Godawari Power and Ispat Ltd
NSE:GPIL
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
130.3254
231.4077
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Godawari Power and Ispat Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to Q2 FY '25 Results Conference Call of Godawari Power & Ispat Limited, hosted by Emkay Global Financial Services. [Operator Instructions]
Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Akhilesh Kumar, Emkay Global Financial Services. Thank you, and over to you.
Thanks, Slok. Good afternoon, everyone. Thank you for joining in the Q2 FY '25 earnings call of Godawari Power & Ispat. We have with us today Mr. Abhishek Agrawal, Mr. Dinesh Gandhi and Mr. Sanjay Bothra, I now hand over the call to the management for opening remarks. Over to you, Mr. Gandhi.
Thank you, Akhilesh. Good morning, everyone. Thank you for attending the conference call of Godawari Power & Ispat Limited to discuss Q2 and H1 FY '25 earnings results of the company. Our financial results, press release and earnings presentation is available on the website of stock exchanges and the company. I believe you have had a chance to review the same. I will take you through the results post which we can have a question-and-answer session.
At the outset, I'm extremely sorry for the delay at the start of the call. GPIL has demonstrated consistent performance in H1 FY '25, even during challenging times of lower realization of sponge iron steel prices although the quarterly performance was impacted by annual maintenance shutdown of pellets plants and fall in realization of sponge iron and billet steel products.
In this backdrop, company has achieved consolidated revenue, EBITDA and adjusted PAT, excluding exceptional item for the quarter and on Y-o-Y basis to INR 1,268 crores. EBITDA of INR 247 crores and PAT of INR 158 crores. The impact of revenue, EBITDA and PAT was to the extent of INR 65 crores on account of loss of pellet production due to shutdown, the loss of production was to the extent of 150,000 tonnes to INR 50 crores on account of lower realization of finished product in the sponge iron. INR 25 crores on account of additional cost incurred on maintenance of the pellet plant during shutdown period.
On half yearly basis, the consolidated revenue from operations remained flat at INR 2,600 crores approx compared to H1 FY '24. Revenue from a higher volume of value-added product was offset with lower realization in the value-added products like sponge iron, et cetera, and lower volume from the pellet plant. Consolidated EBITDA and PAT, excluding exceptional item dropped by 2% and 5%, respectively to INR 654 crores and INR 445 crores due to decrease in realization of the finished product.
Despite the challenges, EBITDA margin and PAT margin stood strong at 25% and 17%, respectively. Company has a healthy balance sheet with net cash of INR 998 crores and strong cash flow from operations of INR 564 crores during H1. The operational number for Q2 and H1 are already circulated in the investor presentation.
The brief highlights are the loss of pellet volume by about 150,000 tonnes due to shutdown of 0.9 million tonnes pellet plant, operating volume of value-added products like DRI finished steel ferro alloys increased substantially. Production of iron ore decreased on account of heavy rains during the quarter.
On half yearly basis, iron ore mining and pellet production remained flat. However, production of sponge iron, the steel billet, HB wires, ferro alloys, and captive power generation increased considerably. The sales volume for sponge iron, steel billet, HB wires, et cetera, increased 56%, 20% and 39% respectively. Pellets realization increased by 5% to INR 10,569 per tonne. Realization of other products dropped.
Update on our CapEx plan. As you are aware, we have an ambitious CapEx plan by nearly doubling our iron ore mining and pellet capacities by setting up an integrated steel plant with 4x capacities of the present capacity.
In this backdrop -- in this regard, I would like to update that the approval for increase in iron ore mining and benefication capacity from 2.35 million tonnes to 6 million tonnes delayed for the business beyond the control of the company. We now expect the approval for increase in iron ore mining capacity by Q4 FY '25.
Once our environmental approval is received, the Crushing & Beneficiation plant is expected to be commissioned within a period of 6 months as we have already done some part of the work on these mines. In view of delaying approval of the mining and benefication capacity, the company has revised the guidance for iron ore production from 3 million tonnes to 2.35 million tonnes for FY '25.
The project for increase in pellet capacity from 2.7 million tonnes to 4.7 million tonnes is running as per schedule and the same is expected to be commissioned by June, July 2025. In this regard, I would like to further inform you all that the orders for all equipment have already been placed. Construction activities to the extent of more than 50% has already been completed, and the shipment of equipments are going to start within a month from various vendors.
As regards greenfield integrated steel plant of 2 million tonnes, public hearing has been completed earlier. During the quarter, the presentation to the MOU has been completed, and the approval is expected to be received by December 2024. The construction activity of the project shall start only after regulatory approvals are in place for mining and for integrated steel plant.
Coming on update on the solar project, a total of 165 megawatts solar power plant has been commissioned till date and now operational and are contributing to the cost savings. GPIL has planned an additional 70-megawatt solar power plant for which land acquisition is in process. This project is to meet the requirement for upcoming 2 million tonnes pellet plant, for which 70 megawatts solar power plant is proposed to be set up.
GPIL is focused on reducing carbon emission and has established a clear objective achieving Net Zero by 2050. Apart from setting solar power plants, the company initiated various energy efficient and decarbonization projects. The capital expenditure for the initiative first stage is INR 75 crores, which will generate an additional 11 megawatt of power without any extra fuel. The payback period for the same is about 3 years.
Walking the talk on the same, GPIL is developing a waste heat recovery based power plant harnessing heat from the company's existing ferro alloys furnaces and pellet plant cooler exhaust to generate additional power of 7 megawatt of clean energy, which will reduce carbon emission by 50,000 tonnes annually. This has been done in collaboration with Siemens at a cost of INR 73 crores to be funded from company's internal accruals.
This project is expected to be completed within a period of 18 months. The detail is further simplified the group structure. Consequent upon and buyback of shares conducted by Alok Ferro Alloys, Alok has become 100% subsidiary and the stake in HFAL has increased to 96%. The Chhattisgarh Captive Coal mining has also completed partial buyback of shares, and therefore, the stake in the company is reduced.
Coming on the market outlook on international front, global iron ore prices dropped below $90 per tonne from highs of $144 per tonne in January '24 on concerns of China slowdown. The recent excitement around China's stimulus pushed prices back to $115 (sic) [ $110 ], but it was short lived. Prices are now back to below $100. The development of a large mine in Guniea will add to the supply from 2027 and might push prices down. However, in the interim, housing demand in China can expect it to recover and has potential to push the iron ore prices back to $110, $115 per ton.
On domestic fund, iron ore prices, NMDC has largely followed global trade, however auction prices of mines and the gradual reduction in supply from [ merchant ] has put the floor on domestic iron ore prices. India remains one of the brightest spot globally for steel demand. While the Steel Association has forecasted that steel demand to grow by 8% in FY '24 and 5% in calendar '25 to 143 million and 153 million tonnes, respectively.
To conclude, I would like to mention that as the transition into second half of FY '25, we are optimistic about getting our iron ore mining and pellet production and sales back on the track, our solid cash flow position, coupled with the strategic CapEx plan and significantly expanding our capacities in iron ore mining, pellet integrated steel sets a strong foundation for growth. Enhanced operational efficiencies and cost savings from our solar power plants will further enhance the profitability of the company. Additionally, the advantage of our captive iron ore mine and production of high-grade pellet along with unwavering support from a stakeholder position us for an exceptional performance in the years to come.
With this, I would now like to open the floor for question and answers.
[Operator Instructions]
The first question is from the line of Sahil Rohit Sanghvi from Monarch Networth Capital.
Best wishes for Diwali season. Also good to see Godawari maintaining its numbers despite the challenging situation. Firstly, I wanted to understand, sir, there were fall in pellet prices also during Q2. I believe that we have a 1, 2 months contract. So just wanted to understand how the prices have not corrected much and what will be the trajectory of pellet prices? Do we have -- will the corrected prices come with a lag in 3Q?
For Q3, the fair price have resumed on a positive territory and their numbers are currently at about INR 10,000...
Yes. That's correct. I understand. But so are we looking at a lower number directionally for Q3? Or I just wanted to understand how the contracts are working out?
No, for Q3, the number will be really on the higher side.
Okay. Okay. That's very good to understand. Were there any kind of iron ore purchases done in Q2? Or were we largely able to manage from our own mines?
No. So usually, we are buying about 25% of our iron ore from the market, and that will continue till our mining expansion happens. So we'll continue to buy the 10% of the iron ore from the market. And until we get that new EC for the mines and that is about continuing for another 6 months.
Got it. And thirdly, I just wanted to understand with this new 7-megawatt waste heat recovery power plant. I mean, would that be excess power for us whenever it gets commissioned? Or would that be still a required thing for the self-sufficiency when it comes to power?
No. As the generation increases, we will reduce our coal, fossil fuel burn, and we'll reduce the carbon emission. That's the whole idea.
Okay. And this will be -- I mean, this will be more of -- it will be all self-consumed, right? I mean there'll be no required -- I mean, there will be no external sales?
No. We still don't buy anything from the grid, and we don't import grid power and this will further strengthen our generation in terms of carbon emission.
Got it. And just one last question. If you can comment on the overall demand. I mean, we've seen prices rebound post monsoon also, but the economic activity was also a little subdued in Q2. So how are you seeing demand on ground in Q3?
Usually, Q2 is always a lean season for steel. Q3, post Diwali, we hope the demand to come back. And the prices to probably, I would say, the margin will come back and the prices should further go up. That's the whole idea.
The next question is from the line of Manav Gogia from YES Securities India Limited.
Sir, one question on the cost front. Could you let me know what was the blended landed coal cost for the quarter?
See, we only import Rb1 coal for our DRI and the blended cost for the coal was about INR 12,000.
And last quarter, it was about INR 11,500, right, if I'm not wrong.
Yes, yes. Yes, exactly.
Okay. And are we sourcing any raw coals domestically for our power plant requirements? Could you be able to give me a split between the coal source domestically versus the imports?
We do source -- we have linkages from Coal India for the power plant and as well as gasifier. So Q2 was about INR 4,000 and Q3, we maintained the same because domestic coal hasn't risen much due to good supply from Coal India and the linkages we have is for 5 years. So the price for the incoming coal for the power plant and for gasified is almost the same, INR 4,000.
Okay. Sure. So just following up on the question asked by the previous participant. Are you saying that pellet prices for Q3 are expected to be a little up as compared to Q2. Could you like be able to qualify the same?
Q2, the average price is about INR 10,000 and the prices which come down at the end of Q2, but then due to sudden rise in the iron ore fines price in the OMC auction, so Q3 should be at the same level as compared to Q2, it's about INR 10,000 average.
Okay. Okay. Sure. Sir, just if I could squeeze one more question in terms of the EP getting delayed for the iron ore mining expansion, I wanted to know since now the ECs are expected to be received in the last quarter, by when are mines expected to be operational? I think in your opening remarks, it was 6 months from Q4. Is that right?
Yes.
No, no, 6 months is for benefication plant commissioning.
Okay. So mines will be starting from Q4 itself by the end of Q4? Is that a realistic target?
You can assume from Q1 FY '26.
Okay. Okay. So right when the pellet plant comes into the picture.
Yes.
And how much of a benefit do we see on the landed cost per ton? Or should we expect it to remain in the same trajectory of INR 2,800 to INR 2,900 a ton?
See, mining cost would be more like the same, probably in INR 100, INR 200 here and there. But actually, if you compare to the current market, we are buying about 20% from the market, which is about INR 3,500. If you split that with iron ore mining, which is a substantial.
[Operator Instructions] The next question is from the line of Aditya Welekar from Axis Securities.
Just a clarification from Manav's question previously. So what I understand is that this pellet plant crushing and benefication and iron ore mining all will start in tandem from Q1 FY '26, right?
Yes.
Okay. And is there any ramp-up time for that means how much incremental volumes can we expect from FY '26?
See, once we get the approval, we'll start ramping on the mining production and hopefully by, I think, end of Q1 or Q2, we should be able to mine the desire thing and done. That's the whole idea.
Okay. Full 6 million.
Yes, yes.
Okay. Sir, next question is on iron ore. I mean on one of the slides, there is one of the mines in Africa is coming online in Guinea. And because of that iron ore prices may fall in future. So what will be its impact on our pellet prices or our pellet prices will remain largely stable, given the domestic situation. I want to understand what are the factors which decides pellet price volatility?
To be honest, with the current increase in production in India for steel, the iron ore prices have been strong. And irrespective of how the international prices play, the pellet price should be in the same levels. So we don't expect any change in the domestic pricing when it comes to iron ore.
The next question is from the line of Akhilesh Kumar from Emkay Global Financial Services.
I have a couple of questions. So first, coming on the CapEx intensity. So sir, for solar plant generally, it takes 50 million to 55 million per megawatt to set up 1 megawatt of solar capacity. However, GPIL is targeting to achieve 70 megawatts of solar capacity with an investment of around 35 million to 36 million per megawatt. So could you please walk me through the difference why is it lower for GPIL?
See the module prices have drastically reduced compared to previous years. Earlier, the module prices were about INR 2 crores, INR 2.5 crores per megawatt. But today, the prices are about INR 1.5 crore per megawatt. So this is that we have already finalized the EPC connector. So for our 70 megawatt, we are confident about INR 200 crores, INR 225 crores should be enough -- for setting up 70 megawatts .
Okay. And second question is on the guidance. So you have trimmed iron ore guidance for FY '25. So is there a possibility that there could be a scale back in the targeted capacity to reach 6 MTPA in FY '26?
No. Hopefully, we should be able to get the approval. And once we get the approval, there should not be any issue in reaching the real capacity.
Okay. Okay. And if I can pitch in one more question. So you have about INR 1 crore -- INR 1,000 crores CapEx -- of balance CapEx to be incurred apart from steel. So could you please guide us how much of it will be done in the FY '25 and in FY '26?
See all of it will be done in FY '25 and '26 because the construction is set for the new [ power ] plant. And once we receive the mining approval, we will start the construction of the benefication plant. So all of it will be consumed and to be incurred in '25 and '26.
So can we assume like 50-50 split between the 2 years?
See, major is the pellet plant. Pellet plant will be -- is already consuming and once we get the mining approval, so remaining will be done in FY '26.
The next question is from the line of Jatin Damania from Swan Investments.
Sir, just want to understand because last time when we indicated that there was a decline in the pellet prices compared to the first quarter. But now when we look at our realization, we have seen a sequential improvement. So can you help us and understand the total grade of the product -- grade mix in the pellet that we have sold during the quarter?
See, we have been maintaining -- so it's 50% of high-grade, which is 56% and 50% of normal commercial grade 63 and that will continue to happen.
So that will continue to remain at 50-50 only, right?
Yes, yes, yes. Until a new pellet plant is commissioned.
Yes. And that the new pellet plant has probably come in the first quarter of FY '26, if I'm not wrong?
Correct. Very correct.
Production will come in Q2.
Production will come in Q2, right?
Q2, yes.
Yes. Yes.
In the opening remarks that you indicated that there's a delay in getting an approval from the mining and the state government for the expansion in the mining activities. So suppose if we don't get an approval in month since until December of Q4 FY '25, so is it safe to assume that the -- currently, what we are buying 20%, 25% iron ore from the market, that proportion will go to almost 30%, 35% since our pellet will come into operation?
See, if you don't make approval, that will surely happen. But we are confident that we will get the approval before we start the pellet plant.
And I mean is there anything which is an issue why we are -- why there's a delay in terms of getting an approval or sort of things?
It's not an issue, but the facility is such, so it will really take times, but with the state government taking little more time, and we are confident we should get the approval before the new pellet plant starts.
Okay. So okay. And in terms of our benefication now since you've already started the activity on the ground, so what is the CapEx that you have already spent for the beneficiation?
Those are given in the presentation, Jatin. The numbers are there.
Okay. Okay. And in terms of the numbers, definitely, we have seen the downward revision in the overall iron ore mining guidance. So now for the month of October, is our pellet plant fully operational?
Yes, pellet plant is fully operational. There was a shutdown -- iron ore shutdown for the smaller one. But since September, both the pellet plants are fully operational and we are confident we'll achieve the guidance given by us at the start of the year.
[Operator Instructions]
The next question is from the line Rakesh Roy from Boring AMC Omkara Capital.
My first question is regarding some margin part. The margin has declined definitely from compared to last year in quarter from 28% to 20%. Any reason except from the rain or pellet?
No, the major reason was the pellet plant, it was on a shutdown -- annual shutdown for almost 50 days because of which we lost the major volume. Apart from that, no other reason.
Okay. So sir, this plant shutdown 50 days. So every year this was there -- this year is it exceptional?
No, no, no. Last time we did the annual shutdown was almost 10 years back. So that is how the plant works. So going forward, it doesn't happen every year.
Okay. Okay. So this is impact on this one, margin front now. So we hopefully from Q3 margins will be normalized.
From Q3 onwards, the production guidance will be normalized. And depending on the market, the margins will be remained intact.
Okay. My next question, sir, if you look at your sponge iron realization, there's recently 1 company declared results. Their sponge realization is higher or is lower. Any reason behind that, sir?
No. Actually, in Q2, what has happened is we have produced sponge iron as per the capacity and there was surplus that we sold in the market. But going forward, we will only sell sponge iron based on our internal requirement. We only sell surplus -- command to our steel production.
Okay. For Q3, sponge iron ore realization will increase compared to Q2 if I remember?
In Q3, the sponge iron sales will be less compared to Q2.
Okay. Right, okay. Sir, and last question, sir, [indiscernible] your coal cost, you are saying 12,000 per ton.
Yes, for DRI. Yes. Correct.
For DRI. So sir, generally for DRI, we import the coal?
We import coal for DRI.
[Operator Instructions]
The next question is from the line of Vikash Singh from PhillipCapital.
Sir, I just wanted to understand one thing since the iron ore prices have again started to inch up. Have we given any thought about the restarting of the Boria Tibu mine because that low grade was previously not feasible at a low price.
See, for Boria Tibu, we have started filing the papers for beneficiation. So Boria Tibu mine will only start once we saw the beneficiation plant because the grid is on the lower side, and it's only feasible in the long term once we start benefiting and then bring the high grade in the market -- to the plant. So Boria Tibu will come online only up to, say, 2 to 3 years, not before that.
Sir, just a follow-up, what is the average rate, what you think the Boria Tibu will give you right now? And post beneficiation, what is the grade you are looking at?
See the average is about 50, 52 and post benefication in about 63, 65. So we have started working on the filing the EC for Boria Tibu and once we get the EC, desired approvals, we'll install the plant and we'll only shut the mines when the plant -- the benefication plant is started.
Understood. Sir, my second question pertains to our private exports market. Usually, we have seen in the past that the closure to October and on November, since China sintering starts gradually depleting, there's a lot of booking happens from India. So have you seen some inquiries and at current prices, is it feasible for us to export? So just wanted your views on that.
See, the average we're exporting for almost last 10 months, and we don't think our exports will happen at least for Godawari because the domestic demand is quite strong, and the prices in the domestic are much better than the export prices. Though pellet plants in India, which are port-based in Odisha or say in Vizag, they are exporting some volumes. But apart from that, not much export is happening from India. Domestic demand is quite strong.
Understood. But even then that helps us, right, some domestic materials will go out in the export...
Of course, of course, because in India, the pellet production is on the higher side competitive demand. So any volume will going India heads to balance the demand and supply.
Understood. And sir, just one last question. I'm sorry if this would have been asked previously because my call dropped. I see the average utilization for the pellet has improved even on sequential basis, sir, while the iron ore prices have been lower. So I just wanted to understand whether the larger part of this dip now we will experience in 3Q? Or on a blended basis, our 3Q would still be higher than the 2Q which is there.
Yes, did you checked the prices? Yes, it should be better, correct.
Sorry, sir, I missed your comment.
Q3 should be better than Q2 in terms of pellet realization.
Okay. So somehow, this sharp fall has been managed into 2Q because we were expecting some fall in the 2Q realization as well.
See, the volumes were lower. So we were able to maintain the pricing in Q2. But Q3, given the demand and supply, it should be better than -- Q3 should better than Q2.
Sir, if I may ask how the spot prices in Q3 as of now?
See, for the [indiscernible] grade, it's about INR 10,000 and for high grade, it's about INR 11,500 at the moment.
The next question is from the line of Aman from Augmenta Asset Manager LLP.
Abhishek, I just had a basic question. So correct me if I'm wrong. So for time being for FY '25 as a whole, you'd be buying close to 60,000 tonnes of iron ore from outside, right, for our internal operations?
Yes. We buy about 1,500 tonnes of iron ore from the market at the moment.
Okay. And also, can you highlight a bit on the iron ore because, for example, over the last 20 days, NMDC has increased prices by 2x by approximately INR 1,000 per tonne and then we listened to the management commentary on the same. So the company is expecting a robust iron ore market and [indiscernible] is also going to be good. So what's your sense on the domestic iron ore market as a whole if you could highlight?
See, domestic iron ore market is quite strong. Recently from [indiscernible] auction, the prices are up almost INR 1,000. Basically, increase the prices. So going forward, with the global steel demand with the monsoon over, we expect iron ore prices should be at the elevated levels.
Okay. Okay. And also, if you could throw some sense on the ferro alloys market, what is happening currently?
See, ferro alloys market is quite stagnant. The good thing is the raw material prices have come down in the national market. Whatever increase happened in Q2 because of certain production being out in the national market and the China's big demand. The manganese price has come down. And the current silico manganese prices in the domestic market is more or less stable.
The next question is from the line of Tushar Chaudhari from Prabhudas Lilladher Private Limited.
Sir, I just wanted to understand regarding the current demand situation for Galvanized Fabricated products over the last 2 quarters, the run rate is falling. Is it -- I mean -- but we -- I think we plan to increase the capacity also over year over the period. So can you throw some light? Also, the margin is under pressure because of higher zinc prices? Or how is it going as of now?
In Q2, the volumes were lower because zinc bath was under maintenance. There was a major repair happened in the zinc bath. That is where the volume is lower. But in terms of demand, the demand is quite strong. We have also commissioned a new rolling mill. So that will support the profitability. So in Q3 and Q4, we hope the demand remain intact, and you can see the better volumes in Q3 and Q4 going forward.
Because 1Q also, that volumes were lower, actually?
Q1 is still okay, but Q2, there was a major repair in the zinc bath. But Q3 and Q4 onwards, you can see a major uptick in the volumes.
Okay. And margins?
Margins will remain intact because this is more of a PSU work with transmission towers, railways, and all that. So demand is quite robust, and we are quite confident once we achieve the desired volumes, the profitability will remain in intact.
The next question is from the line of Pradeep Rawat from Yogya Capital.
So my first question is regarding the buyback of Alok Ferro Alloys. What was the consideration at which we bought back the share from our promoters?
See, buyback was done at about INR 10 per share.
Yes. And both of our ferro alloy subsidiary are doing quite badly. So can you throw some light on that? Why are they doing so badly in operations?
So you see the numbers for Q2, and they are doing much better than the same quarter last year.
Yes. So I was much more asking about yearly performance.
No, last year, performance was slightly subdued because there was a modification in one of the plants. There was a shutdown in the power plant in Alok Ferro Alloys. Both these plants are operating fully and volumes have considerably increased during the current financial year and operating metrics have increased. This is expected to sustain over the period of time.
Yes. So what kind of EBITDA margins are we expecting from ferro alloy division?
See, it is about INR 8,000 to INR 10,000 a tonne on an average. Consolidated EBITDA, I think for ferro alloys business is closer to about INR 40 crores, INR 45 crores.
Okay. And my last question is regarding the cost per tonne for converting mined iron ore into iron ore pellets.
It is about INR 1,800 per tonne.
Sorry what was the number?
INR 1,800 per tonne.
So cost of mining iron ore is close INR 3,000 per tonne and from mining to pellet, it's INR 1,800.
Yes.
[Operator Instructions]
The next question is from the line of [indiscernible] from Badrinath Holding.
So I recently saw Abhishek your interview with Nikhil on CNBC. So I don't want to get these numbers confirm. So of the 2 million tonnes in new pellet capacity in FY '26. Am I right in understanding that in the first year, that is FY '26, we'll be doing like a 50%. So 1 million tonnes will be added to our current production in FY '26.
Correct.
And then the other 1 million tonne -- we can expect like the whole 2 million tonnes, we can expect in FY '27?
Right?
And our captive consumption of our pellets will remain at 0.9%. So in FY '27, when our sales volumes will go up directly by the whole 2 million tonnes, right?
So again, FY '26, the volume should go up by 1 million and FY '27, over volume of 2 million should go up. Yes.
Yes. But our captive consumption of the pellets will remain the same throughout?
Exactly. So right now, it's also [ 0.9 ] million tonnes. And going forward, as we start increasing production, the sales volume will go up.
Okay. Great. And last -- and the iron ore, we don't plan on selling it even once the mining -- because of the additional royalties that we have to pay, even once the mining ramps up, there'll be no situation where we'll be selling our iron ore to the market, right?
No. We have no intention selling that on the market. So whatever we mine will be consumed in the trade plant.
Okay. And the last question is, where do you see the high-grade mix for our pellets between Fe 63 and 66 in FY '27? Will it be 1/3 of low grade and 2/3 of high grade?
See, currently 50:50 and once we start the new pellet plant, they'll also be producing high grade. So yes, you are very correct. Once we start the new pellet production, hybrid will be 2/3 and the normal grade will be 1/3.
The next question is from the line of Vaibhav Dubey from BigMint Technologies Private Limited.
I wanted to ask how has been the share of domestic versus exports in last quarter? And what is your outlook for quarter 3?
See, we haven't been exporting any pellet from last 10 months. We have been selling everything domestically. And looking at the current domestic demand and the prices, we will continue to serve in domestic, export will be in view. Even for Q3 and with current prices, hopefully, Q4 should also be 0. So we will keep selling everything domestically.
Okay. Noted, sir. Sir, my second question is on CCU unit, which you have mentioned in your press release, investor presentation. What are your plans on achieving this net zero emissions if you can share more details?
See, we have gained a target of 2050. We are working with IIT Bombay on the CCU, they have developed a pilot scale in the lab and a bigger version will be installed in Godawari. And once everything is successful in terms of operational and in terms of capturing carbon, we'll go to bigger model. It's a very R&D stage. And hopefully, everything works out, we can start investing on a bigger model. That's the whole idea.
The next question is from the Sahil Rohit Sangwi from Monarch Networth Capital.
Sir, I just wanted to understand, so there is this gap between the net cash number that you calculate in what is directly available on face of the balance sheet. I think you account for the loans and the net cash number -- so just wanted to understand the loans are to whom and at what interest rate?
Sorry, Sahil come again, please? .
Sir, I mean you have a net cash number of roughly INR 970 crores, INR 990 crores in your presentation. So there is, roughly, I think, INR 170 crores, INR 180 crores of loans that you're probably accounting as cash and cash equivalent. So just if you can explain -- who are these loans given to and what interest rate? And if you can give some details on that.
Sanjay, you will take this question.
Yes. The interest is largely between 12% to 16% and these loans are repayable on demand. That's why it is taken as cash and cash equivalent.
But whom are this given to?
The GMR is 1 party and there are some other corporates also.
GMR.
GMR Enterprises.
The next question is from the line of Manav Gogia from YES Securities India Limited.
So in the last call, we had guided that the CapEx for this particular year would be in the range of about INR 800 crores and next year should be about INR 1,000 crores. Are the numbers still intact?
Yes, it is intact.
And could you give me the total CapEx spend up till the first half of this financial year?
The numbers are there in the presentation.
Okay. Okay. I might have missed it. Sir, second question coming up on the other expenses, which have jumped roughly 14% on the quarter-on-quarter basis. Could you just underline the factors that contributed to the sales.
No. As I said in my opening remarks, INR 25 crores is a onetime cost, especially for the shutdown of the pellet plant and the cost incurred for debt. So that INR 25 crores is additional costs incurred in this quarter. It will not be repeated.
[Operator Instructions]
The next question is from the line of Jinesh Shah from HNI Investments.
My question is in last Q1 PPT, you mentioned that the iron ore benefication plant will take 15 months from the date of environment clearance or environment approval. In this Q2 presentation, we are mentioning 6 months from the environmental grants. So what has happened in the last 3 months that the time line has been changed.
We've already got approval for [ 0.6 ] million tonnes. So majority of work has been completed. And once we get the mining approval for [ 6 million ] tonnes, we will spend and create additional volume and start benefication -- that's about [ 15 months] [indiscernible] because major work has already happened. Once we get the mining approval for the 6 million tonne, we will expend additional amount on the beneficiation and we start the beneficiation. That's the whole idea.
Okay. And the -- our mining application with environment clearance is continuously getting delayed. I mean while we have initiated this project in terms of iron ore expansion -- mining expansion as well as the pellet production. The idea was the mining capacity will be available well in advance. But now since we are talking in this call that if environment clearance is getting delayed, then we may have to procure the iron ore from outside to maintain our pellet plant capacity, which we are commissioning in Q1 next year. So why the management and our environment team is not putting adequate effort to ensure that the environment clearance should not get delayed further.
No, no. So I would say the environment team is putting the required effort. It would be wrong to say they're not doing any effort -- process is taking much more time than we expected. But we are confidently by end of the financial year, we should be able to get the mining permission.
Okay. And you also mentioned that some state government approval is pending other than these environmental clearance for this new iron ore -- for the expansion of iron ore plant. So which are those states government approval is still pending other than the environment clearance for this?
No, see, for the current mining expansion as per the law and MMDR Act we are -- we are supposed to get approval from state government. So whatever approvals required, it's with the state government, not with the central government so it's taking time. We do understand, but then things are in place and hopefully by the end of financial year, we should get the approval.
So what I understood from the PPT, we have mentioned the revised [indiscernible] right? So when we are going to submit the response against the [indiscernible].
We have already submitted response within [indiscernible] and now public hearing has to happen and further will so. So things are in process but that is taking little time but we are confident by end of this year, we should get the approval.
So the public hearing is applicable for our iron ore expansion project?
Yes, it is applicable, but it actually happens with state government level, not with the central government level.
And by when this public hearing is going to happen because if the public hearing is still pending, then I'm really -- I'm not sure how we will be getting all the approval in the next 6 months' time.
We are at the last stage of getting the approval and in the permission of route. So once that stage is achieved, public hearing will happen. So fully by November end, we should get the approval and then in December, we are confident that the public hearing will happen.
Ladies and gentlemen, we'll wait for a moment while the management gets reconnected. Thank you. As there are no further questions for the management, I now hand the conference over to the management for closing comments. Sir, you are on the line. Please go ahead.
Mr. Dinesh, please go with your closing comments.
We, once again sincerely thank you all for your participation and support. We are confident that we have adequately addressed all your queries. Wishing you all seasons greeting and Happy Diwali to you and all your families. Should you have any further questions or need any additional information, please do let get in touch with our Investor Relations team at Go India Advisors. Thank you very much. Thank you all.
Thank you.
Thank you, sir. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.