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Godawari Power and Ispat Ltd
Earnings Call Analysis
Q1-2025 Analysis
Godawari Power and Ispat Ltd
Godawari Power & Ispat Limited (GPIL) kicked off the financial year 2025 with an impressive performance in the first quarter. The company reported a year-on-year revenue increase of 12% to INR 1,342 crores, driven mainly by higher production volumes, notably a 24% rise in iron ore pellet production. Additionally, the profitability was bolstered by cost reductions associated with previous capital expenditures aimed at enhancing operational efficiency.
Production volumes across various divisions were robust, with iron ore production increasing by 3% year-on-year, and captive power generation surging by 52%. However, there was a noted quarter-on-quarter decrease in certain production metrics, primarily due to planned maintenance shutdowns. For instance, while iron ore pellet sales rose 49% year-over-year, it declined 9% quarter-over-quarter. This highlights the cyclical nature of production and sales in the industry.
GPIL achieved an excellent EBITDA margin of 30%, up significantly from 23% in the same quarter last year. The EBITDA itself increased by 33% year-on-year to INR 408 crores, reflecting the company’s effective cost management strategies over the past two years. These strategies included enhanced operational efficiencies through the utilization of captive power generation, which has meaningfully contributed to reducing operational costs.
Looking ahead, GPIL is positioning itself for further growth through a series of strategic capital expenditure initiatives. The ongoing expansion plan aims to increase iron ore mining capacity from 2.35 million tonnes to 6 million tonnes, with expectations for some approvals by December 2024. Moreover, the company is also focused on upping the pellet capacity from 2.7 million tonnes to 4.7 million tonnes, expecting commissioning by June 2026. This strategic alignment indicates the company's proactive approach to expanding its operational footprint.
Despite current operational achievements, GPIL is cautious about the near-term market environment. They anticipate some fluctuations in realization prices, given that prices for iron ore pellets have recently dipped by about 10% compared to the last quarter. Nevertheless, the company maintains confidence in the domestic market's strength and is optimistic about its positioning as additional capacity comes online.
As part of its long-term vision, GPIL has committed to sustainability, setting a target to achieve net-zero emissions by 2050. This includes an ambitious addition of 70 megawatts in solar power capacity, complementing its existing generation capabilities. Current initiatives are expected to reduce average power costs further from INR 35 to an estimated INR 33.1 per unit, enhancing operational efficiency while addressing environmental impacts.
In summary, Godawari Power & Ispat Limited is in a strong position, effectively managing costs and increasing production capacities while navigating market dynamics prudently. The continuing investments in expansions and sustainability initiatives reflect a forward-thinking approach that should yield positive results in the coming quarters. Investors can look forward to potential growth, underpinned by solid operational foundations and strategic foresight.
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Ladies and gentlemen, good day, and welcome to Godawari Power & Ispat Limited Q1 FY '25 Earnings Conference Call hosted by Emkay Global Financial Services.
[Operator Instructions]
Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Lahoti from Emkay Global Financial Services. Thank you, and over to you, sir.
Thank you, Aditya. Good afternoon, everyone. Welcome to Q1 FY '25 Conference Call with Godawari Power. From the management side, we have the with us today Mr. Abhishek Agrawal, Executive Director; Mr. Dinesh Gandhi, Executive Director; and Mr. Sanjay Bothra, CFO. I will now hand over the call to the management for the open remarks. Over to you, Mr. Gandhi.
Thank you, Amit. Good afternoon, everyone. I welcome you all to the earnings conference call of Godawari Power & Ispat Limited to discuss Q1 FY '25 earnings results. Our financial results, press release and earning presentation is available from the website of the stock exchanges as well as the company. I believe you had a chance to review the same. I will take you through the results posted, we will have a question answer session. I'm delighted to announce that GPIL has delivered a strong performance in Q1 FY '25, marking great beginning of the new financial year as we celebrate [ 20 to 50 ] years of our journey. The profitability increased significantly mainly due to cost reduction benefit on account of debottlenecking CapEx than in earlier years and commissioning of [indiscernible] 3 billion capacities, et cetera.
Coming on the operation -- coming on the operational performance for Q1 FY '25, and we'd like to share that the company is on track to achieve the volume guidance given at the beginning of the year. The production -- chain production volume is available in our presentation. Production volume across divisions are higher on Y-o-Y basis. [indiscernible] iron ore production was higher by 3% Y-o-Y lower 9% quarter-on-quarter. Production volume of iron ore pellet was higher by 24% Y-on-Y, 3% quarter-on-quarter. [indiscernible] production volume of the iron ore steel production was higher by 5%, between 4% quarter-on-quarter.
Captive Power generation increased by 52% Y-o-Y whereas the same increase 11% quarter-on-quarter. In of the increased production volume, sales volume numbers were higher across the region, [indiscernible] sales increased by 49% Y-o-Y 9% lower quarter-on-quarter. Sales of our other iron and steel products were higher by 4%, 12% and 9% quarter-on-quarter.
The realization of iron ore growth increased by 3% and 4%, respectively on Y-o-Y and quarter-on-quarter basis to INR 3,500 a tonne realization on synergistic products decreased in the range of 5% to 6% on Y-o-Y and increase 1% to 8% quarter-on-quarter basis.
Coming on the consolidated financial performance, revenue from operations net of sales increased by 12% to INR 1,342 crores on Y-o-Y basis due to increased production volume and sales and realization of pellets. Quarter-on-quarter revenue declined due to reduced sales volume resulting in maintenance shutdown on steel [indiscernible] and the discounts. EBITDA increased by 33% Y-o-Y and 24% quarter-on-quarter basis to INR 408 crores. This is primarily the higher volumes as well as cost savings and operating leverage on account of [indiscernible] water lake making them by the company in the last 2 years. EBITDA margin increased significantly to 30% as compared to 23% in Q1 FY '24. It increased 24% and 31% Y-o-Y and quarter-over-quarter amounted to INR 487 crores.
[indiscernible] a healthy branch we get the less [indiscernible] INR 1,261 crores. Update on the CapEx plan and other strategic meters, as you are all aware, the company has taken as growth plan by the iron ore mining and pellet capacity. We're setting up an integral steel part with 4x current capacity. In this result, I would like to obligate that income in the mining capacity from 2.35 to 6 million tonnes, 3 of the 6 million tonnes in the [indiscernible] plant. Rest of the approvals are expected to be replaced by December '24.
Subject of increasing pellet capacity from 2.7 to 4.7 is running on CDs and service is expected to be commissioned by June 2026. The company has achieved the permission to stablish for additional pellet capacity along with associated facilities. With regard to individuals or 2 million tonne capacity, the public hearing from the same has been completed as reported earlier. Environment impact assessment study is now finalized as we file with the MOEF for final presentation.
The process is expected to be completed by December '24. Our tact of environmental approval consent to set at the start position authorities. The production -- the implementation sell start upper lease for the [indiscernible] executed with the government authorities. The project will take about 36 months from the groundbreaking ceremony.
I'm happy to announce that modification of volume in for manufacturer spectral still has been completed and production of easels started. The section will be partially used for manufacturing of generalized educated products for supply to as agencies like Indian and power discom, et cetera, for which company has applied to the uses for approval is an approved vendor for the supply of the [indiscernible] product made by the captive iron ore division as well as we still delay from GPIL existing manufacturing facilities. We see rolling in unit is already registered with the ease of authorities for supply of analyzing. We were earlier opening to be structurally stem from the market and supply unit.
Now with our captive steel billets as well as the role that it will be supplied, which will be substantially cost and value credits. The step we are also committing a treatment along with this volume with a separate line, and that is expected to be commissioned by September. After that, our ERW price rate will source the increase from the captive unit.
Coming on the update on solar projects, 20-megawatt captive solar power plant for letting the power requirement of the rolling mill and captive special division has been completely been synchronized it. Further, GPIL plant is set up an additional 70-megawatt solar power project to meet the power requirement of the upcoming pellet plant, which we expect to commission by Q1 FY '26 coinciding with the commissioning of pellet plant.
For this project, the company is in process of acquiring the land for the same. GPIL has been working towards the carbon [indiscernible] has now led down the per target of becoming net 0 by 2050. Last 2 years, companies focusing on increase the U.K. power requirement through captive solar projects, which has resulted in carbon reduction from 2.45 ton Q2 total of the steel in FY '22 to 2.43 tonnes in Q1 FY '25.
Other companies initiative is not [indiscernible] efficient and decarbonization projects like focus on the efficient and R&D projects to cut on CO2 emission by 9% by changing the fuel in the new pellet plant from coal base to natural gas. And also utilizing the [indiscernible] of pellet plant and other units to generate additional power. The Board has approved an investment of INR 75 crores for this project with the efficiency project, which will generate an additional power [indiscernible] megawatt without requiring any additional fuel.
The project expected payback for this project is about 2 years with a cost saving of INR 38 crores per annum and this is expected to result in additional carbon reduction intensity by 259,415 tonnes. As a part of the [indiscernible], the company has further increase its [indiscernible] is taken to roll from 78% to 88.3%, which is directly set and 97.62%, along with the staying healthy in a always limited.
We can always attempted to reward shareholders for consistent dividends and buybacks more or less the set of shares, et cetera, following the sale thought process, the company has recently completed buy back of 31.5 lakh shares at a price of INR 1,400 per share in July '24. Board further approved a special dividend of 25% or trade values [indiscernible] on low [indiscernible] of [indiscernible] of GPIL will fall on September 1, 2024. The board has further approved the issue of GPIL shares from cases prior this one each.
Coming on the market outlook on interest on funds, global iron ore prices have dropped to around 1,000 -- sorry, $100 dollar price point from [ 514 ] [indiscernible] for 2024. Generally the property sector in China continues to grow in the steel sector and sentiment. However, based on industry reports, more iron ore market remain in deficit for FY '24 and should help stabilize the prices around current level.
While the Steel Association is forecasting steel demand to grow by 1.1% to INR [ 193 ]million tons in 2024 and another 1.2 million tonnes to 1.8 million tonnes in 2025 despite [indiscernible] to demand related. Iron-ore supply is largely stable in 2025, we had into project India is expected to start in December '25, depending on that to ramp up, some surplus can happen in 2026.
On the domestic front, iron ore prices, NMDC has seen a significant increase to $4,610, [indiscernible] up from $3,616 January '23. The NMDC reduced the prices yesterday, the prices have recovered well from the low seen post importation of export duties. On the other hand, pellet prices touched higher 1,000 during the year, in June [indiscernible] has dropped correctly to around 9,000 tonnes [indiscernible] global prices.
India remains one of the greatest global rising demand, WSS forecast India existing demand to increase by 8.2% in '24 '25, 144 million and 156 million respectively. [indiscernible] India steel industry will experience significant expansion profiled by sustained growth across all sectors relying on steel industry, particularly drawn by [indiscernible] infrastructure investments.
The current falling domestic steel prices in the recent past in levering the impact of increased import from China and heavy mines impacting the construction activity. To conclude, I extend my heartful thanks to all employees, regulatory authorities, stakeholders for the unwavering support throughout the value of our company for 25 years. I'm also grateful to all the shareholders and the investor community for their continued support [indiscernible] in the history of the company in [ 2006 ]. We look forward to ongoing support from all our stakeholders, coupled with our experience promoters management team and solid balance sheet, operational efficiency, advancement of advantage of captive iron ore mines and [indiscernible] we are poised for a significant growth in years to come. With this, I conclude my opening remarks. We will now open the question and answer.
[Operator Instructions]
Our first question is from the line of Amit Dixit from ICICI Securities.
Congratulations for a good set of numbers. I have 2 questions. The first 1 is essentially on the integrated steel plant and the proposed capacity expansion of 2 million tonnes. Now in the past, as well, at least if I recall correctly 4 years back, we had a similar endeavor to expand. I think at that point time it was 3 million tonnes capacity. And now this is an integrated steel plant that we are talking about. So I just wanted to understand the final product configuration of this, what kind of products are you targeting for all sector?
See on the product side, currently, so we are very much looking at flat products, which we [indiscernible]. I think we're already into long products. So we have no intention of getting to long products. So we are focusing on flat products for the new steel plant from India.
So will these be narrow coils or your typical...
It will be narrow coils, which will be -- so that, which we will be able to -- so what we're targeting is we should be able to produce right from 1mm to, it should be 12.50 above, so up to, say, [indiscernible], so the entire range from narrow as well as to the wider ones.
And in this present configuration that you have thought about, you are stopping at narrow coil, there is no intent to go...
No, there is no narrow coil part. We will -- we are focusing on the [indiscernible], which is used for all applicatoins, automobile and piping, anything.
Okay. And we also want to go further downstream by putting cold rolled coil, let to say at some point in time or...
Yes. So in the current environment positions which we have like, so we have included the downward stream as well, which is the cold door and the further processing. But at this stage, we will stop at making hot HRC. And going forward, we will start missing down other technologies. That's all I know.
Typically blast furnace route.
See at the moment, so because of the economics of the location and since natural gas is imported into India, so gas [indiscernible] commercially becomes quite challenging to achieve the design number. So the movement is going to be a -- but the first, we will be correctively working with other industries to see how can we replace with other technologies going forward.
Okay. Wonderful. The second question is on [indiscernible] fabricated products, pretty interesting product, if I look at it, the sales volume, we have seen that it declined Y-o-Y and Q-o-Q as well, I mean, and then we also saw that among all your products, Q-o-Q realization for this product also declined. Those the premium product. So I just wanted to understand that whether it was only because of elections or there is some other thing that is also happening.
There were 2, 3 factors for the lower volume, as of course, the election and right next level [indiscernible] election. So that was 1 part of it. But apart from that, so there are also a small is happening, there was a client on the thing 10 because of which entire one line was down. Luckily, there was no harm, but still it took time should come back to online. So that's another reason. There is a small instrument. And For us, since we are still buying billets from the market and actually more the conversional game, now with this commission up mill, the margins will go up substantially, and that will also help to increase our volumes. So that was 3 factors to -- for the volume to go down this quarter.
Our next question is from the line of Vikash Singh from PhillipCapital.
Congratulations on good set of numbers. Sir, my first question pertains to the operating performance, while the volume and realization was down, our operating performance has improved largely on the other expenditure. So what are the items which are different from the previous -- on a Q-o-Q basis -- on the power cost.
Yes, revenue on power cost because the commission, our power generation is higher by 52% and the solar capacity, which is commissioned in the last year, new turbine, everything is aiming to be operating.
There is one more thing, which is adding to that difference in the operating costs. So last quarter, there was a decent amount of volume of export of pellets out of India. So the way accounting method is integral exports, so the logistic come at the selling price, but the entire cost to deliver to that fourth, comes in operating costs. So that is why there is a difference also in the operating costs of this quarter in better last quarter. So this quarter, they're on export volumes of pellet.
Understood. So even considering that we should assume that the larger part of the operating cost decline would be sustainable because it came -- majority came from the power side and only few from the...
Yes, definitely. So going forward, with the current coal dynamics and with our completion of our backfoot projects in terms of power, we think we can maintain this operating cost going forward as well.
Understood, sir. Sir, my second question pertains to our growth CapEx. If I just look at the Slide 9 of your presentation, our question and benefication plant was supposed to take 15 months of their environmental clearance. While our pellet and iron ore mining probably would come earlier, so is that -- we can assume that we would -- for the pellets, we will support pellet from the outside iron ore sales or the alternatively look at it, are high-grade pellet sales would decline for few quarters significantly. How should we...
No. I think there is probably inconvenient understanding. So my current mining, let's make, [indiscernible] and the beneficiation in the mine and the credit and all this will come into operation steadily in sync each other. So because the benefit that we're putting up in the mind is mainly for beneficiating the B&Q, which is the low-quality iron ore, but apart from that, we're able to raise the production of our iron ore grade, which is high grade. So that is supplying to my talent. So if everything goes well, we are confident. We will not be in a position to buy iron ore from the market, next, which is for FY '26.
Understood. Currently, we are buying that...
Since we have shut one of the mines last year. So we are coal buying about 20%, 25% of the requirement from the market.
Understood. And sir, my third question pertains to our JV. If you look at that, we have 3 JVs shareholding between 30%, 33%. So do we have the -- does that JV has the option for us to buy out our stake in the JV in future point of time or we would something similar to what we have done 2 years back in the consolidation of the group. So just wanted to understand, is there an option for us to buy out those JVs and who are the partners there?
Vikash, I think you are talking about driver infrastructure, expected [indiscernible] for [indiscernible], now regular infrastructure, there are 3 partners, Sadanada Power, Godawari Power and there'll be company-called [indiscernible]. We are in the process of winding up this company, or distributing whatever conservative funds are there. This JV is operating. It's a nonoperational company, and we are in process of winding it up.
As regards satiate captive iron ore mining, similar process is being updated, except that in the anticipation of recovery of some money, we are holding on to this company. Otherwise, this is also a nonoperating company. And [indiscernible] is a no-profit organization. This is a daily between the industry operating in that industry areas, entire industry area and government of [indiscernible], and it's a nonprofit organization. It is for the management of the [indiscernible] area. So all these companies are not contributing anything to the profitability or revenue, et cetera. So two [indiscernible], one will continue to stand the way it is there.
Understood, sir. Sir, just 1 last question. I'm slightly surprised with the kind of the realization for basically, which we have experienced because a couple of our peers have seen the realization gain on the sequential basis. So just wanted to understand that is there any timing difference what we are experiencing right now because some of the quantity probably was prebooked and we couldn'et get -- enjoy the higher prices, which had during up in May something else in there? And secondly, how should we look at the realization in 2Q and the cost of production in 2Q?
So because you are talking about quarter-on-quarter realization or year-on-year?
Yes, sir. 4Q versus 1Q. So 1Q realization [indiscernible] everything was 5% down. But if I just look at the streaming prices of the rebar or a couple of your peers who operate in the similar vicinity, they have shown Q-o-Q realization improvement. So that was a surprise that why it hasn't flown to us.
See, especially in steel related [indiscernible], there is a production volume degrowth. And maybe it was a filing train. So there could be the difference would be because of the timing of the production fall at maintenance shutdown, it could be one response to Q-o-Q realization was higher by 15% -- sorry, sorry, sir, utilization across the [indiscernible] except mill rates [indiscernible]. So iron ore pellet is [indiscernible] 4%, [indiscernible] iron 7%, steel billets 7%, [indiscernible] 7%. So Y-o-Y number, you are referring to...
Do you know I'm referring to the quarter-on-quarter numbers, 4Q versus 1Q, we had on an average 4% to 5% fall in the realization.
This is Y-on-Y, not quarter-on-quarter.
Yes, sir Y-on-Y, exactly.
This is Y-on-Y, not quarter-on-quarter. So [indiscernible] again and we can discuss offline if you are interested.
I'll call you offline. And how should we look at the realization of spot basis versus and cost spot basis versus what we had experienced in the 1Q FY '25?
See, definitely under the downlines and that we continue to do the [indiscernible] to do that until we [indiscernible] down market, still [indiscernible] because of strategy of DRI in region. There will be [indiscernible] total and so the line compared to [indiscernible] and we can expect a Q1 realization [indiscernible].
Our next question is from the line of Aditya Welekar from Axis Securities.
So my question is on iron ore mining expansion side. So as you said that we are expecting an approval from December '24. So how much ramp-up you expect in Q4. And any color if you want to put on FY '26, usually how much time it takes to ramp up that mine.
[indiscernible] we have given 3 million but this is we have assume there will be some production of additional capacity in this financial year because the current mine capacity is 2.3 to 2.4. So expect we should be able to achieve 3 million if that was in place by end of Q3. And from FY '26, we should be able to ramp up the capacity at a much faster pace and coincide with our Department of the [indiscernible].
Okay. Understood. And just 1 follow-up on cold rolling and further downstream assets for your steel type of 2 million tonnes. So our current CapEx is INR 6,000 crores, is it -- does it include CRM or it is the approval.
No, no, no. So as I mentioned [indiscernible], then we will be no downstream products in the first page, but we will add through the same conditions. So in power we will start [indiscernible] down later. The first is indiscernible].
Okay. Understood. And last question is if we are seeing the weakness in international iron ore prices, and currently, they are hovering near $100 per tonne. And there were reports that [indiscernible] do iron ore mine is also expected to come in future, which will increase the supply of iron ore in global markets. So from that perspective, how do you see the pellet prices, which for our pellet prices, especially the price trend for future?
See, when it comes to [indiscernible] months, bigger here between the [indiscernible] sale for the branded market cost because we actually see capacity on India capacity, which people have -- there have been no addition of [indiscernible] in terms of pellet supply or additional iron ore. The [indiscernible] has been the same, which is an NMDC and [indiscernible] nickel. So we feel [indiscernible] iron ore in this area, the [indiscernible] build the side effective for the domestic [indiscernible] the gas market. Today that's also the debt of $20 more by selling domestic compared to the industrial market. So we are not in this for [indiscernible] for the last few months. And going forward, we can think so, we'll be in a position to something to export. Domestic is quite strong in terms of R&R.
[Operator Instructions]
Our next question is from the line of Jatin from Swan Investments.
[indiscernible] on an regarding the important that we have indicated. But if you look on the volumes on the [indiscernible] is down, is it that [indiscernible] of [indiscernible] happened in the last quarter, which has impacted the overall volume? Or do some one look at the voices.
Your voice is not clear.
Yes. So I mean just wanted to understand the key reason behind the sequential decline in the overall production volume because once you have on [indiscernible] in the opening remarks, you indicated it because response on the belt, there was a benefit during the quarter. But if you look on the overall volume, we have seen a decline. So what was the reason behind that?
The reason was the annual shutdown for the entire year as soon depending on the retirement of the [indiscernible] when you voting units. So quarter 1 for our there is [indiscernible]. [indiscernible] will see 4.
Okay. And
[indiscernible] is not yet. [indiscernible].
So in terms of the operating efficiency, the benefit of the power that we actually had in the last quarter that will now continue for the remaining part of the year.
[indiscernible] we are in the current year.
Yes. And sir, last question. I mean we have seen the delays in getting approval. And as per our latest update, we expect it to -- we expect the mining approval and [indiscernible] funds approval to receive by December '24. So I mean, is there any further requirement by the center or by the state in terms of giving the approval that can be expected because the approval is so long.
There is [indiscernible] EC from there and then a better [indiscernible] board. So the positive fact so many to election will get say delayed, but which is we are trying our best to move as such as possible. So the continental as committed by Q3, we should have the approvals in place.
[Operator Instructions]
Our next question is from the line of Manav Gogia from Yes Securities Limited.
Congratulations on the strong set of numbers. So one question I wanted to know, would you be able to quantify the average in ported coal cost per tonne for the quarter?
You mean Q1?
Yes, Q1.
So you [indiscernible] DR, or you want the landing cost of the raw material.
From a land fill point of view.
Okay. So land fill point of view, our average cost in Q1 was about INR 12,000 -- 11,500.
And how has it changed up in Q2 right now?
Q2 is more or less same because we do a lot of planning in terms of we maintain a winter of 2 months. Q2 is looks on a similar level. There might be slight increase in Q3 with the current national market, but demand is we are confident the market should be back. But Q1, Q2 are on the similar lines.
Okay. And sir, 1 question on the realization for me. I don't know if I missed this. What sort of corrections are we seeing in terms of pellet pricing and long product pricing as of now during the monsoon.
See, as of now, as around august 8th, so prices are down by almost 10% compared to last quarter. So on at number, there is about 44,800 [indiscernible] is about 39,000 [indiscernible], so there's a [indiscernible] of almost 10%.
Our next question is from the line of Chirag from New Asset Management.
So wanted to understand that traditionally, you have been a long stream producer. So what was the real incentive for you to diversify do plans and how you plan to continue with them even in the flat steel production. And what could be a cost of production for HR coils.
See, the reason for this diversify is steel seeing the low market, there is a huge supply from secondary market as well, right? [indiscernible] in wire into PNG. So secondary market is quite big in India, which can almost 30% of the entire production. And that market is growing. But the cannot venture don't make a flat product quality material. So that is the reason to diversify through a flat product to move away from the competition and feel the demand because of the automobile and the infrastructure growth, we got getting to flat is much beneficial compared to nonproduct. And also price in the last 4 years since COVID. So flat is almost INR 4 or INR 5 higher in terms of [indiscernible] compared to a long product of tiny players only. [indiscernible] INR 50,000, so that's why we go for INR 55,000, so that's also another reason we've ventured into flat, we want to enter the flat product.
So how much will be a cost of production for HR coil?
The [indiscernible] cost is about INR 12,000, between INR, 2,000 and 2,500 piece. But of course, depending on other ones, it's difficult in size. But yes, operating costs are only about $30.
And so since you said you have lost on [indiscernible] and going forward, there are lots of issues coming up with respect to the position coming from the last finance also the new plan. I have asked to go to our [indiscernible] furnace or will you stick with the blast furnace set.
See, it's very, very difficult to comment. Right now, we want to idea of mining in pellets. We don't want to be only pellet players. It's better to hedge your iron ore bet. So we want to use iron ore [indiscernible] value we have and it value-added, so that is the reason. And because of import and natural gas, currently, the blast furnace is viable commercially, importing gas and making steel to DRI route is quite expensive at the moment because of import of natural gas into India. So we see Middle East or an Middle East has cheap gas, but they don't have iron ore. So they both iron ore, but they have their gas. So it's all about location dynamic. So currently, we will proceed with the [indiscernible] fleet only and panel will explore than the steel bump of carbon factor, again other elsewhere.
Our next question is from the line of Chirag Singhal from First Water Fund.
Congrats on good set of numbers. There a couple of questions. First, on the integrated team. So what is the effect on letting from this plant based on the normalized MSLs?
So sorry, come again, please? Can you please repeat the question?
Yes. What is the effect term for the integrated steel plant based on the normalized seats?
I'll take up. As you're asking about the [indiscernible] turnover. So if you set up a 2 million tonne capacity and just for example, the selling price of INR 50,000 a tonne, it comes to about INR 10,000 crores turnover and CapEx is INR 6,000 crores based on our estimate. So it is more than 1.3, 1.4x.
Okay. Got it. And is this expected to come sales wise or we expect this entire capacity of 2 million tonnes will be online by end of FY '28?
No. So that [indiscernible] want to come together because it indicates capacity, so everything will be going up [indiscernible].
Okay. And just one more thing on coal convention cost. So what was the coal convention cost per tonne in Q1? And what is the trend in the current quarter?
In terms of pricing or in terms of [indiscernible]?
No, in terms of the consumption cost for the company.
My forecast, as I mentioned earlier, the fourth is domestically continue from second half of Q1 and continues to -- so feel on cost will be slightly lower compared to Q1 because our imported full costs almost remain the same, flat. So we can see a slight reduction in the coal cost for for 2Q.
Okay. Can you quantify like how much would that be maybe in the...
Monthly, we came about last time monthly, about 90,000 to 1,00,000 tonne last monthly units, so 50% is important to fold, which will remain flat. And other 50% is domestic, there will be a reaction in that cost.
[Operator Instructions]
Our next question is from the line of Chintan Patel from an Abans Investment Managers.
Congrats on a good set of numbers. Sir, currently, we have kept a power plant around 236 megawatts, which can save up to INR 200 crores of power cost. And we are adding another 70 megawatts on the solar side and 10, 11-megawatt on a West case wells side. So put to all the other, what would be cautious on a power side?
See, currently, so there is a [indiscernible] decision intending our current solar capacity stands at up 135 megawatts, which is already operational.
Now is the if -- now. [indiscernible].
Yes, and another INR 70 will be in pipeline. So that will make it to 35 and on the capital side, we have about 20 megawatts of biomark, when we have 400 megawatts of [indiscernible] and the remaining is cold-base. So if you want to know the average power cost in the day average power cost everything is about INR 35. And on the addition of the test taken up a 10-megawatt and further solar, it will further come down going forward.
So how much will it come down?
We expect to be about something about INR 33.1 going forward once everything is up and about.
Our next question is from the line of Rakesh Roy from [indiscernible] Omkara.
[indiscernible] justified. So how much [indiscernible] realization increase year-on-year in quarter 1, quarter 2, [indiscernible]. So this is due to higher grade period in this quarter or just any other agent.
No. So see, our volume of the change of high-grade pellet and the number that has remained the same for the year. But in Q1, especially since there was an increase in side as I mentioned, due to a shortage of iron ore in the domestic market, especially in this per region, the prices were on the upside compared to last quarter. And Q2 also remains on similar levels.
Okay, sir. And sir, last question, sir, Reliance you expect to have [indiscernible] I may say reduce iron ore prices. Our future guidance in Q2 or Q3.
It's very difficult to comment because usually we have an order book of anything we 30 to 45 days, plus get pellets, I sell [indiscernible] premium. So we pricing [indiscernible] on our sales because we have a few customers who really demand as that is because of the quality we make. I think we should be able to achieve the current realization in Q1.
[Operator Instructions]
Our next question is from the line of Pradeep Rawat from Yoga Capital.
So we have 2 mines and 1 of the mine [indiscernible] mine is currently unoperational. So when could we expect commercial production from this facility?
See, as we mentioned last time as well, so we are being on turning the introduction plan inside the mine and can start to it. Because the mining, mining and winning the quality we are getting, it's not commercially viable. So we are working out the [indiscernible] plan. We have started working on the desired approval. So fully, I think by the new [indiscernible] plants, which were commissioned in, say, FY '28 or FY '29 whatever, we are trying to coincide the production of the mine with that. So you can say in 3 years from now on, the mine should be operational, big beneficiation.
So we would be sending raw material from this mine to our key plant.
No, no -- exactly. So we will be benefiting, we'll be making a rate which is technically usable and then we'll be transferring to our new steel plant. That's the whole plan. That's whole idea.
Okay. Okay. Understood. And my other -- I have 1 basic question. So is there any extra amount of priority that the miners have to pay if they sell the ore in open market without any value addition.
See, for miners like companies like us, which have mines which were allowed expect the mining at. So the alumina policy page from a captive mine can sell 50% of their iron ore in the market, but then they have to pay additional royalty of 1% to 3%. This all means royalty and royalty. It comes about additional 150%. So today's at structure, I will have to pay INR 1,000 more as a royalty to the government if I want to sell my iron ore in the market.
Okay. Okay. And I have another basic question. So I wanted to understand why like Tata Steel and JSW steels are bidding plus premium for captive mines. So don't they get such kind of rates from open by procuring iron ore from open market. So why are they adding 100-plus 100% plus premium?
To be very honest, it's very difficult to really comment about my fear, what strategy they have in mind, what is the press. It won't be right for me or my 2 [indiscernible] in comment because their operation that strategy but you can probably lends the only I would not different than that.
Our next question is from the line of [indiscernible] due from Bigman.
congratulations for the figures. [indiscernible] average produces 2 brands currently, 63 grade pallet and [indiscernible]. So may I know the ratio the production of high-grade and low-grade, and is it viable for exports? Are you considering any chance for the exports?
So the ratio is 1/3, 2/3. So pretty about 33%, which pellet and the mining is high-grade. And in terms of export, no, we are not slowing any opportunity. One that we mentioning again again, domestic market is quite strong, and we are happy to see in the machine because [indiscernible] in is much better competitive export right now.
Sir, my -- one more question, [indiscernible]. As we as recent capacity expansion of pellet plant is under and by year also witnessing that production guidance has been lower from 2.6% to 2.4%. So any reason behind the lowering the production guidance?
Yes. So there is an annual shutdown planned for 1 of the 2 plants, which will take about 50 years of operations. That happens every 4 to 5 years cycle. So that is why we have got the guidance in this financial year from 2.6 to 2.45.
And then can you expect this shutdown?
Okay, so down is already undergoing. So it is a plan for Q2. [indiscernible] is already going and the plant will be in operation in the next couple of weeks. But for the full year than remain the same which is 2.45, yes. We will achieve that.
Our next question is from the line of Aman from [indiscernible] Asset Managers LLP.
Sorry for repeating the question. So can you highlight your strategy on the structural steel, like how it can be and are we really testing the waters? Or what is the outlook on the same going forward? Like what is -- what can be the potential of the same? And given that we are coming up with the integrated steel plant, so just wanted a detail thing on the strategy for the structure.
To be honest, with the kind of capacity which are coming up, especially by the bigger players when you talk about 50 million, 40 million, but we do 30 to 25. So it is kind of scary to probably enter that market. But the advantage we have don't have -- our iron ore mine sure at premium. So the only action behind going in investment is to hedge an iron ore debt, but we don't want to be exposed to iron ore pellet because a lot of capacities of [indiscernible] come coming India. For example, Lloyds itself is about clear about 12 million tonnes in the next 5 years. So in iron ore hedge, we want to make value-added and of course, there is completion in everything and then be completion everything going forward as well whether [indiscernible] I know [indiscernible].
No, I think it is on the special steel.
The [indiscernible] new indicates are 2 million.
Yes, I just wanted to know the strategy about the structural steel, the rolling mill which you have modified.
Sorry, sorry. my apology, I [indiscernible] question correctly. So on the [indiscernible] side, we will already [indiscernible], so currently, we were buying their competence on the market, galvanizing it and applying to railways, tangents and other projects. So now with the laser integration by modifying rolling mill, EBITDA margins will go up. our volumes will go up because now dependency on the [indiscernible] side will actually go down, plus the rolling lines, we will be able to produce the [indiscernible] in Godawari itself. It's a complete backlog to cover integration, where right from [indiscernible] will be done in the same route. Eventually, the volume will go up and [indiscernible] margins as simple that.
So to add on that, prior to this thing, priority modification rolling mill, we were acquiring the billet from outside, right, the desired billets?
Yes, the desirbed billets [indiscernible] number being produced from Godawari, but not the entire requirement. Rest were being purchased from the market.
Okay. And also, Abhishek, can you close on like on the far older market currently, given that the prices are down, the prices are increased and there was some disturbance on the Australian mining fund, but this might have restored, I see. So what is your outlook on the parole market as a whole going forward, given that the prices have consolidated around the same level? So how are you looking at the ferrite thing currently?
Okay. So as you mentioned, the mining effect on -- in Australia, it happened in back [indiscernible] that still continues and the latest bid is the mine will be out of production for next another 6 months. So we're looking at a protein supplier from end of Q3, earlier Q4 of financial year.
So that impact is still ongoing. So the prices of high grade go which is say 44 is on a very higher side. But current index is about $9, which was 4.5 months back. So that in fact is in there. see on the finishing side, definitely, the domestic market is quite weak because the demand of [indiscernible]. So there is pressure on the [indiscernible]. But for us. Since we are always exposed to some kind of imports of goes -- we are in early position because of the lower [indiscernible], which we have [indiscernible] now.
So as for a company, we are in a decent position not as bad as the market. But as a whole industry, the market is quite big. Moll also increased [indiscernible] 20% in last auction hopefully should be used going forward, but yes, the market is price calling at the moment.
So even the -- basically because the [indiscernible] market is basically a largely an export market. So we are trying to see, despite the domestic market is weak, the export markets also have consolidated the prices or consolidated about INR 1 lakh per tonne.
No, prices are much below than that. So because we are a income, which is quite a commercial grade. So the prices are -- in the export market is below that, which currently, it's not viable to in export. But as the demand is also quite weak.
Our next question is from the line of Manav from YES Securities Limited.
Again, 1 question on pellet. We usually attract premium of INR 1,000 to INR 1,500 per tonne on the [indiscernible] ore pellets. I wanted to know if can we expect this number to go up also in the near future, the demand starts coming in quite strongly for the high-grade pellets?
Sorry, sorry, [indiscernible], can you please come again?
Yes. So sir, currently, the premium on the high-grade pellet is between INR 1,000 to INR 1,500 a ton. I wanted to know if this number can go up as well if you see strong demand for the high-grade pellet on the market.
Definitely. I would say we have already achieved a band of say between INR 3,800 slowing only. And I think the most important part in the target is below 4%, which is a very important element for making [indiscernible] secondary route, so that is gaining a lot of attraction in the domestic market. So people who are looking to make [indiscernible]. So they are eventually getting convinced if we have 2 [indiscernible]. So [indiscernible] said, really, we are there. But yes, the value of [indiscernible] is going up day by day.
Okay. Okay. So just a follow-up on that only once the dedification plant comes in, that will roughly be an additional cost of -- can I assume INR 250 to INR 300 a tonne for beneficiation of the ore.
So that is in plan because putting up these positions capacity of pellet. So overall at a volume of say, 410 million pellet going forward, the cost of beneficiation remains the same [indiscernible] that will increase.
Okay. Sir, one question I had on the HRC plant. So the HRC plant, we'll be targeting the automotive industry, if I'm correct, right?
It's a minor application, automobile being one of them, so then there are 5 manufacturers. It's a very light application. So with the kind of quality we are talking to produce, we won't be confined to a single market. So we want to keep our for every basket.
Sure, sure. And sir, just post the credit plant expansion, which is coming in Q1 of FY '26 and up till the RC plant comes online. I just wanted to know what sort of market will GPIL be catering its iron ore pellets to? Will it be with the state of super -- and what sort of capacity and consumers are coming up over the 1.5 years where this market will be opened [indiscernible].
[indiscernible] itself, there will be additional decline of close to, say, about million of iron ore because of their tax will be coming on with [indiscernible]. That's because [indiscernible] purchase is going forward as well in the new plant. So we will have a debt create a different markets who are looking for quality exports will always be open. Of course there is an opportunity, we will definitely start excluding again because our pellets are very receptive in outside market as -- so these options are open right now, it's difficult to envisage 1 year from now, but the options are all open.
Our next question is from the line of Aditya Welekar from Axis Securities.
So just 1 color on the recent Supreme Court ruling that the states can [indiscernible] tax on mineral rights. So from that perspective, what are your thought process means? Are we -- can we expect some demand on the state government going forward?
We should be -- to be honest, something which would never [indiscernible] would like to. But we can comment because it is a state matter. It's a [indiscernible] in assembly to impose INR 100 tax on the middle mine industry. So we really can't comment. Hopefully, nothing is imposed. But if there is any position, we have to comply.
Ladies and gentlemen, that was the last question for the day. I now hand the conference over to the management for closing comments.
Thank you all participants for joining to the conference call of the Godawari Power & Ispat. We believe that we have significantly addressed all your queries. So if you have any further questions or any additional information, please reach out to investor relations at [indiscernible] for your active participation.[indiscernible]. Thank you. Thank you all. We to close this call.
And on behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.