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Godawari Power and Ispat Ltd
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Ladies and gentlemen, good day, and welcome to Godawari Power & Ispat Limited Q1 FY '24 Earnings Conference Call hosted by Go India Advisors. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Sana Kapoor from Go India Advisors. Thank you, and over to you.
Thank you, [ Lizan ]. Good afternoon, everybody, and welcome to Godawari Power & Ispat Limited earnings call to discuss the Q1 FY '24 results. We have on the call Mr. Abhishek Agrawal, 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 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.
Thank you, Sana. Good afternoon, everyone. Thank you for joining the earnings call for Q1 FY '22 of Godawari Power & Ispat Limited. Our financial results and earnings presentation is available on our website on the stock exchanges. I believe that you have been able to have a chance to review it. I'm excited to share our financial performance and discuss with the acumen and milestone this quarter. For this, we can proceed with the Q&A session.
[indiscernible] started FY '24 on a positive note. Before we dive into the financial business and [indiscernible] highlights, I would like to throw some light on the strategic update. As you must be aware, [ BPI ] had announced an ambitious CapEx plan aimed at significantly announcing the iron ore mining capacity and pellet plant [indiscernible]. The plant until more than doubling the mining capital [indiscernible] mine expanding from 2.35 million tonnes to 6 million tonnes. Additionally [indiscernible] intends to establish a new [indiscernible] plant [indiscernible] mine with a capacity of 6 million tonnes. The project pipeline for the same is [ completed ] by about 15 months with an estimated CapEx of INR 40 crore.
[ Detail ] has also outlined plans to [ address ] the pellet capacity by 3 million tonnes, resulting in an increase in the capacity from 2.7 million to 5.7 million tonnes by constructing additional pellet plant. The expected time line for expansion of the project is approximately 30 months from now, these estimated CapEx of [ INR 100 crores ]. Further, [ BPL ] has decided to increase the capacity of integrated steel [indiscernible] by 1 million tonne, alluding from [ present ] capacity of 0.5 million tonne taking the total capacity to 1.5 million tonnes. According to our estimate CapEx for the same will be approximately [ INR 2,500 crores ] and expected completion time will be 36 months.
We are awaiting the environmental approval for all these projects, once the approval is received, the construction activity [ should ] start. The time line for completion is in the -- for the regulatory approval is during the current financial year, and we hope to start the construction activity in the next financial year.
Our company is resilient and commitment to reducing the carbon footprint. We plan [indiscernible] towards the goal by establishing total [ coal ] power capacity of 155 megawatts spread across 3 projects. As of FY '23, we had commissioned 70 megawatts of GPIL solar power plant and 30-megawatt on the HFAL and further constructing 55-megawatt capacity which is expected to be completed by end of September in the current quarter.
I would like to highlight that when comparing the [indiscernible] of the [indiscernible] power, the cost of solar power [ degeneration ], GPIL on average sales is [indiscernible] per unit with the plant load sector of around 15% of the [indiscernible] capacity.
In the current financials, an [indiscernible] CapEx for the steel and power plant other than we follow [indiscernible] close out INR 125 crores and the expected completion is in the current year, which includes replacement of turbine, some modification in our rolling mill and steel billet plants, et cetera.
Over and above this, I'm pleased to announce that [ GPIL ] has successfully introduced a new product [ 66 Fe Pellets ] which has received an overall positive response from the market. Notably, these are significantly better realization as compared to the 63 Fe Pellets. The additional realization is in the range of INR 1,500 to INR 2,000 tonnes for 66 Fe Pellet.
Coming on the operational comments, I'm delighted to hear that as per our volume guidance for [ FY '23 ], we have already achieved 30%, 25% and 28% target in [indiscernible] and billet and the [indiscernible] products. This is a strong performance given the confidence that we have been able to reach our guidance target for all products. We outlined in the last quarter and sticking to our guidance for the current [indiscernible] as mentioned in our presentation.
Iron ore volume in third quarter Q1 FY '24 is played a pilot [indiscernible], and we are confident of achieving the total volume for the current year. Iron ore pellet production decreased 21% quarter-on-quarter and Y-o-Y basis due to the client maintenance shutdown. On the other hand, Sponge Iron, Steel Billet and M.S. Round production needs to be significantly primarily because of the shutdown definitely last quarter in Q4 FY '23. Iron Ore selections decreased to 97,000 tonnes because of an increased capital condition of pellet for production of the Sponge Iron in the current quarter. Sales of Sponge Iron, Steel Billet and M.S. Round have also increased significantly in line with increasing production. Realization for [indiscernible] shown an increase of 3% on quarter-on-quarter basis or average utilization for the quarter is INR 1,200 per tonne.
Other products have showed a slight decrease in the prices in line, obviously, reduction in the fuel cost.
All in, Y-o-Y basis realization across the product has [ fallen ]. If you compare our results with Q1 FY '23, then the FY '23 was an exceptional period when the [indiscernible] prices of iron ore was very high, and therefore, our [indiscernible] very high, which is not a normal circumstance. So the Y-o-Y number estimate [indiscernible] normal market condition, which is -- which was for FY '23. And our performance is in line with that.
Coming on the consolidated financial performance, [indiscernible] for the quarter showed a marginal increase of 1% to INR 1,336 crores. On quarter-on-quarter, [indiscernible] it dropped 20% or Y-o-Y ratio, primarily because of falling realization of all products. EBITDA increased 14% quarter-on-quarter basis to INR 305 crores, paid attributable to owners increased to [ INR 231 crores ] up 36% quarter-on-quarter.
I would also like to mention that there was an exceptional income of INR 18 crores in Q1 FY '22 -- Q1 FY '24, which was received from the buyer in terms of our share purchase agreement for sale of investment in Godawari, is about 25 megawatts solar thermal power plant, which we sold in FY '21.
Moving on the stand-alone performance. Sequentially [indiscernible] dropped 1% to INR 1,207 crores, whereas EBITDA and [indiscernible] increased 9% and 16% to INR [indiscernible] crores and INR 224 crores. EBITDA margin improved in the quarter to 25% as compared to 22% in Q4 FY '23.
Coming on the market outlook, international global iron ore prices of such [ 233 ] [indiscernible] China in mid-March 2023 following the China's economic -- economy reopening. However, [indiscernible] the increase in iron ore supplies by global majors couple with lower-than-expected demand pickup in China resulted in correction in prices to current level of $150 a tonne. However, is it the announcement by China to support housing [indiscernible] sector by [indiscernible] increase in consumption of iron ore.
While the steel acquisition is projecting a robust 2.3% growth in steel demand for FY '23 followed by further [indiscernible] in 2024. The positive outlook goes well for the steel demand for iron ore and the indicated prices to remain well supported at the current level.
In domestic market iron ore prices have [indiscernible] have experienced slight increase prices from [ 3,660 tonnes ] in January to [ 4,200 per tonne ] at present while prices have recovered from the [indiscernible] observed [indiscernible] of export tests, they have remained well below the last year level of INR 5,000 per tonne, considerative [indiscernible] prices it, [indiscernible] embarked but has since declined to INR 8,000 a tonne or per normal grade of pellet, which is at 63 Fe. It's positive for testing demand. It is expected with the pellet prices we [indiscernible] supported at current level.
With this, I conclude the opening remarks and we can now open the floor to question and answer.
[Operator Instructions] The first question is from the line of Jatin Damania from Kotak Securities.
I just want to check that, if you look definitely globally the realizing of land or and the [ pallet ] has complete [indiscernible], whereas our realization on the sequential basis has gone up to near about INR 10,200 crore. So can you guide us in terms of what was the total contribution of the hard pellet in the overall basket, which has helped us to run such a higher realization? And how do we see the talent market and the realization going forward?
Okay. [indiscernible] In Q1, the [indiscernible] production was less than 50% because we have taken the annual shutdown of our [indiscernible] bigger one. That's our strategy, we get [indiscernible] before [ monsoons ]. So Q1 is always the production volume is so low. But going forward, target production is going to remain at 65% level of the [ gas ] production.
65% will be a higher grade production?
Yes.
And from Q2 [indiscernible] from the July onwards is the pellet running at the full capacity or the shutdown or the [indiscernible]?
No, no. So from month of June, the operating [indiscernible] month of May and from June onwards. So whatever numbers we have given in terms of our annual analyze volumes, we are confident we be able to achieve that.
Sir, a couple of more questions. Since you have already commissioned the [indiscernible] is expected. In addition to this, you are doing INR 125 crores of CapEx on the relining undersetting of the other turbine. So could you help us in understanding what will be the savings that will be having on both the solar and the new turbines comes in place?
So put together, the solar [indiscernible] megawatts plus [indiscernible] capacity at the line, we're expecting an annualized saving of INR 100 crores, INR 125 crores on EBITDA level, on an annual basis.
And lastly, any update on the [indiscernible] what product and where are we -- how are we moving?
As you see, we've been saying that timing again. But unfortunately, there has been a kind of lag in terms of our approvals. So as I said, we still have a few months before we start the work. So I did [indiscernible] we are very clear, but we are on the [indiscernible] side, we are exploring the [indiscernible] as well as [indiscernible] So I think in time once we start the groundwork, we should be in a position we decide which kind of [indiscernible] be making. So we would need some time. But we're still exploring [indiscernible] because a lot of [indiscernible] so this will be our first project in terms of primary production. So we will need some more time to decide the product.
[Operator Instructions] The next question is from the line of from [indiscernible] from [ SBI CAP Securities ].
I just have a couple of questions. So the first question was that [indiscernible] like? And how much will you be importing Q1 [indiscernible]? And what is the [indiscernible] of coal as of date?
And second question is what is the payback [indiscernible] of this new CapEx plan?
Okay. So to answer your first question. So we import about 0.5 million for our DI operations. We have been doing that earlier, and we will continue to do that in the future as well.
So on the pricing side, as you are aware, the [indiscernible] index has gone below 100 levels. And most [indiscernible] are -- we are buying on index. So we are moving with the market. So as the market is going down, we will get the benefit of lower input for our DI production as well. So on a fixed number, you can say currently we landed close to the plant is about [indiscernible] tonnes, which will further go probably down by [indiscernible] in the coming months. Against [ 80,000 ] in Q4, say about [indiscernible] in Q1. So Q2, we can see a number of pay about [ INR 12,000 ] average mine [indiscernible] and on inventory levels, usually including the transit in the pending shipments and the stock we [indiscernible] about 2 months because the monsoon, we need to keep that leverage so that the plant doesn't get hampered. So the moment we can [indiscernible] 2 months. So basically, Q2 or earlier 2, 3 years over.
Okay. And what is the [indiscernible] [ CapEx ] plan?
Okay. So there are [indiscernible] going on. One is the steel capacity from 0.4 to 0.5 million, which will be commissioned in through to itself. Then second one is better mine, again, the 40 megawatts are buying [ shall be ] commissioned again in Q2. To combine these 2, we expect that the power can [ empower ] fuel cost to go down by at least [indiscernible]. So on an overall generation, as I mentioned earlier, the [indiscernible] the solar, anything put together on the [ NG ] side, we expect sitting about 225 years on annualized basis.
[Operator Instructions] The next question is from the line of Chirag Singhal from First Water Capital.
So my first question is on the 66 Fe Pellets that you mentioned. So you mentioned that the realizations of INR 300 -- INR 2,000 per tonne higher. So is this in comparison to the regular 63 at grade or the second highest [indiscernible]?
So just to be clear with things. So what we have done is, earlier we're making a 65 Fe Pellet. So we have improved that same pellet to 66 now and what Mr. [indiscernible] mentioned, so the premium of [indiscernible] is over the [ 63 ] pellets. If you compare [indiscernible] pellet -- so at the moment, since because this is new to the market, we are trying to establish for the new buyers to really getting if you know about [indiscernible] over 65 pellets.
Okay. And just wanted to understand the delta when you produce the 65 or 66 Fe [indiscernible]. So what is the incremental cost that you're [indiscernible]?
Inventory cost is about -- it's about INR 200 or INR 300. So the addition delta [indiscernible] which will add to a bottom end is about INR [indiscernible] per tonne.
Sorry, [indiscernible], you said INR 500 crores to INR 600 crores?
Yes, because [indiscernible] are additional in food costs. And at the moment, we're able to realize a of, say, INR [indiscernible]. So if you compare apple to apple, so we'll probably make the INR [indiscernible] more compared to a 65 pellets.
Okay. Got it. And what is the price trend looking like for [indiscernible] for the current quarter versus the last quarter?
See at the moment, so domestically, the prices are about INR 9,000 for the 63 Pellets, for the higher gain which we have started marketing. We are getting the price anything between INR [indiscernible]. Still, I would say, it's early stage, where we are confident as people are using this quality, we would be getting the desired premium going forward.
So broadly for us, the realizations would be a little bit higher than what we did in Q1.
In terms of -- yes, definitely volumes are going to go up compared to Q1. That is for sure, because there are no shutdowns. And on the pricing side, we had a plan of INR [indiscernible] I would still say we probably will be in the range of [indiscernible] because there is a monsoon season, the domestic demand is still very weak. The markets have been going down month-on-month. So if you're able sustain the same price, I think it should be a good number.
And what about the finished deal?
Finished [ deal ]? In terms of pricing?
Yes.
[indiscernible] so compared to Q1, the prices are further down to at least 10% in Q2, for sure.
Sorry.
Today's [indiscernible] about INR 27,000. [indiscernible] is about INR [indiscernible] crores, [indiscernible] about INR [indiscernible]. If you compare to Q1, the spend is about INR 30,000. So there'll be a 8% to 10% drop in the finished prices compared to Q1 for this quarter.
But at the same time, the input cost has gone down in terms of common coal or the power [ coal ] because the domestic coal [indiscernible] cash. They are almost line with the lower on bottom prices, which should be pre-COVID levels. So that will help fully sustaining [indiscernible].
That was my last question, actually, the coal cost only. So you mentioned that -- so if I got it correct, you are expecting some INR 3,000 per tonne on your consumption cost in coal for the current quarter versus the last quarter?
Yes, 2.5 [indiscernible] exactly.
[Operator Instructions] The next question is from the line of [ Nikhil Chandak ] from [ JM Family Office ].
Abhishek, so I had 2, 3 related questions all around the capital allocation policy, both at the company and at the promoter end. Now it's obviously a great thing, it's a cash risk balance sheet. But recently, for example, we did an unsecured loan to another company in the [indiscernible] business, [ Prakash ] Industries, [indiscernible] shares in favor of Godawari. Why would you do something like this? As in why get into these unsecured loans to either players in the industry or outside the industry? That is the first question.
On the second -- I also understand [indiscernible] the promoter and there are a few other business interests also which the promoters have, like, for example, [indiscernible] and things like that. Now any chance that you kind of would want to fund this from Godawari's balance sheet? Or would that be again funded by promoter in itself? And just from a management perspective, time allocation or between -- or focus between the 2 entities, Godawari versus some of the other business interests.
And the third one was, again, we saw like some decent [ selling ] by the promoters, which was, frankly, I thought, surprising because there was a buyback which was just done at site [indiscernible] promoters are [indiscernible]. So why sell down stake in the listed entity? And would you look to do more of those kind of sell downs?
I'll answer the question on the first part -- so yes, we do have given some entity loans against the [indiscernible] the hedging of the cash [indiscernible] but on overall, we do have a nice -- the shareholders, especially are not happy with this approach at the company. And as a management, I can comment to you, whatever has been done has been done, I can assure you, all the loans have given are all the [indiscernible], but they will come back to the company because [indiscernible] test. And going forward, we have taken [indiscernible] decision, we will not incur in the tactic any further. So whatever is gone, gone is going to come back to the company as far as they are in agreement. But going forward, we will not continue with this practice. So the [indiscernible] I can assure you that. That answers your first question.
Second part would be -- on the -- we have no intention of funding any promoter investments or their growth from time company. Godawari [indiscernible] company and ensure whatever is [indiscernible] being done, [indiscernible] the company to add value to the shareholders.
And the third question. See, we did dilute some stake. The reason was, we were always looking to get good investors, gains [indiscernible] both so there was an opportunity. We thought we'll add value to and everyone onboard [indiscernible] shareholders. So that is the reason. [indiscernible] There's an opportunity where we wanted to get good investors on board. So we have [indiscernible] big customers in [indiscernible] the only reason.
No, that's very reassuring. So just on the cash generation, which will happen in addition to the CapEx which is going into the business. So from a dividend plus buyback, would the similar strategy as in the recent past, continue over the, say, the medium term?
So [indiscernible], we have a dividend policy, which has been approved by the Board, and we will stick to the dividend policy. We are very clear, whatever cash [indiscernible] here, either is going to -- we're going to distribute to the shareholders and we're going to go to the CapEx. So we will follow dividend policy by the [indiscernible] and if you compare the last 3 years, the [indiscernible] may be more than almost 20%, 25% on a year-on-year basis. So I think that's a bit good dividend policy. So we will continue with that.
[Operator Instructions] The next question is from the line of [ Rakesh Roy ] from [ Omkara Capital ].
Sir, my first question regarding, sir, how is the Ferro Alloy business doing as of now?
See, Ferro Alloy business, I would say, is not going very great because the [indiscernible] almost the [indiscernible] bottom. Currently, the [indiscernible] sillies are about INR 55,000 [indiscernible] plant. The only silver lining is the input cost, which is [indiscernible] and come and cold [indiscernible] the core. So [indiscernible] drop down in [indiscernible] is hovering around lower what I would say. And same is with for thermal coal and [indiscernible].
Definitely, there will be a substantial savings on account of [indiscernible] generation because the prices of domestic coal come on to the [indiscernible] prices. So we can see some savings on the power [indiscernible] side. But as a whole, the Ferro industry right now, I would say it's -- it's operating at a very minimum profit, I would say.
Okay. Got it, sir. But sir, your reliance on [indiscernible] come down due [indiscernible], is that all right?
Yes, definitely, of course, because the prices are -- I think in Q1 is about [ 70,000 ] now in Q2, it's about [ 55,000 ]. And the demand is quite [indiscernible] because India is suppressing alloy production. So a fund has to be expected to balance out the demand and supply. So the prices are definitely under pressure in terms of [indiscernible] at the moment.
Right, sir. Sir, my next question is regarding [indiscernible], sir, maybe [indiscernible] sir. But sir, can you highlight on the new product, the 66 Fe or how the difference in terms of pricing from 65 and other?
So as I mentioned earlier, so we are into the step further. Now we are making a [ 63 Fe pellets ], for which we are getting an additional premium of pay about [ INR 80 ] [indiscernible] 65 pellets. It's a very nascent stage, I was a very initial phase. As people start using it, the [indiscernible], I'm sure we'll be able to [indiscernible] the desire for the longer term.
Okay. So sir, same for [indiscernible] sir, sir, in Q1, we have 65% of [indiscernible] on higher [indiscernible]?
So we have been reducing the percentage of highly production of pellets compared to my normal. It is always 55% over the last 2 years, and we will continue to maintain that.
Okay. After 66, you maintain 65 volume?
The percentage should be 65% only. Yes. At the moment, the portion volume will be same. Exactly, we have improved the quality, a notch more.
Okay, sir. Sir, next question is regarding -- okay, most of the steel plant or steel players are setting their own [indiscernible] can we face any difficulty to sell in the pellets?
No. So I would say a very stable answer. There are 2 reasons but -- because of the captive mines, our center [indiscernible] at a very lower cost compared to others. And because the entire India is making the same [indiscernible], which is [indiscernible] pellet. So -- but in my case, since I'm making a premium product, which is a [indiscernible] now, so I have a different market, I have a different audience, different target audience. And [ finally ], we always put export market as well. So I don't see any reason that we would be taking any kind of [indiscernible] from my peers in the domestic market [indiscernible].
So most of [indiscernible] companies in the [indiscernible] next 1 month or [indiscernible] on credit for cost will come down. So in that sir, our realization will come down or how much you are expecting, sir, in near term?
So as I mentioned, for us, I know doesn't come down much because it's a taxes [indiscernible] me, right? Only on the royalty part, is changing up and down.
On the coal side, definitely someone [indiscernible] as I mentioned, Q1 [indiscernible] is about INR [indiscernible] to expecting average price of [indiscernible] So that had a way add to our additional EBITDA. But at the same time, the finish [indiscernible] gone down on was 10%. So that will balance out. So whatever input cost has gone down, the finish down on the in the same proportion. [indiscernible] improvement at site.
[indiscernible] usage coal will come down from INR 15,000 to INR 2,500 crores?
Yes, yes, for Q2.
Sorry, in total [indiscernible] how much percentage [indiscernible]?
I think coal -- so coal is about 35%.
35%, sir?
Yes.
Sir how much your energy we are using for renewal currently in terms of percentage?
In terms of renewable power, it's about 30% at a group level, [indiscernible] level.
Any plan to increase in your [indiscernible], you are just mentioning [indiscernible] megawatts on the solar plant.
Currently 100 is running and another 55 in pipeline, which will be commissioned in Q2. And -- so -- and going forward, there is a comment of further power, then we will provision [indiscernible] full base plant in [indiscernible].
Sir, you said [indiscernible] pillar products come down [indiscernible].
Yes.
Okay. But last year, same Q1, so the [indiscernible] there for [indiscernible] sir.
See, depending on the machine ability and the machine condition, we decide everything before hand before the year starts. So the down [indiscernible] Q1 [indiscernible] Q2. But on the overall guidance, if you see, at the end of the year, the numbers we have committed, we are [indiscernible] the 0.5 million volume. [indiscernible]
Sir, last year, we have -- you will [indiscernible] by 6.7 lakh tonnes.
No. [indiscernible] you see the annualized basis, we produced about some 2.6 million something. So this is also -- we are confident we will see the same volume.
For FY '24, we are [ seeing ] the same volume?
Yes, definitely.
Okay, sir. All right, sir. And regarding, sir, your mining further, it takes how many months [indiscernible] ramp up the new [indiscernible] money [indiscernible]?
Once the approvals are received, anything between, say, 12 to 18 months.
[Operator Instructions] We move on to the next question that is from the line of Vikash Singh from PhillipCapital.
Good afternoon, I want to understand one thing. Once we improved our pallet and new pallet product capacity, would the high-grade pallet ratio would remain the same, like today 65% or it could come down?
No, no, no. So the current capacity is 2.7 million going. So of course, we are -- we have [indiscernible] for approval of 3 million tonnes. But I also said earlier, depending on the market conditions and the mine expansion, we might see the capacity to probably set to past 1.5 to 2. But yes, going forward, whatever pellet we produce, it's going to be higher pellet that is for sure. So we will solve the capacity in the same volume, and we can finance a mining capacity. So going forward, the ratio of [indiscernible] pellets will go up rather than going down.
Understood, sir. And sir, one more thing. If I remember correctly, we previously talked about debottlenecking our [ Sponge Iron ] plan, bringing it to almost 6 lakh tonne capacity. Looking at the 1 quarter results, you see that is running at the same capacity. Considering we have done maintenance CapEx already. So why we are still giving a guidance of 0.5 million tonne only and not [indiscernible]?
Because [indiscernible] which we have received from the MOEF and the state position would about for 0.5 million tonnes. We have received the [indiscernible] as also mentioned in the [indiscernible]. We have got the commission from MOEF, but [indiscernible] from the approval from the state commission board. So at current level, we can actually produce [indiscernible] million tonnes but due to the permission limit, we are receiving a [indiscernible] million tonne. No other reasons.
Understood, sir. Sir, my third question regarding our integrated steel plant. I know it's a little bit early but do we have the land bank already a label? Or we still we have the impacting has to be drawn from this class and not only on the product?
No, no. So we have the land bank -- certain [indiscernible] are under process because it is a government land. So we [indiscernible] land has been already alluded to us. So we're just saying that the formality should get completed, so the land can be alluded to us officially in terms of [indiscernible] under work. So that is the reason there is a delay in terms of the projects and its ground work. But we have been [indiscernible].
And lastly, sir, in terms of iron ore mining incremental of 3.65 million tonnes, can you give us where we are in terms of regulatory approvals? And if there is any change in time lines there?
[indiscernible] energy [indiscernible]. Hopefully, I think it should be in place in next -- probably by -- I think, end of Q3. So on everything from there on, we can consider 12 to 18 months to ramp up to the full capacity.
Okay, sir. Sir, just one more question, if I can pitch in. You said that you are actually covered [indiscernible] Q2 in terms of coal price. So the price at which...
I said Q3 as well as first -- early half of Q3 as well.
Yes. So Q3, so the price at which we have bought the coal versus the spot price, what is different?
[indiscernible] all buying has been on index pricing. So we can index means the -- as the market is going down, my value of incoming [indiscernible] down. So I will always be on the gaining side. Even the market go further back in dollars, we will take [indiscernible].
Understood, sir. Understood. And lastly, [indiscernible] seems to be making losses till now. So any outlook, why then we [indiscernible]?
The reason was only Q3 of last financial year, there was a stock loss because the prices of [indiscernible] had come up quite a bit and the cash and the finished prices of alloy also crash. So I think Q3 and Q4 was impacted that. Q1, when you were able to start producing at capacity and partly the market turnaround of Ferro Alloy and the [indiscernible], currently. So that is the reason, I would say that the profit as [indiscernible] alloy business are not showing the numbers. That's the only reason. No other reason. The market is [indiscernible].
Let me intervene [indiscernible] is not making losses. It is at least at a breakeven [indiscernible] was slightly above the breakeven level. And despite all this, this power plant is commissioned solar power plant [indiscernible], that will continue to be margin from Q2 onwards. And the capacity is also ramped up there. So hopefully, next year onwards above INR 50 crores EBITDA is definitely possible for [indiscernible] forward.
[Operator Instructions] The next question is from the line of [indiscernible] from [ Anubati Advisors ].
Thanks for the opportunity [indiscernible] the call late, so I don't know whether questions is answered or not. My question is with respect to the...
Sorry to interrupt. Mr. [indiscernible] we unable to hear you clearly. [indiscernible] question, you use the handset mode while speaking and not the speaker phone.
Am I audible now?
Much better.
Yes. Yes. So I was saying that I have join the call late, so I don't know whether the question is answered or not. But I just wanted to understand on a Y-o-Y basis, [indiscernible] the iron ore mining and tariffs have gone down significantly. So what's the reason for that, if you can explain.
Okay. So on the pellet side, we already mentioned that we had taken an annual shutdown of a bigger plant which we always do before the monsoon so that giving monsoon, able to [indiscernible] capacity. No other reason. It's a planned annual shutdown. And -- but we still -- the guidance given to everybody at start of the year, we will -- we are confident to keep that, which is a [indiscernible]. So you can see the improvement in volumes [indiscernible] onwards.
And on the mining side, we already mentioned a couple of [indiscernible], there was an accident at [indiscernible] collapse and because of which there was an industry mining at full capacity April end of March till April, from May onwards, we started [indiscernible] the full capacity. So that bottleneck thing, we have took some time. But today, we have [indiscernible].
Okay. Okay. Got it, sir. Sir, [indiscernible] outlook on export markets for pellet. So how Godawari is looking into the exports and...
We are always exploring the export market. But at the moment, we haven't done single export shipment primarily because the domestic [ license ] of pellets are much better than export. So it's the [indiscernible] businesses, wherever you get more money, you sell it. So at the moment, domestic is a deferred market. but we are always on [indiscernible].
So can you give a broader [indiscernible].
Sorry to interrupt. Your audio is breaking up, we unable to hear you clearly.
Okay. Am I audible now?
Yes, yes.
Yes, I just wanted to know if you can provide the difference between the export price of pellets and domestic price of pellets? If you can share.
So today, if I compare on [indiscernible], it's about [ 2 ]%. So if you take the domestic [indiscernible] they say about [indiscernible] for high grade, export will about INR [indiscernible]. So there is [ 10% ] difference. That's the reason we are not in the export market at the moment.
Okay. Okay. And sir, one last question that with respect to the new CapEx plan that you have announced. The total amount comes to around INR 3,500 crores. So out of that, what would be the amount that would be incurred in FY '24 itself?
This year, to see on the new -- both the new projects, the current financial year, we don't see much of CapEx being spent because both the projects are [indiscernible] approval. We're expecting approvals to be probably in our hand, say, end of Q3, earlier Q4. So there will be no major [indiscernible] CapEx in this financial year. We're only complete [indiscernible] going on. Next year onwards, we can see a substantial amount, but the project is about 2 to 3, 3.5 years. So of course, with the [indiscernible] accordingly.
Okay. Okay. And sir, just one follow-up with respect to this pellets business summary. So incremental [indiscernible] that we are setting up. Is this only, say, for exploring the export market [indiscernible] mixture or it depends upon the scenario at that time?
So it all depends on the scenario. We are focusing on the export market. Even the demand in India is also [indiscernible] going up. People are realizing the value of good quality iron ore. Plus, if we also have to start up steel production, which is 1 million capacity. So you can say 50% will be going to announce consumption. So going forward in the longer term, say, 5 years down the line, we will have only 1.5 million tonnes for exports or merchant sales. That is the whole idea behind the [indiscernible] capacity.
The next question is from the line of Yogansh Jeswani from Mittal Analytics.
Abhishek, so most of the questions have been answered. Just 1 or 2 more follow-ups. So sir, on the mining and the verification expansion that we are planning, we have highlighted in the presentation, we had roughly around INR 200 crores is [indiscernible] for it. So how much would be for mining? And how much will be for the verification plan, sir?
See, on the mining side, basically that we created infrastructure to mining and the raw material and its [ patches ]. So out of [indiscernible], I would say, about, say, about -- over INR 40 crores will be on the mining side with the recent [indiscernible] and the many [indiscernible] crores will be on the verification side.
Understood. Sir, I mean on the verification plant, just for our understanding, if you could be [indiscernible] with this verification plans, [indiscernible] able to use more of base fines and convert them into [indiscernible]? I don't know what will this also help us on the cost side [indiscernible]? Basically, what is identification will do for us?
Okay. So there are 2 parts. One is we will beneficiate the low-grade iron ore, obviously, [indiscernible] to make it do a high-grade concentrate, say, about [ 55 56 ], which can be used for pellets. So then we [indiscernible] to update the low grade from 35 to 65 or 60, whatever, depending on the process.
And second is the cost side. Currently, we are bringing everything to the plant and benefiting in Godawari, so we are paying about INR 1,000 transportation. So in pursuing that, we are going away about 15%, 20% of our tailings. So to save transportation, now we'll be benefiting in the mine, and we can say about INR 150 of transportation. So you say, [indiscernible], if you do a mining of 6 million tonnes or 5 million tonnes from almost INR 70 crore, INR 80 crores. So that is the whole idea of starting a benefiting in the mine rather than being in the plant.
Okay. So just currently, we already have a verification plant at the [indiscernible]?
Yes, Yes, the capacity is 3.2 million tonnes. And that is the reason we are able to produce high grade pellet.
Okay. So with this 6 million verification plant that will come up as you might, the other 3.2 will still be of use or...
See, we can always utilize it depending on the -- how the process gets stabilized in the mine. But of course, the plant is running smooth so no reason we're going to actually isolate it. It's going to be the [indiscernible]. There's a requirement of further [indiscernible], yes, we will do it. It's a choice we have.
Okay. But suppose the 6 million mitigation plan end of mine is running smoothly and this 3.2 becomes not so useful there?
Exactly. Exactly. Yes, you're correct.
Okay. And the savings that you mentioned was roughly around INR 70 crores to INR 80 crores per year on [indiscernible]?
Yes. So if you see our [indiscernible] crores. So it's a 2-year payback. So it's no brainer.
Absolutely, right. And next on the [indiscernible] steel plant, is there a little more clarity as to what we want to do now? I think in past, we are still contemplating whether we want to...
No. So we...
Or integrated steel plant?
So we are a clear. We won't be going in with the only [indiscernible] are because selling to that end, which is used volume it's not a [indiscernible] of work. What you're going to do is we have definitely put a finish line of steel. So we are excluding the [indiscernible] steel as there is a fact, which is the [indiscernible] we can say, structure or strip.
Got it. Just one last question from my end. So I think the approval are not in our hands. So it's tough for you also to make any commitment to us, but you are fairly highlighted that Q3, Q4 is where you expect something to come through. And then again, it will take anywhere between 15 to 20 months for the mining and 2, 3 years for the [indiscernible] steel plant. So between today and then, what is the growth that we see? I mean what kind of growth can we expect? Will it be very marginal 5% to 10% that we get from debottlenecking of our [indiscernible] for and so on and so forth? Or there can be something which this will be made in the next 2, 3 years also?
See, firstly, the additional savings comes from the energy business because we have been commissioning the new turbine, the solar plant. So our energy input costs will go down and we see an additional EBITDA of [indiscernible]. That is one benefit. Second would be as capacity will be from 0.4 million to 0.5 million. the additional EBITDA [indiscernible] will also be realized [indiscernible] live from, say, Q3 onwards. And on the growth side, to be very honest in terms of volume, we don't see much growth from here [indiscernible]. But of course, with the market, the market can go up again, of course, the volume is going to go up again.
The next question is from the line of [indiscernible] from [ Steelman ].
Sir, I wanted to know [indiscernible] recently launched high-grade pellets, you all know [indiscernible] grade. So we wanted to know what is the market of the particular grade talent? What is the demand? And from which reason the demand is maximum for the particular grade?
At the moment, we are selling everything domestic. So because of the lower silicon levels, lower cost level. So domestically, we are able to get a desire premium and people are much quite happy with the quality because we are able to realize the benefits in the downstream products. So at the moment, we are saying everything domestically. So [indiscernible] it. And we're also exploring export opportunities.
The next question is from the line of [ Kishan Toshniwal ] from [ Polar Ventures LLC ].
I was just really [indiscernible] the promoter of your company has invested and has participated in a private placement of a company called [ Datang ] Gold Mine. So is there anything related to the company's business? Or is it a promoter and a small capacity has done that?
Promoter [indiscernible] capacity [indiscernible] that. Nothing to do with the comment.
Nothing to do with the [indiscernible]?
Nothing.
The next question is from the line of [ Ganesh ], an Individual Investor.
Thank you for keeping us minority investors well inform. Just going through the deck and now you have a couple of additional...
Audio is not clear. May we request you switch to the handset mode and not the speaker phone.
Can you hear me better now?
Just slightly, please proceed.
Yes. So there are a couple of slides that are not there this time about [indiscernible] prices and all that. Could you please include them from the next time?
Sure. I'll discuss with my team and whatever slide you're expecting, which was earlier, we will try and give it back in [indiscernible] for next.
Yes. Secondly, the lead times that we are talking about for a long-term expense and there are a number of months, 24 months, 30 months. Are these from today? Or are we from the time we get environment approval?
No, [indiscernible], I'll tell you on the mining side, it is about 12 to 18 months from approval. On pellet side, it's about 18 months from date of approval. And on the steel plant side, because it's going to be a big [indiscernible], it's going to be [indiscernible]. So we can expect anything between 24 to 30 months from data approval. So yes, the commission is [indiscernible] because that is something which not enough. We know how to -- how much then we can put at the plant, but to start the working, we need that approval and which is not in our hands, unfortunately.
Right. And regarding the new [indiscernible] pellets that we are facing the market. Just curious, I want to understand. The coking prices, coking coal prices and other input prices are all very less now. So what is the motivation for [indiscernible] higher grade pellet if they can manage with a lower grade pellet because the other input costs pellet [indiscernible]?
No, because the problem [indiscernible] both the products, if you mix both the products, the point is we lose the premium on the better. And in total market that there already on a demand-supply mismatch in India in terms of sale. If you start making more volume of the [indiscernible] pellet [indiscernible] we won't get a desired premium which we're getting right now plus there will be a pressure on us to sell. And then you get under pressure, then you start selling, you do [indiscernible]. So we don't have that. We are very focused. Our tiny focus is to produce more of higher grade pellet and eventually like the desired premium because going forward, with more initiatives towards green steel, the demand of high-grade iron ore will keep going up year-on-year, be it domestically, be it internationally. So our focus is very clear, we want to make more and more higher grade pellets.
[Operator Instructions] The next question is from the line of [ Rakesh Roy ] from [ Ankara Capital ].
One more question, sir. So when you see a [ Ferro Alloy ] realization for [indiscernible] of 3 different [indiscernible] Why we are different for [indiscernible] and [indiscernible]?
See, I'll tell you the difference in terms of ratio for [indiscernible] alloy, probably in terms of the kind of booking, the input cost on the raw material side, that's the only difference because [indiscernible] the reason probably we sold some quantity [indiscernible] marketing or the market went up and allow to them. So it's only a price [indiscernible] as well.
The next question is from the line of Vignesh Iyer from [ Sequel Investments ].
I may have missed it, but can you [indiscernible] how are you going to fund our CapEx of INR 3,500 crores of [indiscernible]...
[indiscernible] an approval. I think it's going to be [indiscernible] approval. We have no intention of going to the banks. If [indiscernible] required, we might. But at the moment, we are in the current scenario, we are confident that it could be funded by the in approval.
Okay. Okay, sir. And sir, just to understand this year of FY '24, [indiscernible] to 25% tax? And it was 27% [indiscernible] time [indiscernible] from last year.
No, no, we [indiscernible] 25% only some deferred [indiscernible] or some adjustments here and there, but [indiscernible] 55% debt.
Ladies and gentlemen, that's the last question. I now hand the conference over to the management for the closing comments.
Thank you. First, in [indiscernible], I would like to highlight that [indiscernible] are well prepared for the next phase of growth, [indiscernible] by robust net sales balance sheet and a competitive advantage with captive iron ore mines and the production of high-grade pellet with initial growth plan and [indiscernible] support from [indiscernible], we are confident of our future prospects.
We extend our sincere gratitude for your presence in this conference call and we [indiscernible] that we have been able to address all your questions. If you have any further cases on additional information with you [indiscernible], please do not hesitate to contact us directly or reach out to our Investor Relation at [indiscernible] advisers. Thank you once again for joining and participation in this call. Thank you. And with this we conclude this call. Thank you very much.
Thank you, members of the management team. Ladies and gentlemen, on behalf of Go India Advisors, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.