don't know if you shared that. Any volume guidance for the Lignite since we were targeting 10 million tonnes for last year, but we fell short and we were trying to make that up this year. So any Lignite volume numbers for this year?
And also like somebody previously mentioned about bauxite. We also had a lot of limestone and some of the other materials. So -- and broadly, you had given a guidance previously that we are looking to have at least 50% of our revenues coming from non-lignite sources. So just wanted an overall view, like how are you progressing on that front? And any possible revenues from these other sources this year since, of course, Lignite realizations are under pressure, and we are working on coal mines.
But however, these other minerals that we have, can we expect anything from there? So these are the few questions. And just lastly, a little bit on the capital allocation policy since Gujarat government has come out with the policy mandating 30% of PAT or 5% of net worth as dividends. So just in terms of broad capital allocation policy at the company level since we have INR 2,000 crores of cash on books. And they are expecting to do about INR 2,900 crores CapEx. So just a broad, if you can just share some color on how we are planning to use our cash reserves, that will be great?
Siddhant, I think in the previous answer I gave a very detailed answer on how we are planning to use our cash reserves. So, for everybody's benefit, I would not repeat it. But what I would like to say is again, the government of Gujarat new dividend policy is very visionary for a company which is on a growth part and which is exploring newer revenues, like us. Because we are, at the moment a debt free company. And to achieve our growth, we would need to take on debt and other issues. And when we have a very mature and robust dividend policy like the one annunciated by the government of Gujarat, we will be able to fulfill on those parameters.
Second -- your third question was on limestone. I would request Mr. Arun Sharma, who is -- who has been spearheading this initiative, he will explain to you in greater detail. And I wish you had glance through yesterday's business dailies. Over to Mr. Sharma.
Regarding limestone, what our MD sir has told, we have been working for last 1 year. And we have done a lot of homework. We have identified our deposits. We have done a feasibility report. And yesterday, we have launched [indiscernible] UI for one of the projects, wherein we are looking for the partners and how we can develop this limestone deposit. I can only tell you that because it has a potential, and that potential would be one of the largest in the country at one particular location. So we are very serious on that. We are -- already, we have done our homework. We are in the market, and we are looking for the partners and our strategic alliance, how to utilize this lime stone. And I think within 3 to 6 months in 1 or 2 quarters, we'll have a clarity and then we will explore further and we'll let you know.
And for the question on INR 300 crore CapEx for which we will be getting a pass through from the regulatory authorities and for which we shall be raising debt also. I would request our General Manager, Power, Mr. Janardan Dave, give you a flavor of the -- that are underway and by what time it should be positive?
For the CapEx [indiscernible] power plant, we have already identified the high packages for the execution of this CapEx. And for that, our RFP are in online. And one of the RFP like the P&C, we are in final stage. And in the last quarter, 50% of the CapEx will be utilized and remaining will be utilized in the first quarter of next year.
Okay. Okay, sir. Got it. So the improvements will be basically visible only basically towards the end of FY '25?
In second quarter...
Between '24 and '25.
Okay. Okay. Got it.
Well, Suddhant, the issue is most of these are proprietary items. And most of these suppliers are not in India. And it is a seller's market, and they have an extremely large lead time. So that is where -- we would have liked to compress this entire thing into a very short time, but it is going to take some time.
Got it.
Immobilizing the spares and whatever is required there.
Got it. Just needed one clarification, sir. You told that the cash and the current balance is currently around INR 2,000 crores. I remember in the previous call, you had mentioned that it was around INR 2,500 crores. So just wanted to know that have you deployed any CapEx this year? And what would be the FY '23 CapEx that we would have had done?
So Mr. Kulshrestha, kindly take this question on the cash available.
We have given some amount for Odisha 2 projects [indiscernible] West and [indiscernible] That is around INR 350 crores, remaining amount we are incurring for land development and civil works.
Got it. Okay. Okay. Sir, just one request, if you could just keep the con calls after every results, that would be great since we are having calls very abruptly or intermittently. It would be great to have pause if you could -- have a call after every result, it would be a good chain to follow.
Siddhant, point validly noted, 2 errors on our side. We didn't meet the last time. And this time also, we did not give you a lead time. Apologies for that. This will be taken care of.
[Operator Instructions] We have a follow-up question from the line of Shashank Kanodia from ICICI Securities.
Yes. Sir, if you can please share the volume numbers for this quarter in terms of Lignite sales and the corresponding figures for quarter-on-quarter and Y-o-Y basis?
Volume numbers and Shashank?
Yes. And the corresponding number, sir, for Q1 FY '23 and Q4 FY '23?
Okay. So who would like -- Rajat K. Dash, why don't you take this question, volume numbers compared to previous quarters and previous financial year.
The Lignite product turn during quarter 1 -- corresponding quarter of 2022, '23 was 25 lakh metric tonnes, and this time it is 19.2. And during this time, it is actually -- this time it's probably -- this time, it is INR INR 88...
Shashank, could you rephrase the question once again?
Sir, I wanted the volume numbers Lignite sales volume for this quarter, that is Q1 FY '24, then corresponding numbers for Y-o-Y and quarter-on-quarter comparison?
Okay. So I would request Mr. Kulshrestha to take this call.
As far as the total quantity is concerned, from [indiscernible] production was 9.82 lakh metric tonnes in Q1. Last year, it was 10.05 lakh metric tonnes. And in case of Rajpardi, [indiscernible] you want value also?
I will need sum total for all mines, sir, at a company level.
Total is 18.28 lakh metric tonne as against 25 lakh metric tonne in previous year in the same quarter.
Right. So 19.2 lakh tonnes of sales volume versus 25 lakh tonnes last year?
[indiscernible] as against a 25 lakh metric tonne in previous Q1 -- previous years' Q1.
So the increase of approximately 27%?
Decrease.
Increase.
Increase, sorry.
And sir, does rain -- there were some existing rains in Gujath, right? And there were some coastal disruptions as well. So did it impact us for the month of July?
Yes, It did. And I would request Mr. H.K. Joshi to take this call. For the month of July, Mr. Joshi, how it impacted and how heavy the rains were?
In July, we have received almost 40% more rain than last year...
Yes, sir.
Yes. Mr. Joshi, we can hear you.
This year, we have a rain in July, 40% more than last year. So it impacted our Lignite production.
And may I add it impacted our generation from our wind turbines also because of severe cyclonic disturbances.
Right. Great. And sir, one small request sir. You used to share these volume numbers and power generation units in your press releases. I think this time, it was missing. So if you could please recontinue that practice, please.
Okay. Well, I don't know how this has happened, but we can share it with you now. Mr. Kulshrestha, would you like to give numbers for the thermal wind predominantly about this?
Yes. In Q1, we have generated 140 lakh million units -- 140 million units as against 235 million unit in last year in the same quarter. And as far as wind project, our generation was 105 million units as against 118 million unit in last year. As far as solar, we have generated 1.8 million units as against 1.96 million units in Q1 of last year.
Right. And sir, lastly, you have charted out this very aggressive CapEx plan. So what is the IRR or the payback period that the management keeps in mind while putting out such CapEx number? So it's like 5 years, 4 years, you wish to get by this amount in terms of profitability? How do you look at it?
Shashank, each project and subproject has different internal rates of return. Well, I can talk about the prominent ones. The rate of return for existing projects is extremely progressing. Some are in the range of 30%, somewhere in the range of 40%. For the coal projects, they are in excess of 20% since that is a new territory for us. We have taken conservative numbers. For our new projects, Lignite projects, so those numbers again are in excess of 30%. So we are very comfortable. A lot of thought and diligence has gone into it. And being a mining company, CapEx will ensure growth. Without CapEx, we will start [indiscernible].
There is a minimal threshold what I gather is 20% for us, right, before commencing on any CapEx plans?
So at the moment, we don't look at opportunities, which are for 15%. And these -- the projects where we have made CapEx provision, they are fairly -- we are comfortably about that.
[Operator Instructions] Our next question is from the line of Rahil Shah from Crown Capital.
So given volume target for this year and everything based on all this CapEx and the new projects coming up. So what can one expect in terms of revenue growth? And especially, what are your expectations for EBITDA margins for this year?
Well, if we told you that then we'll be in trouble, but I would request Ms. Anupma Iyer to give you the flavor on volume, revenue and the kind of comfortable EBITDA, we should be in the range of.
Yes. Regarding EBITDA, we hope to maintain the EBITDA margins of around 30% on our [indiscernible] business. And expanding the volume, we hope we'll be able to achieve turnover of last year, around 3,500.
For the margins, you said 30%, correct? That was like overall for the company or just...
Yes, yes, yes.
For Lignite business.
Yes. For all company, company as a whole 30% margin, will be able to maintain.
[Operator Instructions] Ladies and gentlemen, that brings us to the end of our question-and-answer session. I would now like to hand the conference over to the management for closing comments.
Thank you so much. Well, we have said what we have to say about volumes, margins and our growth plans. But we have received very important feedback on how we need to continuously keep on engaging with you. Yes, we will continue the process of meeting every quarter. And yes, we will not convey these conferences at a short notice, point taken. Thank you so much for your interest.
Thank you all for being part of this conference call. If you need any further information or clarification, please e-mail gaurav.g@conceptpr.com.
Ladies and gentlemen, this concludes your conference for today. Thank you for using Chorus Call Conferencing Services. You may now disconnect your lines. Thank you, and have a pleasant day.