GPIL — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
Moderator · Conference Operator
Ladies and gentlemen, good day and welcome to Godawari Power and Ispat Limited Q4
Thank you.
Our next question is from the line of Kunal Motishaw with Reliance Securities.
Please go ahead.
Kunal Motishaw
Good morning Sir.
Congratulations and a great performance in FY2022 and thank you for the detailed presentation.
Sir could you quantify the export percentage in 4Q and FY2022 of volume or something as a percentage of total sales?
Dinesh Gandhi
FY2022 will be closer to 30% to 35% and Q4 Abhishek you have ready the quantity available export how many consignments.
Abhishek Agrawal
We have done one shipment in every month since we are supplying a domestic market, so we reduced volume in the export side and we were doing one shipment of 55 every month.
So, the export volume has considerably gone down compared to previous quarter.
Kunal Motishaw
Okay, got it.
Sir, so how much is the realization gap between domestic and exports?
Abhishek Agrawal
No, we were supplying at the same level which were supplying for export for our high grade pellet.
Kunal Motishaw
Okay, so there is no gap as such?
Abhishek Agrawal
There was no gap as such because we were selling the product domestically and export at the same level, so the export market was going up, so domestic prices were automatically going up, the export was going down, so substantially the domestic prices went down, so both are in tandem.
Kunal Motishaw
Okay, understood and Sir you have guided us 2.4 million tonnes for FY2023, so are you confident that I mean without exports would you achieve this and when do you expect this export duty to be in place?
Abhishek Agrawal
I wish we had an answer for this whether duty is going to be reversed but we are hopeful that this is a short-term measure to control the prices because everybody knows the inflation is very high, the infra projects were on a standstill because of the prices, same steel sold at 7000 plus, so this was the measure taken by the Indian Government to probably control the inflation, so hopefully this is a short-term measure, not a long-term, we have to wait and watch and in terms of the production volume been sold, we are confident we will be able to find new buyers to replace the export volumes only because we had this high grade market where coking coal being on a higher side is going to support us.
Kunal Motishaw
Okay, understood.
Sir, are you in dialogue with the government or something for this or how is it?
Abhishek Agrawal
See of course we have a pellet association at India level, so we had started a dialogue, it is always better do talk with numbers and data so we have given certain numbers and data to the government and hopefully things should get resolved soon.
Unsure to say anything, but we have started a dialogue with the Finance Minister and Commerce Minister at association level of course not on an individual level.
Kunal Motishaw
Alright, okay.
What would be the current spot versus total average current spot price of our high grade pellets?
Abhishek Agrawal
Current spot price of high grade pellets price is about Rs.11500 going forward.
The earlier price was about Rs.12000 – Rs.12500 so a reduction of probably Rs.1000 we are expecting looking at the current market scenario.
Kunal Motishaw
Sir, I am sorry, I did not get you, you are saying 11500 currently?
Abhishek Agrawal
Yes, the orders we are executing the high grade orders are 12000 plus levels and since we have booked till almost end of June, we have time to correct the amount as required going forward.
At the moment we are very comfortable.
Kunal Motishaw
Okay, thank you.
I will come back again if I have questions.
Moderator · Conference Operator
Thank you.
Our next question is from the line of Prashanth KP Kota from Dolat Capital.
Please go ahead.
Prashanth Kota
Good morning and congrats for the good year FY2022, what we are always hearing should not happen, has happened, I think how the steel sector operates because it is in the same value chain, we will do exports at some price, it is pricing based on international market but when it comes to domestic market, all the ferros, non ferros entire metals state follow import parity price similarly even now if there is a duty, let the duty be there on exports, we will reduce volume on exports, but domestic volumes see collectively work along with the iron ore industry etc., the prices can be held up well, where I am coming from I will tell you, if pellet price has come down, iron ore lumps will come down, if iron ore lumps comes down, price will come down again if price will come down, pellets will come down, so it is a vicious spiral somewhere someone who also lock it and if he take the first more in terms of reducing price, so as pellet industry then iron ore will follow then lumps will follow, pellets will follow, the fines will follow, so somewhere somebody have to completely lock this, I want to know your thoughts and how to think about?
Abhishek Agrawal
No, unfortunately I do not agree with your thought process because everything commodity means demand and supply, so first everybody knows there is pellet surplus in India, so eventually there will be price fall but the only way has to be done is when the prices has to go up, it takes a second for the seller but when the price has to go down, it will takes almost a day, so the difference the time gap which is required for the prices to correct takes some time, so eventually all the pellet buyers, of fines will stop making the fines, so mines will come under pressure then they will revise their prices, so it is a cat and mouse game, it is all about being patience, things will not happen overnight, so going forward we have to wait and see how much prices go down, how much pine price go down, so it is very complicated but the patience is the only thing I can say right now.
It is too early to say anything right now.
Prashanth Kota
Got your point.
Just input from the steel, steel always trade at import price in the domestic market, so some efforts from our side also, if we are not there, what is the other alternative even iron ore if Indian miners do not supply, they have to import then what is the import tariff, so somewhere..?
Abhishek Agrawal
Eventually prices will correct definitely, this is about matter of time, nobody would like to for example miners, they would never want to do mining and do not sell in the market, right, even they are into the merchant mining, so eventually they will sell, they will scale the prices but everything will be driven by demand in supply and things will take time for a certain level of correction or certain level of stabilization, this was announced last week only, this is the second week, so let be patience and see how market corrects itself.
Prashanth Kota
Understood Sir.
Thank you for your time and wish you all the best.
Moderator · Conference Operator
Thank you.
Our next question is from the line of Vikas Singh with Phillip Capital.
Please go ahead.
Vikas Singh
Good morning, Sir, while the prices would obviously take some time to readjust to the new reality, I just wanted to understand in last one week, how has the prices for our product segment has changed basically?
Dinesh Gandhi
See, there are no more major transactions in the pellet as of now in the local market, everybody is busy and waiting and watching, so we are also supplying whatever ordered quantities are there, so the business continues as it is and everybody is in wait and watch mode, steel the prices have gone down to some extent I think sponge iron prices have gone down to about 32,000, billets have come to the level of 45,000, so prices have started falling in the finished market at some point of time, the prices will come down in the pellet as well but we have to wait and watch.
Vikas Singh
Understood Sir and my second question pertains to our Q4 volumes have been lower because of the mill was under shutdown, so have you been able to complete the maintenance and now it is up and running up full utilization or still 1Q would also be impacted to certain extent?
Dinesh Gandhi
No, I will tell you, in fact Q4 our production volume in sponge iron and billet as I said in my opening remarks were lower because of we reaching the EC limit, production capacity for sponge iron is 500,000 tons and we reached that limit so we cannot produce more than that and our application for enhancement in the capacity, environmental approval is still pending with the State Government, so we had no choice but to shut down and if I shutdown the sponge iron then the power generation will be lower at recovery and I cannot produce the billet at low price and sell it because it will not be economically viable and buying a sponge iron from the market, so we discontinued the production in steel billets as well and we took this opportunity for the maintenance of the plant, so maintenance were completed and now plants have started functioning as normal.
Vikas Singh
Understood, Sir what is the export prices of high-grade pellet, if you can tell us?
Abhishek Agrawal
See the last order we did was roughly about Rs.12500 ex plant realization because we were suppose to deliver in June.
Vikas Singh
Okay and whatever the orders we had, we do not have to pay duty on that, right so that is the basic understanding or there is still some confusion?
Abhishek Agrawal
No, there is no confusion, unfortunately whatever orders are pending for exports, you have to pay the duty, there is no recession by the government, so if we happen to export our pending order which is supposed to be in June then we have to absorb 45% duty and sell the shipment, so that is why I said we are talking to the buyer we have a long term relationship with the buyer, we have been doing business with them almost three years now, so even they understand the situation, so we are trying to find a solution where both are happy.
Vikas Singh
Understood and Sir this Jagdamba Power purchase we are paying that money for 66% of the pending stake, right?
Dinesh Gandhi
No Vikas, we are buying the plant on slump sale basis, so we will pay 70 Crores to the Jagdamba Power and going forward we will either tender the share in the buyback to be announced by Jagdamba whatever shares we have and let me tell you and clarify Jagdamba had given us this 26% shareholding at a price of Rs.10 per share in 2013 when we wanted to supply under the captive route, so we are trying to find out a mechanism for that to tender the share to them.
Vikas Singh
So, are we saying that our effective price at the end of the day because we have to tend a certain sales would be less than 70 Crores, is that correct?
Dinesh Gandhi
Slightly less than because we had not paid the fair value at the time of taking this 26% shareholding at Rs.10 per share rate?
Vikas Singh
We would be tendering also at a very low price?
Dinesh Gandhi
Yes, definitely I am the tender because this is an arrangement mutually beneficial arrangement was there, we did not wanted to invest money in 2013-2014 when the, you know market conditions were there at that point of time.
Vikas Singh
Understood and Sir just one last question, in terms of our high grade pellet versus normal grade pellet, if we had to shift this entire quantity to the domestic market, just wanted to understand is the propensity in the domestic market is more towards the cost and they would take a lower grade pellet and then we have to steep our production or it is a vice-a- versa that high grade pellet would continue to dominate the market and we would be just slightly better of them rest of the players in the pellet price in the market, just wanted ….?
Abhishek Agrawal
I would go with the situation two, so firstly the domestic market of pellet which is based out of 63 Fe the commercial market which is driven by demand and supply, high grade pellet because we are the only company in India who is making high grade pellet, so the target customers are totally different which are biggest steel mills like Tata, JSP and all these guys and they prefer, they give priority because of the coking coal prices because of the better quality, the coke coal consumption in the blast furnace goes down so it given them added advantage in steel production in terms of the cost as well as the production level, so both the market is totally different and we will continue to produce at a desired level, will not reducing any kind of production, that is for sure.
We are confident we can sell whatever we produce.
Vikas Singh
Understood Sir.
Thank you.
Thank you for taking my question and all the best for future.
Moderator · Conference Operator
Thank you.
Our next question is from the line of Sachin Kasera with SVAN Investment.
Please go ahead.
Sachin Kasera
Good morning.
Congrats for a good set of numbers.
Regarding this high-grade pellet, could you just give some break up is it that the last year the entire production and sale were high grade pellet or was there some breakup?
Abhishek Agrawal
To be honest it is difficult to give you an exact number but I can say with the current production volume, about 60%-65% is in the high grade pellets and about 30%-35% is low grade pellet, so 65% pellet are totally sold out in the domestic market, for the high grade pellet part of it is consuming in steel making and part of it remaining is showing machine market being export now it is going to be totally domestic till the duty material is around.
Sachin Kasera
Sure, and for our captive consumption we have flexibility on both high grade and fine grade pellet, so…?
Abhishek Agrawal
We have set within both depending on the current seen market in the prices which is changing the combination, ultimately it is about I think it should be on the higher side.
Sachin Kasera
Sure, and you mentioned that from what I could gather that you get around Rs.1500 per tonne premium and you sell high grade pellets, correct?
Abhishek Agrawal
No, that was the earlier case, so when we started doing that but now since we have a brand in the domestic as well as export market now we are getting close to Rs.2000 to Rs.2500 a tonne.
Sachin Kasera
And in case your target for the next year, in case you want to produce the entire quantity as high-grade pellets, is that possible for us?
Abhishek Agrawal
Yes, going forward that is possible, for that we need to ramp up a mining production for which we had taken certain measures, so this year it is going to happen but end of this financial year when the mining production starts ramped up, we can shift towards 100% high grade but not at the moment, it will take time.
Sachin Kasera
Sure, and what is the difference in cost of production between the normal grade as well as high grade pellet?
Abhishek Agrawal
Zero, absolutely zero.
Sachin Kasera
So that incremental to Rs.2500 you are getting gets added to the EBIT?
Abhishek Agrawal
Exactly, yes.
Sachin Kasera
Okay, just one more thing that you mentioned that the high-grade pellets are getting premium and first will be preferred by the buyer because of the high coking coal rate, now going forward assuming for whatever reason the coking coal prices were to correct how would this impact the scenario for the high-grade pellets?
Abhishek Agrawal
I think it is a very superficial thing at the moment because I do not think the reason where you know the thermal coal prices and the coking coal prices are going to come down, if that there will be correction of course, it may go 600 it will come back to 400 again but what I know in international market is coking coal prices are here to stay for at least some more time, it will not happen overnight for sure and similarly the case with the thermal coal as well.
Sachin Kasera
Sure, but just if I am understanding this premium that we get of Rs.2000 to Rs.2500, can that come down suppose for whatever reason, I understand you said the outlook is very strong and that is what we are also expecting…?
Abhishek Agrawal
If coking coal goes from probably 400 to 200 then definitely the premium will come down, that is direct relation with the coking coal so if the coking coal price goes down then the premium should go down.
Sachin Kasera
Sure and now that the company has become debt free, is there any thought process to improve the overall payout ratio either by buyback or via dividend so I think we are giving 10% to 12% last two years but now you have become completely debt free, do you think it make sense that we should look now at much higher percentage say 22% to 30% of the cash flows to be paid out to shareholders, any thoughts on that?
Dinesh Gandhi
Sachin, this will be determined going forward based on what kind of profitability is there in the current financial year, number one; number two, our capex plan is to how much is the capex plan we already have about 500 Crores kind of capex in hand, we have some cash reserves as well, so that will get completed and then based on that we will reduce and if there is a surplus case we would be happy to distribute it to the shareholders.
Sachin Kasera
No Sir, the point is that earlier we had lot debt and it was very much understandable that we kept payout ratio little low, regarding capex, it is very capital intensive industry, so it is in our hand, we can do final course of capex also and there will be process which we can look at 2000 to 3000 every year also?
Dinesh Gandhi
No, we have to make a balance between the growth and the distribution, that is how it should be.
Sachin Kasera
My request is that we should look at…
Dinesh Gandhi
No, I understand, I totally agree with you that payout should increase if the profitability increases but if you see FY2021, I think we had a debt and utilized 100% of the money for debt repayment, we did not do even much capex now capex is something for debottlenecking even solar etc., which is critical in cost saving, we have taken up in the last year and in Q1 we became the debt free in the standalone prices, of course with the disinvestment of solar project, we have become now net cash positive as well as debt free on a consolidated basis, so definitely I agree with you the payout should increase and then we will definitely aim to increase the payout going forward and that will definitely depend on whatever is the investment we had and the surplus will definitely get distributed.
Sachin Kasera
I would also request that we should consider buy back consider the correction in stock price and the type of cash flows you are looking even at the post the correction in the pellet prices I think both should seriously evaluate a buy back.
Dinesh Gandhi
Definitely, the point is taken, we will definitely take it forward in our board and as per accept the situation led the market pull down first because of this entire and therefore I am not able to comment anything at this point of time.
Sachin Kasera
Sure.
Thank you.
I have more questions; I will come back in the queue.
Moderator · Conference Operator
Thank you.
Our next question is from the line of Aman Madrecha with Augmenta Research Private Limited.
Please go ahead.
Aman Madrecha
Thanks for the opportunity.
Given that you said that currently over the last two quarters, we have not imported pellet, so I just wanted to know what was the peak export number in pellet in any previous year if you could help me with that?
Dinesh Gandhi
Abhishek you go ahead.
Abhishek Agrawal
No, he is saying about the price, not the volume.
So, the peak price… sorry?
Aman Madrecha
I am talking about the volume like what percentage of the pellets is exported being the peak period?
Abhishek Agrawal
Okay, when corona has just come in, so the steel production in India was quite down and the convention and domestic construction in India was down, so we were expecting exporting about 1 lakh- two shipment every month over one lakh a month.
Aman Madrecha
Okay, so currently it is zero, right?
Abhishek Agrawal
It was down to 50%.
We were doing one shipment a month and going forward it will be completely zero till the duty matter is resolved.
Aman Madrecha
And given that like is the export opportunity for billets like is there an export market for billets given that there is no export done in billets?
Abhishek Agrawal
Yes so we have exported some billets in the last couple of years and we are always in touch with our esteemed buyers so there is an opportunity for exports and if we think that realization in international is better than domestic market we will export.
We have done that before as well and we will continue to do so.
Aman Madrecha
Like out of the total billets like full volume is exported or it depends on the markets?
Abhishek Agrawal
The volumes are very, very limited because we had a very good international domestic market.
The reason being since the pellets are high Fe, the phosphorus contained in quite low so we get a signal premium in the domestic market because of quality so for steel making you use the same pellet and the same billet that is sold in the market so we have a very good market for that so as such we have no issues in terms of our sales in the domestic market.
Aman Madrecha
Okay thank you.
Moderator · Conference Operator
Thank you.
Our next question is from the line of Raj Shah from Statheros Capital LLP.
Please go ahead.
Raj Shah
Congratulations on a good show.
I had some book keeping questions?
I understand that the realization for the ardent steel is fairly less for pellet if you could just throw some light on the same?
Abhishek Agrawal
I think the realization is not quite low so we have been in the Odisha market where we are making the steel pellets which is the benchmark in India and as I said earlier everything is the demand and supply and we understand sometimes there is a transitional phase where the market for us on the finished side but the fines does not correct at the same time so there is always a transition period.
Probably that is the reason why probably hardened pellet is little on the lower side compared to previous quarters otherwise there is no other reason.
It is a market correction nothing else.
Raj Shah
Okay and then we have shut down three power projects the solar power projects what will be the entire cost of the same and if you could just quantify the cost savings?
Dinesh Gandhi
Rs.3.5 Crores per megawatt.
I think complete detail is available in our investor presentation how much we have invested, how much is the total cost and what is the balance to be invested in the current year.
Raj Shah
And it will be operational by the entire project?
Dinesh Gandhi
One project 70 megawatt is expected very soon I would say.
It is just awaiting the synchronization with grid and the rest two are under construction so by Q3 end it will get commissioned.
Raj Shah
Sir last thing I would concur with what you said on the buyback with the sudden drop in the share price it really helped the minority shareholder as well?
Dinesh Gandhi
Sure definitely.
We have noted that point and we will take it forward.
Raj Shah
Thanks a lot and all the best.
Moderator · Conference Operator
Thank you.
Our next question is from the line of Siddharth Agrawal from Prudent Value Partners.
Please go ahead.
Siddharth Agrawal
Good afternoon Sir.
Sir my first question is regarding our iron ore so the reserves have gone up to almost 165 million tonnes now so would you just let us know is there any expected increase in cost of extraction from this reserve.
It depends on how these reserves are again located so in this quarter our cost of production was roughly Rs.2800 so how do you expect this to pan out for the new reserve that we have identified?
Abhishek Agrawal
I go your point.
Rather with the increase in the volume in the mining the cost should proportionately because of the operating leverage cost should go down.
The cost is also at elevated level because with the royalty on India, IBM price and because of whatever announcement in terms of export the government has done which will reduce the iron ore prices and therefore IBM prices will fall so that will also result into some fall in the royalty payment which we are paying on our iron ore mining and of course some reduction has been given in the petrol and diesel prices which should have some minor impact on our transportation cost as well.
Siddharth Agrawal
Okay and Sir could you also speak a little bit about what is our cost of led production today per tonne and how are we placed vis-à-vis our competitors?
Abhishek Agrawal
So since we have the iron ore coming from a mine so there are two costs.
One cost is the iron ore cost which is quite low compared to our peers because of our captive iron ore mining.
On the operating cost side currently our cost is about Rs.1500 a tonne.
The total cost from iron ore plus Rs.1600 Crores.
Siddharth Agrawal
So from iron ore mining till you can get pellet production ours is similar about Rs.5500 per tonne?
Abhishek Agrawal
So Rs.6000 Crores you can say on the higher side.
It will go down because as Dinesh just said so the royalty portion which are going on in the future there is a reduction in the diesel prices so both that will be intact to an certain extent so going forward the cost will come down.
Siddharth Agrawal
Great thank you.
Moderator · Conference Operator
Thank you.
Our next question is from the line of Saravanan Balakrishnan from Sarva Captial.
Please go ahead.
Saravanan Balakrishnan
Thank you for giving me the opportunity.
I just wanted to understand about the new steel capacity capex that has been going of 2 million tonnes?
Could you give an elaborate answer on that like in terms of like when do we expect to sort light taking the current scenario and the second one is preferably on the one query that the earlier participant also asked like in terms of category pay outs like any reason like we will expect to sort of again improve on that like sort of again 30% to 33% of PAT?
Dinesh Gandhi
Abhishek you will take this.
Abhishek Agrawal
On a dividend payout Dinesh already mentioned we need to strike a balance between the free cash plus the capex and industry will also grow so your point is well taken and we will definitely discuss among our peers and amongst the management and the board and we will take a call accordingly.
From the steel side the future expansion has been kept on hold for two primary reasons.
One is we are waiting for the sponge iron EC to get clearance because a lot depends on the sponge iron EC because if you expand the capacity and we do not get the permission for sponge iron then we will not have the raw material to feed to the steel making capacity so there will be a big bottle neck.
We are hopeful that we will get a consent of sponge iron in this financial year so once that is cleared we will move ahead with our steel expansion and the second one was we have taken a buying project where we have also mentioned it in our presentation.
We are replacing the whole mine with a new efficient one of 40 megawatt which will give us additional power of about 10% to 12% with the same steel generation so when these two things are clear then we will go ahead with the expansion of steel because without these two we will not be able to feed the furnaces to produce more steel.
Saravanan Balakrishnan
So what is the IRR and cost of capital for the steel expansion?
Dinesh Gandhi
The iron ore is now with the entire scenario is changing what Abhishek is talking about whatever is the debottlenecking capex which we are doing it in the existing plant so far and I think you the question was with regard to the investment in the Greenfield project.
We want to do when we start with the investment but for that we have filed an environmental approval.
We are still awaiting the approval for the land acquisition from the government and once these two things are decided and then we will do a viability work out based on the prevailing scenario.
Till then that large project is kind of old.
FY2023 there is no investment is going to go in that project except some money is required for the land acquisition and the project will be reviewed in due course of time.
Saravanan Balakrishnan
Got it so one last question Sir so like once the new plant goes live so what will be the average time it will take for the new capacity to go about 80% to 83% utilization?
Dinesh Gandhi
Of the existing plant.
Saravanan Balakrishnan
No the new plant?
Dinesh Gandhi
The new plant is we will give you more details when we are closer to the investment schedule.
As of now it is in approval stage, etc., etc., so we will give you the guidance on that but in FY2023 except land acquisition if it is approved then that will be there.
No more capex on the new Greenfield investment in FY2023.
Saravanan Balakrishnan
Alright thank you so much Sir and good luck.
Moderator · Conference Operator
Thank you.
Our next question is from the line of Viraj Nahar from Mili Consultant.
Please go ahead.
Viraj Nahar
Thank you very much and congratulations on excellent results.
One particular point that you mentioned about the coking coal we will come down because of use of high grade and efficiency of the blast furnace will also go up so the parentage of iron in your pellet is already higher by 2% to 4% compared to the normal grade so does it mean that you get roughly about Rs.2000 per tonne advantage on getting the higher yield and the 5% cooking coal cost come down that is what SAIL and other people have been talking about it so there is huge advantage of using the high grade pallet so can you throw more light on that cost saving on that part and how much can it be sustainable on a longer terms basis, the extra realization we are getting.
Abhishek Agrawal
Yes government of India has reduced the import duty on cooking coal by 5%.
For example if cooking coal prices are hovering around $500 by $25 their import cost will go down which is about you can say about Rs.2000 a ton which is little contribution on cost savings for the import players like the bigger steel mills.
On our side we get a better realization because the import in system is less which is basically silicon and with lower alumina the coke rate in the blast furnace goes down so whatever discussion we had in out interim discussion the numbers we have got with our pellet they are saving about Rs.4000 a ton in the blast furnace in terms of the input cost which is primarily the reason of cooking coal going down and the slag volume also goes down so these two prices they are saving about Rs.4000 a ton so that is why they are able to pass on a margin of say $30 to us so it is beneficial to both the parties.
Viraj Nahar
Okay Sir thank you.
One more question is we are buying coal from Coal India or are we buying on the auction and what is the impact actually now if you are buying from the auction because prices have gone up very high in the auction also.
Abhishek Agrawal
Unfortunately because of the Russian war I think globally there had been impact on a huge size and we are impacted in India as well so we have linkages from Coal India.
There has been a slight delay in terms of the delivery but they are trying to cover up the gap to certain extent and for sponge iron as you said earlier we are totally using the imported thermal coal.
We do not buy from the open market and for the coal India linkages it is mainly going to our power plant so the impact on the domestic supply is not very high when it comes with us.
Viraj Nahar
Regarding the bio fuel based power plant.
There also the cost has gone up for purchasing the bio fuel in your area.
Abhishek Agrawal
See bio fuel is mostly a seasonal commodity.
Post Diwali the average prices till now would be around Rs.3000 which is quite reasonable compared to the coal prices which are in the market right now and there is sufficient supply of bio fuel in the market that is one thing we are doing to stabilize compared to the coal.
Viraj Nahar
Okay Sir.
Thank you all the best Sir.
Moderator · Conference Operator
Thank you.
Our next question is from the line of Vikash Singh with Phillip Capital.
Please go ahead.
Vikash Singh
Thank you for giving me opportunity again.
Sir just wanted to know with Jagdamba Power merger with ourself do we invoice any cost savings also or it would not be coming.
Dinesh Gandhi
Because you know the power which we are getting from Jagdamba currently is cost plus certain margin to Jagdamba so whatever is cost we will continue to get incurred but if I compare this with my grid prices then it is two and half rupee cheaper price on a production volume of about 15 Crores unit annually.
Abhishek Agrawal
And then Vikas Ji the Indian Government rules states that if it is an ITP so then you would not get a credit of GST or the input correct but when you merge with Godawari, Godawari, being the manufacturing so we will save on 5% GST on the input coal side and 18% GST side so there will be additional 6 to 6.5% savings on the operating side well because of the merger with Godawari.
To save as to about 35 paise on annualized basis per unit.
Vikash Singh
And Sir one last question our blending coal cost how it is moving in 1Q over 4Q what kind of the cost inflation we can expect.
Abhishek Agrawal
You are talking about Q1 versus Q4.
Q1 FY2023 Vikas right.
Vikash Singh
Yes Sir.
Abhishek Agrawal
See going forward we do not see substantial difference in terms of pricing because we had hedged our cargos at a very reasonable level so my Q4 cost average cost of thermal coal and Q1 there will be difference or probably 10 to 15% maximum so we are not very much impacted by this coal prices.
Vikash Singh
But then your cargo would have hedged up to certain point right beyond that if coal cost remains higher than that cost would hit us because we use imported coal for sponge.
This higher cost when it is going to hit us.
This higher cost of our production.
Abhishek Agrawal
At the moment we are very covered till next three months which is June, July August so September we still are uncovered but I think September is too far away to think right now.
When the market is very volatile the prices are going up almost by 20% to 25% on week on week basis so for the next three months we are very well covered which I think is a good decent level, so Q2 will not have a very substantial impact on the coal prices.
Vikash Singh
Understood.
Thank you for taking my questions again.
Moderator · Conference Operator
Our next question is from the line of Jathin with Invest Savvy.
Please go ahead.
Jathin
Congratulations for a good set of number.
Sir my first question is that if you can share some revenue breakup of domestic and export in general percent wise.
Abhishek Agrawal
Dinesh Ji he wants to know the revenue of export versus the domestic supply.
Dinesh Gandhi
I do not have frankly the numbers readily available but export close to about 600,000 tons of pellet at an average price of Rs.
12,000 a ton.
Jathin
Sir you do not have percentage wise break up right now.
Dinesh Gandhi
Right now we do not have the percentage.
I can tell you after or you can get in touch with our investor relations.
We will provide the data and she will give it to you.
Jathin
Sir my second question in Q4 there is some exceptional gain of 134.
Sir can you throw some more light on that.
Dinesh Gandhi
It is 98 Crores not 134 Crores.
That as I said in my opening remarks and earlier announced we have gained this amount on the sale of our stake in 50 megawatt solar power IPP that is Godawari Green energy.
We have divested 100% stake in the company.
Jathin
Thank you Sir.
Moderator · Conference Operator
Our next question is from the line of Shamanth Bhardwaj an investor.
Please go ahead.
Shamanth Bhardwaj
Congratulations on a great set of numbers.
I just wanted to ask there is around 270 Crores of loan on the balance sheet who is it given to and is it related party transaction.
Dinesh Gandhi
No it is not related party transaction.
Some short term advances have been to certain party and this is on demand.
Shamanth Bhardwaj
Is it secured.
Dinesh Gandhi
Secured in the sense it is unsecured but we have high confidence on the party.
Shamanth Bhardwaj
While calculating working capital changes you have included other noncurrent assets and liabilities why is that.
In the cash flow statement while calculating working capital changes you have included other non current assets and liabilities.
Dinesh Gandhi
Frankly I have to recheck and then can you tell me or can I separately give you the clarification on this.
You know Sana will get in touch with you.
Moderator · Conference Operator
Ladies and gentlemen due to lack of time we will end the question and answer session and I would now like to hand the conference over to Mr. Dinesh Gandhi for closing comments.
Dinesh Gandhi
Once again thank you very much on behalf of the management of Godawari Power for joining the Q4 FY2022 earnings call.
We will continue to be happy to answer all your queries.
You can get in touch with us our investor relations agency for further clarification if any you need on the result or the operations of the company.
Thank you and thank you all.
Moderator · Conference Operator
Thank you very much.
On behalf of Go India Advisors that concludes this conference.
Thank you for joining us and you may now disconnect your lines.