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Ladies and gentlemen, good day, and welcome to Q4 FY '24 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. Amit Lahoti from Emkay Global Financial Services. Thank you, and over to you, Mr. Lahoti.
Thanks, Manav. Good day, everyone. I'm glad to welcome the management and thank them for this opportunity. We have with us today, Mr. Abhishek Agrawal, Executive Director; Mr. Dinesh Gandhi, Executive Director; and Mr. Sanjay Bothra, CFO.
I shall now hand over the call to the management for the opening remarks. Over to you, Mr. Gandhi.
Thank you, Amit. Thank you very much. Good afternoon, everyone. Thank you for joining us today for the Q4 FY '24 and FY '24 full year earnings con call for Godawari Power & Ispat Limited. Our financial results and earnings presentation is available on our website and on the website of stock exchanges. I believe that you have had a chance to review the same. I will take you through the results post which we will have the question-and-answer session.
I'm happy to inform you that GPIL has shown a strong performance in Q4 and FY '24 and has ended the year on a great note. The performance was driven by enhanced capacities of value-added products, increased production and sales of value-added products, cost savings through solar power plants and high-efficiency turbine commissioned during the year and operational leverage despite fall in the realization in almost -- most of the value-added products, except pellets, which was higher by 8% as compared to last year.
Before discussing the financial performance in detail, I would like to update you on the de-bottlenecking CapEx and operating efficiency program, which was undertaken by the company 2 years ago and which is now almost complete in FY '24. The financial results for FY '24, in the financial year '24, the company has received consent to operate the sponge iron plant with higher capacity of 0.9 million tonnes from 0.49 tonnes and the steel billet plant with the capacity of 0.535 (sic) [ 0.525 ] million tonnes against a capacity of 0.4 million tonnes. The company commissioned solar power plant capacity of 145 megawatts out of 173 megawatts proposed capacity.
In FY '24, company commissioned 45 megawatts solar power projects. Also a new high efficiency turbine generator to replace old turbine has been commissioned, and duly synchronized with the grid, which is leading to hire power generation by 7 to 8 megawatts without any additional fuel cost. The additional power generated from steel -- solar power plant and new turbine is being used for consumption in steel plant to operate with plant capacities at a higher level, which is leading to cost savings, both through the lower power costs and higher operating capacity leading to improved operating margin and profitability.
Our de-bottlenecking CapEx has also almost been completed, except modification in one rolling mill, which has started prior operations and is expected to be commissioned during the current quarter along with 20-megawatt solar power project to meet with our requirement of the rolling mill and fabrication and galvanizing plant. All this CapEx are now almost complete. Money has been invested, and this will be operational by June 2024. These initiatives have started contributing to higher operating margins. And in this backdrop, company's operating margin for FY '24 has increased from 20% to 24%, despite fall in the sales realization across value-added products like sponge iron, billets, wire rod, et cetera.
Coming on to the operational performance for '24, I'm delighted to say that GPIL has met production guidance for FY '24 for most of these products. It has exceeded highest ever production volumes of sponge iron, steel billet and captive power generation. We marginally missed our production target in iron ore, pellet and ferro alloys on account of maintenance shutdown of the pellet plant in Q1 FY '24 and shutdown of ferro alloys unit in FY '24 for de-bottlenecking purposes. One of the major competitive advantage of GPIL is that it has a captive iron ore mine. The captive iron ore landed cost for FY '24 is INR 2,800 from the captive mine as compared to current market price of INR 6,800 a tonne. The prices of iron ore in auction conducted by OMC yesterday has increased by INR 800 to INR 1,000 a tonne.
The iron ore mining and pellet production decreased by 11% and 7%, respectively. The decrease in production of iron ore mine is because of closure of Boria Tibu mine and pellet is due to maintenance shutdown. Production volume of value-added product like sponge iron, steel billets, MS rounds, wire, ferro alloys and galvanized fabricated products have gone up.
Coming to the sales volume, the iron ore, pellet sales and sponge iron sales have dropped because of the increased captive consumption for manufacturing of value-added products. Sales for the still billets, MS rounds, wire, rod, ferro alloys, galvanized fabricated product increased on account of commissioning of higher capacity. Realization of iron ore pellets increased by 8% to over INR 10,000 a tonne. Realization for the other products dropped, a decreasing trend.
Coming on the consolidated financial performance. On quarterly basis, revenue for the quarter increased by 16% to INR 1,530 crores on Y-o-Y basis because of increase in the sales of value-added products. EBITDA increased by 19% and 29% on Y-o-Y basis to INR 329 crores against INR 220 crores. EBITDA margin is till at 22% during the quarter. On annual basis, revenue dropped by 5% to INR 5,455 crores compared to last financial year due to lower trading sales by INR 250 crores, slight decrease in production of pellet and fall the realization across the product range, except pellet. However, despite fall in the sales, operating EBITDA and PAT increased by 14% and 18% to INR 1,328 crores and INR 937 crores. EBITDA margin increased to 24% for the whole year as compared to 20% in the previous year.
GPIL has a healthy balance sheet with a net -- strong net cash balance of over INR 1,000 crores. The cash flow from operations during the year increased to INR 1,044 crores, up 5% as compared to FY '23. Company has during the financial year '24 distributed a total amount of INR 355 crores to the shareholders by way of final dividend for FY '23 and buyback of INR 250 crores. So including buyback, tax and dividend, company has distributed INR 355 crores, which is 45% of FY '23 net profit. The company could not announce dividend for FY '24 due to certain technical reason on the Board meeting held yesterday for approval of accounts. We have now scheduled a Board meeting, meeting of Board of Directors on 24th May to consider payment of dividend for the FY '24. Our volume guidance for FY '23 is as under.
Production guidance for volume iron ore mining is 3 million tonnes. Iron ore pellet, 2.44 million tonnes. Sponge iron, 0.9 million tonne -- 0.59 million tonnes. Steel billet, 0.5 million tonnes. And ferro alloys, 80,000 tonnes. Coming to update CapEx plan for the next phase of growth. As we are already aware, GPIL has planned to more than double the iron ore mining capacity at Ari Dongri mine expanding it from 2.35 million tonnes to 6 million metric tonnes.
And as mining capacity shall the operational on receipt of environmental clearance and current status is that the revised mining plan is filed and TOR is received. We are planning to hold the public hearing in the month of June or July '24, the preparations are on. GPIL is also setting up a beneficiation plant is Ari Dongri mine with the capacity of 6 million tonnes. The estimated CapEx for the sale is INR 200 crores. Out of which, INR 24 crores has already been spent. The beneficiation plant will be set up within the period of 15 months from the receipt of environmental approval and contains consent to set up from State Pollution Control Board.
GPIL is progressing towards its plan to increase the pellet capacity by 2 million tonnes. This will increase the total capacity of pellet to 4.7 million tonnes. CapEx requirement for Phase 1 expansion is 600 -- for pellet expansion is INR 600 crores. Out of which INR 32 crores has already been incurred for a placement of orders. To meet additional power requirement of the proposed pellet plant, the Board of Directors in the meeting held yesterday has approved setting up an additional solar power capacity of 70 megawatt to meet the requirement of additional power for the proposed pellet plant. The pellet plant is expected to be commissioned coinciding with the commissioning of pellet plant in Q1 FY '26.
We have already started looking for -- identifying the land for the project and we are quite confident that the project, solar power plant also will be commissioned along with the pellet plant commissioning. And you are all aware, GPIL was focused on announcing capacities for raw material for steel making and have not added meaningfully the capacity in finished steel making post 2007, except completing the integration of steel making capacity to 0.5 million tonnes through de-bottlenecking, which was just completed in FY '24. GPIL with support of strong cash flow has decided to increase the capacity of its integrated steel plant by 2 million tonnes, taking the steel making capacity to 2.5 million tonnes, that is 5x the present capacity.
Through the blast furnace route, the CapEx for the same is announced earlier is INR 6,000 crores. The public hearing for the project at a new location has already been completed. Environmental approval is awaited. Once the environmental approval is received, we'll start the construction work at the site. Although, no meaningful development has taken place because of the central election in the last 2, 3 months, but we are hopeful that once -- now that the election is almost complete and new government is expected to form in the first week of June, we are quite hopeful that we should be able to get the approval in Q2 FY '25. The project will be commissioned in a period of 36 months from the receipt of environmental approval and consent to set up.
With the commissioning of new steel plant, the company will join the league primary steel producer, although we are currently a secondary steel producer. Some of the other strategic update. In order to strengthen the Board of Directors of the company, I'm happy to announce that we have appointed 2 distinguish industry experts: Mr. Sunil Duggal and Mrs. Roma Balwani, as an Independent Director on the Board of Directors of the company. Just to give you a brief introduction, Mr. Sunil Duggal has 37 years of experience in leading high performance teams and has also served as CEO and Whole-Time Director of Vedanta Ltd. and Hindustan Zinc Ltd. He is Chairman of the National Committee on Mining, Confederation of Indian Industry; former President of Federation of Indian Mineral Industries; former Co-Chair, FICCI Non-Ferrous Metals Committee 2018; and former Chairman, Skill Council -- Development Council for Mining Sector in India.
Mrs. Roma Balwani has 4 decades of experience in manufacturing companies like Vedanta Group, L&T, Mahindra Group in various aspects of strategic businesses like sustainable development, brand management, stakeholders and event, et cetera. We welcome Mr. Sunil Duggal, and Mrs. Roma Balwani on the Board. The Board has further appointed Mrs. Neha Sunil Huddar and Mr. Hukam Chand Daga as Independent Director, subject to approval of the shareholders in the AGM proposed to be held on 4th of July to replace our present Independent Director namely, Mr. Shashi Kumar and Ms. Bhavna G. Desai, who are retiring by completing their terms in August, 2024. The appointment of these 2 directors will further strengthen the Board.
Mrs. Neha Sunil Huddar has over 40 years of experience in finance, accounts, HR and compliance management. She has worked as Head of Finance in Reliance Foundation; Vice President - Payroll at Reliance Industries; Group CFO at Thirumalai Chemicals, just to name a few.
Mr. Hukam Chand Daga, also has an illustrious career. He has more than 4 decades of professional experience in various Aditya Birla Group companies namely Hindalco - Renusagar, Grasim Industries, Indian Rayon, H G Industries, Essel Mining. He was former President of Federation of Indian Mineral Industries, FIMI, and Member of National Mining Committee of The Confederation of Indian Industry. So we welcome Mrs. Neha and Mr. Hukam Chand Daga on the Board of the company. And we are quite confident that with their experience, the company will be immensely benefited going forward.
Coming on the market outlook. On the international front, global iron ore prices touched to $144 in January '24, up from $103 at the start of the year and is currently at $120. China imports were strong, as this year there was no explicit steel production cut announced. At the same time, China domestic iron ore production lagged. World Steel Association is forecasting steel demand to grow by 1.7% to 1,793 million metric tonnes in 2024 and another 1.2% to 1,815 million tonnes in 2025.
This augurs well for the demand for iron ore. We expect the prices to be we supported around current level. World Steel Association foresees that the steel demand in China for 2024 will plateau, mirroring the level of 2023, owing to decrease in real estate investment. However, with -- this dip in the demand is expected to be counteracted by surge in steel demand driven by infrastructure projects and manufacturing sectors.
On domestic front, iron ore prices NMDC Fe 64 have seen a significant increase to INR 5,260 crores a ton. As I said earlier, the iron ore prices in the yesterday's auction by OMC was at about INR 6,800 a ton. Prices have recovered well from the low steel, post imposition of export tax and have surpassed the high ceiling in calendar year '22 of INR 5,160 a ton. On the other hand, pellet prices after touching INR 8,800 in July has increased to INR 10,500 in December and now currently hovering at about INR 11,300 a ton, which is for 63 Fe pellet. Our high grade pellet is selling at about INR 12,500 a tonne currently.
Given the positive steel demand outlook, pellet prices should remain well supported. India remains one of the bright spot globally for the steel demand. World Steel Association forecasts India's steel demand to increase by 8.2% in calendar '24 and in '25 to 144 million tonnes and 156 million tonnes, respectively. World Steel Association further predicts that India still, industry will experience significant expansion coupled by sustained growth across all sectors, resilient on the steel, particularly driven by robust infrastructure investment.
In conclusion, I want to highlight that GPIL will offer net cash balance sheet, advantage of captive iron ore mine, production of high-grade pellet, enhanced capacity cost savings, reduction in carbon footprint through the solar power plant, a strong CapEx plan, and over 4 decades of industry experience of the promoters, committed in visionary leadership, hard-working employees and support from all stakeholders augurs well for the growth of the company.
I would now like to open the floor for question and answer. Thank you. Manav, we can now open the floor for question and answer.
[Operator Instructions] Our first question from the line of Jatin Damania from Svan Investments.
Sir, just wanted to understand that in your initial remarks, you indicated that the cost savings through solar power plant and benefit from high efficiency turbine has supported the overall performance. So can you quantify what was the annualized savings that we did in FY '24? And what could be the saving for the FY '25?
See, overall, our operating margins have increased by 4%. There was an average about 10% to 12% fall in the sponge iron prices throughout the year. The average utilization for the FY '24 and 8% increase was there in the pellet. So if you take all these, the 4% increase in operating margin, which is about closer to about INR 200 crores, was at INR 5,000 crores whole, is as a result of higher operating efficiency because of the solar power plant, new turbine and of -- higher capacity will be steel plant. So this entire INR 200 crores is being contributed by the operating efficiencies and this de-bottlenecking, solar power plants, et cetera, et cetera.
Yes. But sir, the high efficiency turbine was started in the mid of the year, so does the solar power plant. So does that mean that the savings from this will be much higher than INR 200 crores what we did in FY '25?
I hope so. Subject to adjustment of the increase/decrease in the selling price, but definitely full year impact because of the solar power plant, which has been commissioned in FY '24, turbine commissioned sometime in November-December. Steel plant started operating in Q4 will definitely support. Although during the full year, we have been able to reach -- like the sponge iron, we have reached to the optimum capacity of 600,000, that is 5,90,000 tonnes. In the same year, steel billets, we got the approval. Steel billet has reached to 475,000 tonnes. So additional 25,000 tonnes contribution will come from steel billet. Addition power generation through all these projects will definitely lead to the profitability going forward in the next financial year.
Sir, second thing on your -- if I'm looking at the overall CapEx, and in your slides also, definitely, there is a cost overrun in the modernization and the expansion plan. So is it safe to assume that INR 30 crores, INR 35 crores of the increase in the overall cost is largely attributed to the increase in the de-bottlenecking capacity of the rolled products? And what will be the post-debottlenecking, what will be the capacity of the rolled product?
I think, you are very...
Our rolling capacity -- okay, Abhishek, go ahead.
Yes, you're very correct. There is this slight overrun, but yes, big on the rolled product capacity. The rolled product capacity, once the mill is fully commissioned and operational, we will -- this financial year, probably this will be the first year, we're targeting about 3.5 lakh tonnes. And going forward, we will achieve the full capacity of 4 lakh tonnes, 0.4 million.
So post de-bottlenecking, the capacity will increase to 4 lakh tonnes, right? Is it safe to assume?
Definitely. Definitely.
And sir, a couple of more questions on the mining thing. Now if you look, we are expecting the public hearing for our iron ore mining expansion to be completed in June or July '24. So how much time will it take for us to operate the higher capacity mining once we get the approval or once the public hearing is done?
See, in this particular permission, we don't need to go to MOEF, which is the center authority. This will be taken care by the State Pollution Board. But earlier, there was state election, then there was a government change and then there was state -- center elections. So because of all these elections, the entire thing got delayed by a few months. Once the results are out hoping, so June onwards, the process should pick up some pace and expecting by end -- by Q3, we should have the desired approvals in hand. And once we have the approvals, end of Q3, early Q4, we'll start ramping up the capacity. That is what the target is right now. Sometimes because of certain environment, we just can't control things. We just have to be patient.
Yes. So for initial 9 months, we'll probably operate the mine at the current run rate. And in the last 3 months, we will be incremental...
Correct. Correct. Yes, last 3 or 4 months probably then we ramp up the capacity. So target is to reach 3 million this year and then further going forward, from next financial year, further ramp up to 6 million tonnes.
Okay. So 3 million tonnes for this year and 6 million tonnes in FY '26.
Yes.
And sir, last question is on your maintenance shutdown that we had taken for the pellet and the ferro in the last year, which was in the first quarter of FY '24 because of which the production for both the things were lower. I mean, is there any maintenance shutdown planned for Q1 of FY '25 in either of our facility or we will be operating at the retain...
No. See, pellet plant, of course, as I've have been telling earlier as well, depending on the environment, we planned shutdowns before monsoons. But this quarter, there is no shutdown of pellet plant for sure. But ferro alloys, we have already taken a shutdown, but it's an annual shutdown, which is always planned in the months of summer. But the production guidance for the entire year is the same, there will be no change in that. So whether you take it in Q1, you take it in Q2 or Q3, but the production guidance for the entire year remains the same.
Yes. And sir, update on the ferro alloy market if you can probably...
Okay. So the ferro alloy market has suddenly moved up quite a bit, last few weeks. The primary reason has been, there was a cyclone in Australia where one of the mines being operated by South32 was out of production and they declared force majeure. And as for the new communication from them, the mines will come into production only probably by end of Q3 of FY '25. They were producing high grade, which was 44 MN. So if you see the entire ferro alloys -- manganese market globally, the entire trading volume is about 7 million tonnes. And that mine particularly was producing about 0.7 million tonnes. So 10% of the global production is out of supply, which is a huge volume.
Because of that, there was an uptick in the manganese prices globally, especially from China side. And that is the reason that ferro alloys, on the material side, the prices increased drastically in last few weeks. So if you see the price is hovering about 65,000 per silico manganese. Now currently, it's about 85,000, 87,000, which is as high as about INR 90,000. So there is a pick up about 30% compared to last month only because of a shortfall in supply of manganese ore globally. No other reason.
[Operator Instructions] Our next question from the line of Aditya Welekar from Axis Securities.
Sir, I wanted to understand, recently, the iron ore prices have been quite volatile in international markets. In the month of January, they have increased and then they have come down. And currently, they have also -- they have increased again. So what is the outlook in the -- of the international iron ore prices and also of the domestic iron ore scenario, if you can give some color on that?
See, firstly, I'll update about the global scenario. So as you rightly mentioned, the iron ore prices, which is China was down from $140 to about $100 in the month of March. Again, it was -- there was a surge in the prices and reached about $120 levels. So the up-down has been going on and currently the prices are about $118 on the iron ore front. On the domestic side, as you're aware, there has been uptick in the steel demand. And so accordingly, the iron prices have gone up domestically as well.
As Mr. Gandhi mentioned in his opening remarks, yesterday, there was an auction conducted by OMC, who is one of the biggest suppliers. There was a premium of about INR 1,000 on the fine. So of course, there has been uptick in the iron ore pricing domestically. Now per se Godawari, I would like to especially mention one thing here is what we need to understand is, we need to really start perceiving Godawari's operations or Godawari's numbers away from the export market because there has been a surge in the domestic demand of iron ore and pellet supply, especially in the domestic market, where we're sitting, which is...
Additional capacity of DRI has been added of close to 2 million tonnes. And with the current session happening in the local surrounding, the capacity, which should be further added is about another 1 million tonnes. So to feed these DRI mills, we are sitting in a very sweet spot that everything will be sold domestically going forward as well. So I would say pellet prices and iron ore prices domestically will remain higher compared to export markets by at least good couple of quarters.
Second is, on an annual basis, if we see that the employee expenses have increased by 17% year-over-year and other expenses have come down. So what is the kind of run rate we can expect for FY '25 and maybe as we expand in future for both employee and other expenses?
From the employee side, there are a couple of things. One is, of course, the annual increment, which we've been giving to our employees on an annual basis, which they rightly deserve. And second is, we have put in a note, so we have announced a list of schemes for our employees of senior level. So we've done a provision of about INR 3 crores in the Q4 basis that. That is with accounting standards.
So if you see the average increment in employee spent is about 10%, 11% on an annual basis, which is standard increment, this is what we give. And other operating expenses, see, other operating expenses includes a lot of things, which is contractor, raw materials and other things as well. So the market is quite volatile. So last year, raw materials prices were on the higher side. This year, it has come down. So it will keep varying. But overall, we still maintain a healthy EBITDA margin of, say, 20%, 25% going forward.
[Operator Instructions] Our next question from the line of [indiscernible] from Niveshaay Investments.
Am I audible? Was my question audible or should I repeat?
No, no, we couldn't hear anything. Please come again.
Yes. So there were some reports suggesting that the sponge iron imports in the country has been on the increasing trend. So what is the scenario going forward that we see and also the prices of the same in the coming future, especially in the Q1 and Q2?
You mean sponge iron -- so -- because that's a news to me. Probably, a little bit of cargo of HBI, which is the gas-based DRI, which is made in Middle East might be imported into the country. But apart from that, I don't think so. We do import a lot of sponge iron. Rather, we do export some of sponge iron to our neighboring countries like Bangladesh, Nepal, and those. So probably I need to check on the data, but this is a news to me that we are importing sponge iron. We import scrap, probably we import iron ore, but sponge iron being imported, I really need to check on my data and come back to you on that, please.
Correct, sir. And also, sir, I had this question regarding the CapEx that we are doing in the hot-rolled space. So which are the products that we are looking to get into?
Okay. So the -- okay. So you talk about the 2 million greenfield project, which we are going to start going forward...
Integrated steel plant.
We're only focusing on HR coils, width of 1,250 mm and above, nothing else. It will be a single mill of 2 million tonnes HR coil with width size of 1,250 mm and above, nothing else.
Correct, sir. Also, sir, you mentioned that we import iron ore and not sponge iron. So what are your views on the imports that are happening from the Chinese counterparts?
So we -- as you know, I am talking about, we, as in a country. And whatever iron ore is being imported into the country, it's not from China, it's mainly from either Australia or Brazil. So I'm assuming port-based plants, bigger plants like probably ArcelorMittal, JSW, so I had high Fe reports where some volumes of imports have started coming into India, especially by the bigger players like JSW and ArcelorMittal, especially who are port-based. People who are sitting in land like probably, we, or any other peer companies, they're not importing.
Okay. So was this imports because of higher Fe quantity in the ore or any other reason?
It can be the quality plus at scale it can be the quantity as well because as you're aware, India's steel production is gradually going up year-on-year and the supply in the domestic market remains tight because the mines, which have been auctioned are still taking its own pace to come into production. So the reason can be both. It can be the commercial value, it can be the quality as well. I think it will be risky for me to comment what is the reason why imports are being done in India, but yes, some imports have started coming into India now, especially by the bigger players, which are port-based.
[Operator Instructions] We have next question from the line of Manav Gogia from YES SECURITIES.
Sir, one question on the crushing and the beneficiation plant, which is for the 6 million tonnes, this is I I'm correct for the Ari Dongri mines, right?
Correct.
Yes.
And any update on if we are looking to start in the Boria Tibu mines in the near future?
Okay. So on the -- so just to update on the Ari Dongri mine, we have -- the issue which is under process also includes the issue for beneficiation. Currently, we have a 0.6 million permission for beneficiation, for which we have already done the CapEx. And once we get the approval, we will start the plant. And for the remaining, once we get the approvals, we start the CapEx cycle and complete that as well. So basically, the beneficiation of 6 million along with the mine expansion happen together because both approvals will be received together.
On the Boria Tibu side, as we mentioned, a few months back, we have shut down operations at the moment because of the mine being commercially unviable. Because the mine have huge quantities of low grades compared to the Ari Dongri mines. So we are putting up a beneficiation plant as well there for which designing has already been done. We have started the paperwork to apply for the permissions. And once we get the permission, we will spend on the CapEx and beneficiation and then bring the iron ore from Boria Tibu mine. But sitting in FY '25, it will at least take 3 years from now on for the mines to be operational again. So we can look at FY '28 for any iron ore coming from Boria Tibu mines for consumption to the steel plant, at least 3 years from now on, nothing before that.
Okay. Okay. That was helpful. Sir, my other question is on the CapEx. Can you just provide me a number for the next couple of years? Can we assume like INR 800 crores of CapEx in FY '25 and then INR 1,000 crores in FY '26, assuming that the steel plant CapEx should also start from the next year onwards?
See, for FY '25, all our de-bottled CapEx has already been completed, barring the rolling mill, which is already in trial production. The major CapEx, which will happen is on the new pellet capacity of 2 million on the mining side to ramp up the capacity, along with the beneficiation plant. And then the new solar plant, which will be CapEx to provide power to the pellet plant. So put together all these, we have already invested a certain amount. And the remaining about INR 700 crores will be spent in FY '25 to complete that CapEx cycle. And for next year, since the new greenfield, we hope to start the work in end of probably Q3, so the CapEx required will be on the very minimal side, probably land requirement and all those things. From FY '26, we can say, INR 1,000 crores. And then going forward, probably the CapEx will go up drastically once we start the supply of equipment and other activities.
Okay. Sure. Sir, if I could just squeeze one more question in. You earlier mentioned that we won't be putting up a coke oven for the integrated steel plant. Is that theme currently still in the -- down the line would we be thinking of putting a coke oven if things go...
As of now we are firm on our thought process, after a lot of due deliberation. We have no intention of setting our coke oven in the Phase 1. Although we will be having the permission. We have applied for the permission along with the other capacities. But yes, in the Phase 1, we have no intention of spending on coke oven. That is a scenario at the moment. So it remains status quo. Because -- see to be honest, Indonesia has built a lot of coke capacities, which are primarily for export purpose. So today also, it's better to import coke rather than importing coking coal and use by a blast furnace. Commercially, also, it doesn't make sense to invest in coke oven right now, that you are able to get to import cheap cokes and using the blast furnace. So as of now we are not putting up a coke oven in Phase 1, for sure.
[Operator Instructions] We have our next question from the line of Yogansh Jeswani from Mittal Analytics.
Yes. So Abhishek, once we are done with the iron ore pellet expansion at our Siltara plant and [indiscernible] rolling, in that, you have expanded. So will there be any further scope to add something in this plant?
No, no. So at this complex, there will be no further scope to add further capacity. Primarily for 2 reasons: One is, of course, the space constraint. Secondly, currently, our complex is, it is in an area, industrial area, where it has been declared as CPA, which is critically polluted area by MOEF. So basically any industry, which is under CPA category there will be no further expansion allowed by MOEF or even the State Pollution Board. So between both those things, we have no intention of expanding any capacity in this complex. Whatever expansion will happen in the new complex, which is the greenfield one.
Okay. And sir, what about Urla industrial unit?
See, Urla, we have already done -- we already invested and de-bottlenecked in our ferro alloys company, which is Hira Ferro Alloys and Alok Ferro Alloys. That has already been done last year. And this is that we -- our production will go up this year. And after that, there will be no further scope because, again, for the same reason because as you know, Urla is also a CPA. So since ferro alloys requires coke addition, we have to make metal. So there will be no further expansion in that complex as well.
Understood. And sir, coming to your expansion on the iron ore and the pellet size, so far, what our business has been that we have had surplus or enough pellet capacity to consume our entire iron ore. Right now with the expansion that is coming up, we will have a surplus iron ore capacity. And we being a captive miner, we can't sell this. So any specific thoughts on how we will use this or we will keep this iron ore as an inventory and we'll keep using as and when needed.
No, no. So I would -- so there is a difference of understanding. So firstly, going forward, once we start mining 50 million, we will be fully captive, and we won't be having any iron ore to sell in the market because once a new pellet plant gets commissioned, so my capacity will be about 4.7 million tonnes. So after beneficiating to reach to a certain desired grade of Fe, there will be a loss of about 15% to 18%. So once you compute that, 6 million of 18%. So we will be getting about 5 million of processed iron ore to use for a pellet plant. So technically, we don't have anything to sell in the open market. It will be totally captive. And secondly, and the most important point is, although our mines were given to us on captive basis, but after the new MMDR Act came into picture, there is a provision that a captive miner can sell up to 50% of their capacity, but they have to pay additional royalty. So if you say today's market, the additional royalty will cost me about INR 1,200. So it doesn't make sense to sell iron ore in open market by paying additional royalty.
Okay. Understood. I also wanted to understand on the crushing and beneficiation plant that you want to set up and how that would affect our economics in terms of costing and margins. So you also mentioned that after our mining is completed -- completely ramped up to 6 million, beneficiation will help us and then 15% to 18% would be the loss in the production.
See currently, also, we are throwing about 12% to 15%. But what is happening is everything is coming to plant, beneficiation is happening in plant and it's throwing -- we are handling the dumps in the plant site. Whereas once we start the beneficiation on the mine site, so everything will be beneficiated in the mine. So the 15%, which we are throwing away will be handled in the mine, and we will save on the transportation cost. So today, for example, I am paying INR 1,000 per tonne to transfer from mines to plant, so 15% means INR 150. So INR 150 and on the entire volume, will straight away add to reducing the cost of my iron ore. So that is the logic behind setting up a plant in the mine's area and not beneficiating in the plant. That is the logic behind that.
Understood. And sir, overall, how does the beneficiation plants help in terms of costing a costumer. If you could just help us understand. Suppose today, iron ore cost is INR 2,800. Will that cost come down or -- because in terms of grade we don't have much scope because we already have 63%, 64% Fe content iron ore.
No, no. So that is -- so I'll tell you, the average grade, which we are currently producing and probably will further produce is about 61%, 62%. 61.5%, you can say. That is being beneficiated to a level of 68%. And from there, we are making pellet of 66%. So the purpose of putting a beneficiation is to upgrade my 61%, 62% iron ore to 68% level and then make quality pellets of 66 grade.
It has nothing to with the costing. It is more of producing quality iron ore concentrate, which can be feed to my pellet plant. Rather, beneficiating will add to my cost because there is a cost for beneficiation. And mainly, beneficiating is to upgrade the iron ore to a certain level and then making pellet of high grade. If we do not beneficiate and if we use the iron ore as it is, we won't be able to produce a pellet of more than 62%, which will be a very commercial grade and the quality will not be substantial -- suitable for steel operation -- operationally, efficiency-wise.
[Operator Instructions] We have our next question from the line of Aditya Sen from RoboCapital.
Sir, I missed the part where you mentioned how much capacity are going to commission this year. Can you please reiterate that? And when are you going to commission that, in which quarter or which month?
So you're talking about iron ore mines capacity?
Yes, right.
Okay. So as we have given a production guidance by FY '25; currently, we envisage to produce 3 million tonnes. So currently, our mining expansion is under approval state from the State Pollution Board. It got a little delayed because of the election. So once we have that in -- permission in hand, we will run the capacity and we target to produce 3 million tonnes by end of FY '25 against 2.4 million of FY '24.
We have our next question from the line of Chintan from Abans Investment Managers.
Sir, can you give us EBITDA per tonne or EBITDA margin for billet and our rolled products?
Dinesh, please go ahead.
See, we don't give the numbers for the iron or the billet, we give the consolidated number and we don't have it with us right now.
Okay. Okay. That I will take from offline. Sir, can you give us any guidance on a debt-to-EBITDA ratio for the further CapEx? Because right now we don't have any kind of debt on the balance sheet. So can you guide us on our debt and equity ratio?
No. Debt and equity, like we have said that we are investing about INR 1,000 crores in the pellet plant as well solar power plants for the mine, put together is close to about INR 1,000 crores. And to that extent, we are already having the cash on our balance sheet. So no more debt will be required for this. Coming on the integrated steel plant, that is expected to take about 3 years from the date of the receipt of approval to commission the project. And with the commissioning of new pellet plant in the next financial year, our cash flow from internal accruals is going to go up. So we hope to commission -- complete the majority of the CapEx through the internal accrual.
And resulting debt, shortfall of whatever cash accrual and the debt, total investment required will be balancing that, so we don't think that we will be able to require to take more than INR 1,500 crores kind of debt in order to complete the new project. So rest everything should go from the internal accruals. That's what is our expectation as of now. Now this figure can change somewhere here and there, depending on the operating margins, et cetera. So -- and if we are able to maybe require to take a debt of INR 1,500 crores or so, then that will be less than 0.3x of the net worth -- of the project net worth. And this debt, we may be required to take it after 2 years. So that time our net worth will further go up, so it will be negligible.
We have our next question from the line of Rakesh Roy from Boring AMC.
Sir, can you give me a breakup for MS round and TMT bar for full year FY '24? How much is the MS round and how much is the TMT bar sales volume?
See, firstly, we do not...
Numbers have been given in presentation. TMT bar, we don't break it.
So we have only -- MS round only.
Yes, yes.
Okay, sir. And sir, any, sir, last is just you said you have saved money from fuel like solar by adding solar and new turbines. So how much we expect for FY '25 from this part?
No, that is very difficult. In solar, where -- such as the grid cost, you save minimum INR 3.5 per unit. So whatever additional power will be required, it will be saved through solar.
Okay. And sir, any outlook for margin, operating margin for FY '24 or FY '25.
We believe that whatever margins we have achieved in the current financial year should be minimum there. Now that depends on the selling price as well. So if the selling price for some reason would be either goes down, then the margin can go down. Otherwise, we are quite set to achieve the margin of over 24%, 25%, if the current prices sustain.
Sir, any comment on realization side because if I see your Q4 realization, except pellet all is down, nearby 12% to 14% year-on-year basis. So any comment for Q1 also? This will happen same type or -- the pricing?
So for Q1, the market has definitely gone up because there has been a certain demand for -- in steel post-Holi. And people are quite bullish going forward. So prices are almost 10% up compared to Q4 versus Q1 of FY '25 across the chain. Be it iron ore pellet, be it DRI, be it billets of any finished steel, so price is almost 10% up across the chain post-Holi, which is -- so Q4 versus Q1, we can expect a 10% higher price variation.
We have our next question from the line of Rohan Mehta from Strategic Investment Management.
Yes, I just wanted 2 ratios. Asset turnover for the pellet plant that we are putting up and the steel plant we are putting up, a ballpark figure would do.
Asset turnover ratio?
Yes.
So like this 2 million tonnes additional pellet plant will have a turnover of close to about INR 10,000 a tonne. And 100% utilization will have a turnover of INR 2,000 crores. And investment including mine and beneficiation, solar power plant is INR 1,000 crores. So it is 2x what is your investment.
Okay. And for the steel plant?
Steel plant, it's a 2 million tonne steel plant x INR 50,000 a tonne.
Okay. So let's say, about INR 10,000 crores of revenue?
In terms of revenue. And CapEx is INR 6,000 crores.
We have our next question from the line of Shivam Saxena from ICICI Bank.
Just having one question. I wanted to check on any impact of the ongoing heatwave on the operations of the company. Just have an update on...
No, no, no. Zero impact. And to be honest, even for -- during the monsoon period, where usually we see industry suffer, we maintained our 100% production capacity. That's why we are developing infrastructure.
Okay. Any shortages on employees getting sick because of the ongoing heatwave?
No, see -- but with more and more CapEx going into mechanized operations. So even if there is a little bit of shortage in terms of contractors and employees, it doesn't disturb our production volumes. We are well equipped to handle all these situations. But this is -- it's not an unusual phenomenon. For us, being in Raipur where the temperature is usually plus 40-degree, we have been facing this since every year. So we are well equipped to handle these situations.
The next question is from the line of Piyush Arora from School of Intrinsic Compounding.
Congratulations for a good set of numbers. Sir, as a percentage of our pellet sales, how much comes from the lower grade versus the higher grade?
It's 50-50. So 50% is of lower grade and 50% of high grade because the remaining high grade is being consumed in house for our value added stream, which is DRI and then for the crude steel and rolled products. So the sales volume is 50-50 for both the grades, 56 and 53.
And sir, going forward, do you think that after our expansion of iron ore mines comes up, so this will change further towards the higher grade.
So yes, the new plant, which we are setting up, we will be rather producing high grade pellets only. So further once the capacity is in line, then the ratio will -- it will be 25 or 53 and remaining will be the high grade. Once the iron ore capacity goes up and the new plant comes into the production in FY '26.
Okay. Okay. And sir, how much higher EBITDA per tonne shall we get? Like as a percentage versus lower grade and higher grade, just for a ballpark idea.
Okay. So the average yearly premium, which we command from our buyers is about $20. You can say $20 or INR 1,500 a tonne. That's a yearly average between the 53 and the high grade.
The next question is from the line of Shikhar Mundra from Vivog Commercial.
Sir, just one thing. What kind of incremental EBITDA we are expecting from the steel plant at the present prices?
See, so already last year, FY '24, we have increased our steel capacity from 3.75 to 4.75. And this year, we have given a production guidance of 0.5 million tonnes, so addition of only 25 KT. So we don't see a substantial improvement in terms of our steel capacity because we already -- we are close to 90% of our production capacity. So I don't see a substantial jump in additional EBITDA from the steel side. Of course, the prices -- if the price go up across the supply chain because our iron ore prices are intact, we can see substantial improvement in EBITDA. That's the only upside I would say.
I am talking about the INR 6,000 crores of CapEx, which we are doing...
Okay. Sorry, sorry. See the way we have envisaged the entire project, bare minimum we're looking at EBITDA of INR 10,000 a tonne.
Okay. Okay. Got it. At these present prices?
Yes. Current scenario, definitely.
We have our next question from the line of [ Rakesh Mangal Agarwal from Rakesh Mangal & Company. ]
Sir, considering the CapEx, what will be the top line growth and credit margin for FY '25?
See, I think FY '25, we have already reached our maximum capacity for all the operations. So we don't see additional revenue being benefited because of additional capacity or additional CapEx. Whatever additional revenue is going to come in on the top line will happen in FY '26, once the new pellet plant comes in production.
Okay. Okay. And nice to hear you, sir, that whatever further in the CapEx plan, we are trying to come from cash accruals. That is very nice.
Thank you so much.
The next question is from the line of Amit Kumar, a shareholder.
So on Slide #12, I can see there is a projected CapEx of INR 6,000 crores of integrated steel plants and -- but no -- the expected time line is 36 months from environment approval. So when can we expect the approvals and what kind of product this is like producing, sponge iron or steel billets? And further, what kind of top line we can expect after we have -- after everything is installed after 36 months? Just a ballpark figure.
On the time line, we have already mentioned in earlier discussion. Due to the elections of the state and center, the things are getting delayed. We are hopeful we should get the environment clearance by end of Q2 or early of Q3. So once that is -- we have entire approvals in hand, from there, we can assume about 30 to 36 months for commissioning of the project. And as Mr. Gandhi mentioned, once that is commissioned, considering finished steel price of, say, INR 51 a tonne. So for 2 million, the additional revenue of INR 10,000 crores, but it's 3 years from now, which is a very long time in a commodity market.
Okay. And what are the end user industries for this like what we produce, sponge iron or steel billets?
No, no. So we will be -- so we're not producing. We won't be going for a secondary coal-based DRI route. We are trying to install a blast furnace, too, which is a primary route. So blast furnace, then the SMS, which is crude steel. And then, also we will be producing HR coil, and the primary buyers for that will be automobile, pipe manufacturers like APL Apollo and other segments. So we will be producing the same quality and even within the same market as players like SAIL, TATA, all the big guys, JSW, ArcelorMittal, specifically the HR coil sheet, which is used for automobile and other value-added products.
So roughly, we can expect the revenue coming in after FY '27 or FY '28.
I think second half of FY '28 partial. And then FY '29 will be the full revenue once we are able to operate in the present capacity.
The next question is from the line of Pradeep Rawat from Yogya Capital.
So my question is regarding the -- if ever we complete all the CapEx like the integrated steel plant CapEx and all other CapEx, so what could be the revenue that we could generate and EBITDA that we could generate?
See on the revenue -- Dinesh, please go ahead.
Yes. See we already discussed, I think, this question 2, 3 times in the call. The revenue would be additional 2 million tonnes at an average INR 50,000 per tonne could be about INR 10,000 crores, but that is 3 years away. EBITDA. We are looking at an EBITDA of INR 10,000 a tonne on the proposed CapEx of integrated steel plant, but that would primarily depend on the prevailing demand supply scenario, pricing, et cetera. But on an average longer term, we expect INR 10,000 a tonne EBITDA margin on the integrated steel plant on a longer term average basis.
We have a follow-up question from the line of Aditya Welekar from Axis Securities.
Earlier in the call, you mentioned that we will be sourcing metallurgical coke rather than coking coal. So can you quantify the kind of advantage we get from that?
See the only advantage in the current scenario is, it's cheaper to import coke straight away for using blast furnace rather than importing coking coal, investing CapEx in the coke oven one and then making coke for your blast furnace. So I have done the math, so today commercially, it's cheaper to import coke rather than importing coking coal, and they're investing heavily into coke oven one and then using in your blast furnace. That is the primary reason because Indonesia has come up with huge capacity. Currently, they are 15 million, going into 20 million tonnes, which is primarily an export market for them, and already a lot of folks are already in hunting in India. That is the only reason for not putting up a coke oven and rather importing coke directly.
Okay, so we are saving some CapEx on installing coke oven there?
I think for a 2 million -- to feed a 2 million steel plant, the CapEx will be as high as INR 1,000 crores. It's a substantial money we will be saving plus commercially also in terms of operating costs, importing coke is cheaper than importing coking coal today.
Understood. And one last one, so what is the competitive strength we have for our steel -- integrated steel plant. So we are installing 2 million tonnes with a CapEx of INR 6,000 crore. So what is the industry standard per 1 million tonne of installation? How much CapEx industry needs? And what is the differentiating factor for our integrated steel plant?
See, of course, one is, going power in today also is our iron ore mining, which is getting zero premium. So that will be -- that is the biggest advantage we have compared to our peers. Of course, people do have -- like TATA has, but compared to others, they don't have. They have got the mining from auction, so they are paying certain premium. So that is the biggest advantage. We want to capitalize our iron ore capacity for further value-added steel. And on a ballpark figure, yes, industry standard is about INR 4,500 crores, INR 5,000 crores per 1 million.
We are targeting about INR 3,000 crores. There are a couple of primary reasons: One is, of course, the saving on the coke oven capacity. Second is, we won't be going for coal-based power capacity to feed to our steel plant. We will be going for a group captive solar plant, so that will save us huge CapEx. And third is, see, we are already investing on the iron ore in current complex. The 2 million pellet plant, which will be commissioned next year that will be for a merchant sale only for a couple of years.
Once my blast furnace comes into production, the entire 2 million will be feeding by blast furnace. So we are saving a huge amount on 3 accounts: One is the iron ore capacity to fed the blast furnace; second is the coke oven; and third is the coal-based power plant. Put together, all these 3, we envisage we can save about INR 1,500 crores to INR 3,000 crores per 1 million compared to what our industry standard is. That's the only reason.
Yes, that's quite helpful. So one last one. So with the kind of EBITDA per tonne, we are targeting is, INR 10,000 per tonne, so is it not slightly conservative, means, given some competitors are having EBITDA per tonne of INR 16,000 per tonne.
See the problem is, if I am able to start the mill production today, I can say, yes, probably, say, INR 15,000, INR 20,000 EBITDA per tonne. But 3 years down the line, we have down the line, we don't know where the market is going to be? How the demand and supply is going to play? How the iron ore market is going to play? So basically, the commodity market, right? So when I assume today's market, yes, we will be saving much more than INR 10,000. But on a conservative side, in the long term, we feel INR 10,000 is a good number to probably commit or probably to discuss on. That's the only reason, so 3 years is a long time from now on.
We have our next question from the line of Manav Gogia from Yes Securities.
Sir, just one question from my end. If we look on a Q-on-Q basis, for the other expenses, the other expenses have gone up by roughly 25%, can you just elaborate on the key factors behind this?
I think, there are some export of pellet and the freight for the outgoing pellet is also included in that. That is one primary reason for the other expense going up.
Correct. So we were exporting pellets until month of Feb, when the domestic market demand was quite subdued. And once -- post -- in March, once -- when the China market came down and there was a reverse cycle in domestic market, when the demand from the domestic market started to come in, we stopped exporting. So Mr. Gandhi mentioned, there are -- that is the reason primary for the -- our expenses to go up.
And then, of course, there is an additional production in the steel billet exposure and all the value-added products. So additional consumption of material stores, spares, electricity, all those things are there in that.
We have our last question from the line of Rakesh Roy from Boring AMC.
I have only one question. Can you give me the break up for ferro alloy between the GPIL, Hira, and Alok, so -- for production and sales volume, both?
See, capacities, I can tell you right away, production numbers are not available. Capacity: GPIL is 16,500, Hira Ferro Alloys is 60,000 tonnes, and Alok Ferro Alloys is about 15,000. I think that numbers are given in our presentation.
Yes, sir, it is there, but just I need...
And put together, I think, there is a production of 80,000 tonnes or so. GPIL is operating at full capacity. Alok also operated at 90%. There was a lower volume in Hira Ferro Alloys. Close to about 42,000, 43,000 something.
Because we have taken a shut down for modification of furnaces for better efficiencies, that work is already over. So you can see the volume growth in Hira Ferro Alloys from FY -- Q1 FY '25.
Yes, you are saying that the sales volume, 100%, and Alok is 90% and Hira is near about 40%?
Yes, Hira was about 50%.
Yes, production...
Hira was about 50%.
Yes, 50% plus. So it's not sale volume, it's production rather than sales. Because whatever is being produced in Hira and Alok, it's totally for merchant sale and the captive consumption.
Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Yes, thank you, Manav. Thank you, everyone, for joining the conference call of -- earning conference call of Godawari Power & Ispat for FY '24. We are confident that we have adequately addressed all your inquiries -- queries. Should you have further questions or need any additional information, please feel free to reach us directly or contact our Investor Relations team at Go India Advisors.
Once again, we sincerely thank you all for your participation and unwavering support. Thank you very much. With this, we conclude this call.
Thank you.
Thank you.
Thank you. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.