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

GODAWARI POWER & ISPAT · Management

MR. ABHISHEK AGARWAL - EXECUTIVE DIRECTOR –

MR. DINESH GANDHI - EXECUTIVE DIRECTOR –

Godawari Power and Ispat Limited November 06, 2023

Moderator · Conference Operator

Ladies and gentlemen, good day and welcome to Godawari Power and Ispat Limited Q2

Thank you.

Next question is from the line of Vikas Singh from Phillip Capital.

Please proceed.

Vikas Singh

Sir I just want to understand given there is a mismatch in the timeline of our iron ore capacity coming in and pellet coming with a lag of 15 months is it any provision which Godawari Power and Ispat Limited November 06, 2023 allows us to sell iron ore in the market or we will just bring down the Boria Tibu to 0 and start utilizing on the Ari Dongri so what is the plan there?

Abhishek Agarwal

We are definitely allowed to sell iron ore in the market after the new MMDR act, but as a company we had no intention of selling iron ore in the market because eventually the mining will take some time to ramp up from 2.35 million to 6 million so the time frame from now on to the next time we commission say about 15 to 16 months, we want that time to ramp up the mining capacity, so I think both the projects are in tandem and we are hopeful once the pellet plant commissioned before that we will be able to handle the capacity in mining, but we are going to ensure we are selling iron ore in the market that is for sure.

Vikas Singh

Okay but even if you want to there would be some additional premium which you need to pay right that is 25% premium will be applicable?

Abhishek Agarwal

No there is no premium on it because, the rule says if you have to sell in the market you can select at 50% as a part of commercial mining but then you have to pay additional royalty which comes about Rs.1000 per tonne so straightaway it sales will be Rs.1000 less so it does not make any sense to sell in open market.

Vikas Singh

Understood.

My second question pertains to Boria Tibu so is it the lower grade steel problem or we are experiencing this problem with the entire mine almost all of the them are of low grade?

Abhishek Agarwal

This is how mining is, till now we were able to mine bring it to plant beneficiate with other mine but given the current prices we feel it is commercially unviable because of the recovery percentage so it is better to install a plant in the mines and then benefited, so commercially it does not make sense to operate Boria Tibu mine.

Vikas Singh

At what price basically you feel that it would be commercially viable?

Abhishek Agarwal

See the problem is you cannot start and stop mine right because there are other factors as well but say another Rs.2000 from now, from here if the price goes up in India then it make sense to use that mine, but still the impact of Boria Tibu out of the production does not make low volume does not have impact on us because we are still buying from the market and our first focus is to make Ari Dongri to ramp up the production.

Godawari Power and Ispat Limited November 06, 2023

Vikas Singh

Understood.

Just one question on Ari Dongri with the heightened capacity how does it impact our mining life because I think we have just 30 years of mining life previously.

Would it come down to less than 20, how does it plays out?

Abhishek Agarwal

See our lease is till 2057, we still have about 34 to 35 years in terms of a lease but in terms of we have already declared a reserve of 155 million tonne, further exploration is going on where we feel there is a potential of further deposit, so as and where probably it will be happen later we will definitely share with everyone.

At the moment you can say at least the couple of next two decade at least 20 years with the increase mining capacity.

Vikas Singh

Is that going to get the increase mining capacity to 20 years is covered.

Abhishek Agarwal

Capacity at least till 2045, nothing to worry on that front.

Vikas Singh

Understood and just one last question in terms of our integrated steel plant, so just wanted to know if we have already purchased a land bank what is the status of that and this 2500 Crores seems to be a bit low for an HRC plant so is the module something different.

Abhishek Agarwal

When we had envisaged this budget we were thinking of mix of flat, long, we were trying to explore other market as well because till now we have been doing long products.

So this capex was decided long back once we have probably the final figures then we decide on the capacity and what would product probably then we can always amend but at the moment since we do not have the numbers the similarity so we want it to keep it to 2500 only.

If it goes above we will definitely share with everyone.

Vikas Singh

Understood.

Thank you and all the best for future.

Moderator · Conference Operator

Thank you.

Next question is from the line of Satyan Wadhwa from Profusion Investment Advisors.

Please go ahead.

Satyan Wadhwa

Just wanted to know what sort of margin expansion you are thinking out of the steel plant is it because you think demand for pellets will be lower going forward as China sort of slowed down and that is why we had to get into steel because in terms of just capital intensity, steel is quite capital intensive compared to your existing businesses which are quite profitable.

Abhishek Agarwal

I would like to differ in that.

The reason we are entering this field is because we see an additional EBITDA over the pellet margins because we are into hybrid markets.

We made 56 pellet so I do not think so there any pressure on us to sell pellet because the kind of capacities we are coming up in India and you will see Middle East, right.

So Middle East is increasing capacity like anything because of the gas being available.

So I do not see Godawari Power and Ispat Limited November 06, 2023 challenge in selling high grade pellet which will be the main center of volume but when we consider the pellet at today’s cost and transfer to steelmaking we further see the EBITDA increase about Rs.8 to 10 so that is that is the reason we want to power indicate into steel rather than only remaining a pellet player.

Satyan Wadhwa

How much EBITDA would be how much in terms of steel above the pellet EBITDA.

Abhishek Agarwal

At current market it should be about Rs.10,000 a tonnage.

Satyan Wadhwa

Rs.10,000 a tonnage.

Over and above the pellet EBITDA.

Abhishek Agarwal

Of course.

Satyan Wadhwa

Okay great thank you.

Moderator · Conference Operator

Thank you.

Next question is from the line of Rakesh Roy from Omkara Capital.

Please proceed.

Rakesh Roy

Morning Sir.

My first question is regarding you told your mining capacity is revised due to the low grade from the Boria Tibu mine.

Abhishek Agarwal

See we are bringing the mining capacity.

All we have done is because in today's market mining commercially becomes little unviable so we headed to lower the volume and then put up a beneficiation plant there and then adopt that process of beneficiating and then bringing it to the plant for usage That is the only measure.

Rakesh Roy

Is there any impact on revenue from this only or is there any impact of this so we have to lower mining from Boria Tibu.

Abhishek Agarwal

Financially there is no impact in this financial year and going forward because at the moment also commercially the mine is not viable so it is better to source from the market rather than mining and then bring it back so this financial year and going forward also we do not see any impact.

Rakesh Roy

So next financial we hope this mining will start normally.

Abhishek Agarwal

No Boria Tibu will take time because we will be putting up a plant to integrate and we will further enhance our mining capacity but we need to take the required approvals from the state and the central government including the mines ministry.

So that will take some time.

Godawari Power and Ispat Limited November 06, 2023 So we can expect the Boria Tibu can come back into production with beneficiation say next 24 to 30 months.

We are looking at FY2027 probably.

Rakesh Roy

So we have a set up and new plant near to Boria Tibu.

Abhishek Agarwal

Yes we will set up a beneficiation plant in the mines itself so for that all the required approvals and other process had to be created.

So that will take some time.

In the meantime, for the next financial year we finally increase the capacity of our other mine Ari Dongri.

Rakesh Roy

So for example Boria Tibu we have 85 million tonnes reserves there.

Abhishek Agarwal

As of now explore data what you said is correct.

Yes.

Rakesh Roy

So Sir in that case can we ramp up our Ari Dongri mines.

Abhishek Agarwal

I have just spoken sometime back we are waiting for approval for Ari Dongri mine and once we have the approval which should we have in hand in next 3-4 months.

From next financial year, we will raise the capacity from 2.35 to 6 million tonnes.

Rakesh Roy

So Sir my next question is can you help us understand if you are able to achieve your FY2024 guidance for ferro alloys and pellets.

Abhishek Agarwal

Yes so whatever guidance they have given this financial year apart from mining, we are very much on track and we are confident we will be able to achieve.

Rakesh Roy

Okay in margin front it can be hoped this margin will stay in or is there any margin changes in next few quarters Sir.

Abhishek Agarwal

See at this moment things are good because China is buying a lot of iron ore because prices of pellet have gone up in India as well and with festive season getting over after Diwali and this is being the peak demand in India and I am confident the prices will sustain and we should be able to maintain these EBITDA going forward unless of course there is change in market but at these levels we are confident we should be able to maintain EBITDA level.

Rakesh Roy

Your outlook on some margin front especially ferro alloys or this realization will sustain for next one quarter or any downside is there Sir.

Abhishek Agarwal

See very difficult to predict because ferro alloys it is globally connected.

One thing for sure, the pellet prices are at the rock bottom at the moment and the current raw material prices the margins are bare minimum which used to be earlier.

The only positive side for us is with the Godawari Power and Ispat Limited November 06, 2023 new solar plant getting commissioned our power cost will go down which will improve the margins in ferro alloys because ferro alloys is a high power captive unit.

So we see an upside there.

Apart from that market looks quite stable and depends how globally steel plays because in India ferro alloys is a big market price for export as well especially in Europe.

Rakesh Roy

Okay Sir your view on domestic steel market size and especially how the steel market in India, next one year from here?

Abhishek Agarwal

I am bullish with the government spending.

So let us hope for the best.

Rakesh Roy

Okay than you Sir.

Thank you so much Sir.

Moderator · Conference Operator

Next question is from the line of Dhyey from Niveshaay Investment Advisors.

Please go ahead.

Dhyey

Good morning, Sir.

I just had this question that as we are adding another process like beneficiation in our manufacturing process so what is the improvement in margins that we expect from this expansion?

Abhishek Agarwal

See, as I explained earlier, the only reason we are installing plant of beneficiation in mine is to do the cost saving part because earlier we were beneficiating everything by bringing it towards to the complex.

So we were losing on the transportation because when you beneficiate there is some yield loss as well so to save on that cost, which is substantial say Rs.150 at the moment we are installing a plant in the mines.

The quality of pellet we make will remain same.

The cost of mining and everything will go down.

Dhyey

Correct sure Sir.

What is the kind EBITDA expansion that you are looking for turnover of EBITDA expansion in terms of margins.

Abhishek Agarwal

It is a small saving of Rs.150 but when we look at the volume we wanted to be doing, so the payback is quite fast.

So it is not substantial improvement of Rs.150 to 200 but when you look at 6 million tonne going forward it becomes almost 100 Crores a year.

So with the amount of capex we are doing the payback is hardly 18 to 24 months, so that is the reason we are doing in the mines itself right now.

Dhyey

Correct Sir.

Thank you.

Dinesh Gandhi

We are saving some part on royalty.

Godawari Power and Ispat Limited November 06, 2023

Abhishek Agarwal

Exactly.

Dhyey

Okay correct and I just had this question so what is the captive consumption at every levels of manufacturing process, if you could give us any guidance?

Abhishek Agarwal

See the current market levels I think all different products are showing positive be it pellets, sponge iron and billets, but it is difficult to comment on individual performance because when you complete a steel plant so you have to look from backwards to forward.

It will be difficult to comment on individual products but I can assure you all the divisions are doing good.

Dhyey

Correct.

Thanks a lot Sir.

Moderator · Conference Operator

Next question is from the line of Jathin Kaithavalappil from Investsavvy PMS.

Please proceed.

Jathin Kaithavalappil

We would like to know one your plans to split have actually got postponed or cancelled or is there a timeline on which you will reconsider that?

The other is with the new emphasis on solar plants and power and fuel saving, while you are saying you will be able to maintain the current EBITDA with the new power capacity etc., which you are planning whether there will be benefit of that coming into the EBITDA margin as well and finally, how are you seeing your pellet exports going forward in terms of growth?

Abhishek Agarwal

See on the solar side definitely once the entire plant is commissioned and with our efforts of debottleneck we can see additional EBITDA of 700 Crores going forward annually on the power side itself.

On the export side, we have always been there in the market, but products domestic prices are still better than export markets and because of a high grade we do not have any pressure selling domestically.

So till the time licensing does not come at par with domestic we are happy selling domestic.

So we are always open but then it is not guaranteed when you start exporting because for us licensing is the topmost priority.

Jathin Kaithavalappil

And how do you see revenue growth going forward?

Abhishek Agarwal

See depending on the steel prices because for us we are operating at almost 100% capacity 98% capacity across the plants so the only thing we should add up is our additional 1.5 tonnes of steel billet so depending on the market prices, the revenues should go up going forward because I see the demand in India for steel going to be on upside with the government spending.

Godawari Power and Ispat Limited November 06, 2023

Dinesh Gandhi

I will make some addition on the volume growth and the sales growth.

In fact the sales growth is going to come with setting of additional as Abhishek has told you that the plants are running almost at 95-100% capacity utilization so volume growth will come only when we set up the additional pellet plant and additional steel plant which we have announced till that the sales growth will come only with the price growth.

If there is a degrowth in price there will be a degrowth in sale.

If there is a growth in the pricing then the sales will also grow.

See we had initiated a proposal to split share, but our board of directors felt that the current volume and the price of the share is not very high, which requires split of shares and where almost about a year and a half you split the share from Rs.10 to Rs.5 so board suggested to wait for some time and at an appropriate time, the proposal should be revisited but there is no timeline for revisiting the proposal.

Jathin Kaithavalappil

And practically speaking when do you expect this additional capacity to start kicking in.

Dinesh Gandhi

New capacity he is asking.

Abhishek Agarwal

For the steel division we are waiting for the approval which should be in hand probably very soon.

I think for next quarter we can see the additional capacity of steel melting coming into production and for the pellet plant Q4 FY2025 is what we are looking at for the additional volume, Q4 FY2025,

Jathin Kaithavalappil

Okay thank you.

Thanks a lot.

Moderator · Conference Operator

Thank you.

The next question is from the line of Siddharth Gadekar from Equirus.

Please go ahead.

Siddharth Gadekar

Hi Sir.

Good afternoon.

So my first question is on the pellet side.

Now given that our expansion will be starting somewhere in 4Q or early FY2025, when do we expect the first capacity to come online and what should be the fair assumption in terms of volumes in FY2026 or we will see the entire volumes coming in FY2027.

Abhishek Agarwal

As I mentioned Q4 FY2025 is 15 months from now on.

So from FY2026 we can start seeing the additional volume of the pellet capacity which will be putting up.

FY2027 is too far.

We will be able to commission the plant 12 months earlier.

Siddharth Gadekar

So pellet should be roughly around 1 million tonne of contribution in FY2026 and the balance will be coming in at FY2027 is that a fair assumption?

Abhishek Agarwal

The first pellet plant which we are putting out, it will be commissioned in Q4 FY2025 and in FY2026 we can derive the entire production volume nothing will pass on to 2027.

Of Godawari Power and Ispat Limited November 06, 2023 course we are confident we should be able to achieve 100% capacity within few months of starting the plant.

Siddharth Gadekar

Okay so our ramp up will be much faster than normally.

Abhishek Agarwal

Because I think we have a good expertise on our hands.

We are already running two pellet unit so we do not see a challenge in handling of the capacity.

Siddharth Gadekar

Okay and in terms of steel making capacity is it fair that our capex should get over nearby end of FY206 and FY2027 will be a meaningful volume growth from the steel side as well?

Abhishek Agarwal

See if we get the required approvals then we start the groundwork.

We are confident the new steel plant will take about 30 months from dig up groundwork so if that happens and everything is within the timeline we should be able to see significant volume growth.

Siddharth Gadekar

Okay and once the approvals come in that is when we will finalize what processes are we going to use to make the steel?

Abhishek Agarwal

That working is going on.

We have been evaluating because for us also this is something new till now we have not done it.

So we are evaluating with all the stakeholders, the experts in the market, so I think we should be able to get everything in the next three to four months.

Once we get the permission, we can straightaway start the ground work.

Siddharth Gadekar

Okay so broadly by FY2026 end all these capex should be completed.

Abhishek Agarwal

Steel plan can probably overlap depending on the approvals and everything else.

Siddharth Gadekar

Okay so mean things come by this year end we should be on track for volume growth for 2026 and 2027 pellets and steel that is the fair assumption.

Abhishek Agarwal

Correct this is a fair assumption.

Siddharth Gadekar

Once our incremental pellet capacity comes online how should we look at the mix between high grade and normal pellet.

Abhishek Agarwal

No so see the new plant is coming up is going to be again on the hybrid so the mix will change so the further capacities we should be able to produce say 75% will be the hybrid pellets and 25% will be of normal pellets only.

Siddharth Gadekar

Okay and the 65 pellets are currently sold at Rs.50 premium to the normal pellets?

Godawari Power and Ispat Limited November 06, 2023

Abhishek Agarwal

So the normal pellet the premium is anything depending on the market condition it is Rs.1000 pellet but I would say on a fair basis about Rs.50 on a yearly average basis about Rs.50 from the 65 pellets.

Siddharth Gadekar

Okay Sir got it?

Thank you.

That is it.

Moderator · Conference Operator

Thank you.

The next question is from the line of Aditya Welekar from Axis Securities.

Please go ahead.

Aditya Welekar

Thank you Sir so couple of questions.

How is the ferro alloy business doing as of now if you can individually throw some light on GPIL, HFA and Alok Ferro Alloy business?

Abhishek Agarwal

On the ferroalloys side the prices are rock bottom because globally the market is quite weak because India is suffering from the pellet capacity so lot of alloys has to be exported to achieve the balance between domestic and export.

Because the export market is quite mute so it has the same effect as the domestic pricing so I would say right now the margins are between Rs.2 to Rs.3 but going forward we hope the margins will improve when the demand comes back into the market.

Aditya Welekar

Understood and the second one is on thermal coal, so what is the thermal coal cost you incurred in Q2 of this fiscal?

Abhishek Agarwal

In Q2 the average price was about Rs.12 a tonne and Q3 the international market has started going up so there will be a margin increase and Q4 onwards let us see how the market plays but Q3 it was below Rs.12 and Q3 will be marginally top of Rs.12 because the incoming coal is on the higher side.

Aditya Welekar

Understood and lastly I missed on that part on Ari Dongri beneficiation plant so what is the incremental capex for that and what is our capex?

Abhishek Agarwal

Total we envisage with the mining capacity as well as the beneficiation plant, the total capex envisage is about Rs.200 Crores and we should be able to complete the desired project within the budget.

Aditya Welekar

Understood.

Thank you.

Moderator · Conference Operator

Thank you.

The next question is from the line of Moksha Shah from Yellow Jersey.

Please go ahead.

Godawari Power and Ispat Limited November 06, 2023

Moksha Shah

Thank you for the opportunity.

Sir my question for the management was there are market rumors about the company getting into forward integration and expanding into new business verticals so what are your views on that?

Dinesh Gandhi

There are no market rumors.

We are in the process of building up a new steel plant and there the value added steel will be manufactured what steel, and what kind of product will be manufactured will be decided as Abhishek mentioned earlier and hopefully we should be able to announce the complete plan on which kind of product by maybe end of the current financial year or may be at the time of the results call for Q4 FY2024.

Moksha Shah

Okay thank you.

Moderator · Conference Operator

Thank you.

The next question is from the line of Marsal an Investor.

Please go ahead.

Marsal

First of all my humble request Sir like you are speaking through speaker your voice is very much getting echo, we are not able to fully understand it so if you could kindly speak slowly it will be really helpful Sir.

Abhishek Agarwal

Thank you.

I will do that.

Marsal

The second thing Sir regarding the price for different product, can you please give some idea that what was the prevailing average price of pellet, sponge iron, billet, MS Round and bullet, and HB wire including the month of October?

Abhishek Agarwal

October 7, the pellet prices have been around Rs.10,000 domestically and for sponge iron it was about Rs.30,000.

The market has gone down by over 5% due to weak demand and the festive season.

Sponge iron was about Rs.30,000 and billet was about Rs.42 to Rs.43, and wire was about Rs.48 and the price remain at levels only because of the subdued demand and it should improve going forward when the festive season is over.

Marsal

And MS round Sir?

Abhishek Agarwal

I said Rs.48.

Marsal

Okay and my second question is regarding this the new capex first of all like this new capex on integrated steel plant are we going to do with the existing site where in like for example this existing common facility will be used or it will be Greenfield plant?

Godawari Power and Ispat Limited November 06, 2023

Abhishek Agarwal

No, it will be a different location and it will be a totally a Greenfield project.

It will be in the Godawari Power, the same company, but then of course it is going to be a new location with a totally Greenfield project.

Marsal

Okay and like are we going to make the similar products like MS Round or are you going to for the coal?

Abhishek Agarwal

So see currently we follow the second league of steel making which is a coal based GRI plus induction furnace and going forward, we will be putting up a blast furnace and make value added products like others.

Marsal

Like this hot rolled coil and cold roll cold like this right?

Abhishek Agarwal

Yes, depending if you go with the hot and cold or if we go for whatever products we choose we should be able to freeze on those in two to three months.

Marsal

Because I was just like making a small analysis here because our current capacity for example of this MS Round and HB wire is 60% and 75% utilized so I was thinking if you are expecting the same thing then like it will be difficult but you are adding new product then it is fine?

Abhishek Agarwal

Yes so we do not intend, to be honest at the moment I think the long products have taken a back seat and we are focusing on value added steel.

Marsal

Okay but like there is one point I want to play this like example devil advocate here?

We have come a long way?

In 2017, we had net debt of Rs.2000 Crores?

Now we have Rs.600 Crores plus net debt if you are going to have the Rs.2500 Crores capex at one shot means like whether we will be able to fully market it and more so we do not have coal linkage also so like we do not have the coal mining of our own captive mining so like how are we sure that like we will again fall in the, I will not say there like for example debt, but for example even if we make such a huge investment and you are not able to fully utilize it then like there will be a burden of depreciation for example like this funding revenue like which you could use somewhere else like?

Abhishek Agarwal

To be honest when we are first put up pellet plant, almost 2008 to 2009 we were one of the first movers in India to put up a pellet plant.

So but we do not see a challenge.

With every new challenge we are very confident with the team we already have and the focus on recruit and I do not see any challenge being are not able to produce the desired levels or market it.

Secondly, since you mentioned we do not have any coal mine, but we have an iron ore mine Godawari Power and Ispat Limited November 06, 2023 which is a big, big plus.

So one side of our steel making is always covered with a captive iron ore mining so even in the cost indication because of no coal mines, I do not see a challenge in achieving the profitability we desired to.

Marsal

But Sir since you already are expert in the mining sector so why we are not bidding for the coal mining because government is there like every third month the government is offering so much?

Abhishek Agarwal

I will tell the reason why we are not doing it because for DRI the coal availability in India is not up to the same mark.

If you start using domestic coal our production in the DRI will go down which we do not want to do.

So we have to keep importing for our DRI which is about a point 0.5 million tonnes annually or 0.4 million tonnes annually.

That is the first thing.

For power plants as we have announced we have been expanding aggressively in solar to look at the cost saving as well as in terms of the green initiative of the carbon emission.

Early the remaining volume whatever you need to source from the domestic market we have linkage with Coal India which is almost at the market price depending on the auction.

So we do not see a very cost implication on the coal side compared to iron ore side.

So since we are iron ore side covered so for us it is good enough to move forward.

On the capex side see we are a surplus cash company and with the plans going forward we should be able to get EBITDA on year-on-year basis so that you can fund it internally.

Marsal

So if you are not going to have any debt like new debt for this new plant that is a good thing?

Abhishek Agarwal

See that is the intention but depending on the capacity we go forward and which product we choose even if we have to take some debt it is going to be within the limit because in the end we have realized where it has gone wrong 12 years back so we are very sure how to proceed forward so that the balance sheet does not come under stress going forward.

Marsal

Just one input we have seen that like another for example other major player in this team they have tied up or they have acquired some stake in the overseas for example coal mining company so I do not want to name it here but it is very well so since you are saying through our logical point that this domestic available coal is not good for the DRI that is fine so why do not we acquire some stake overseas in Indonesia or Africa or some other companies?

Abhishek Agarwal

Again I am saying all your assets are not available at cheap value and just to secure certain volume of coal for captive production we do not see any value addition compared to the same money probably again going forward with the steel plant so you have rightly mentioned but I think on the cost indication side I would say we are very much covered Godawari Power and Ispat Limited November 06, 2023 because of iron ore and we want to utilize our money probably making high value added steel other than going backward and making coal captive.

Marsal

But like this is very small point, so since you mentioned about DRI that is fine?

So suppose if you participate in any bidding of the coal mine auction so that coal cannot be utilized for this manufacturing of sponge iron or this pellet or billets?

Abhishek Agarwal

As I have said I just had all these coals so essentially in the past also we have bid for a few of the coal mines but we were never very aggressive and in terms of quality all the coal produced in India is possible to use in our domestic production but as I mentioned, we use that coal production our production volume will drastically go down especially with DRI because in domestic coal the ash is very high and because of the higher ash our production volume will go down which we have no intention to reduce.

Marsal

No Sir I am not saying about DRI?

I am only saying for our current product for example billet or for example?

Abhishek Agarwal

See billet does not require any coal.

We generate power.

We are already having linkage with Coal India for thermal power plants so that is covered but DRI we keep importing and for pellet plant we have exposure of about say 2 lakh to 3 lakh tonnes annually which is not a big exposure and the domestic coal is readily available nearby.

Marsal

Very detailed answer, appreciate it.

Thank you so much.

Moderator · Conference Operator

Thank you.

The next question is from the line of Rucheeta Kadge from iWealth.

Please go ahead.

Rucheeta Kadge

Good afternoon and congratulations on a good set of numbers.

So I had a few questions regarding your volume growth?

Sir going ahead, do we like in the next two years, do we see any incremental capacity coming in other than the mining capacity that we had mentioned so if you can give a little clarity on that?

Abhishek Agarwal

See the pellet capacity will further add up as we mentioned before also.

We expect the pellet plant approval to be in hand in next couple of months.

Once we have that, we will start the work and in FY2026 we can see the entire set of volume coming into production which is as desired and parallelly next quarter Q4 of this financial year our additionally steel capacity of 125,000 tonnes, 1.2 lakh tonnes will also be operational.

The project is completed.

We are just waiting for the required approvals.

When we have the approvals we will start the operations.

Godawari Power and Ispat Limited November 06, 2023

Rucheeta Kadge

That is Q3 right?

Abhishek Agarwal

Q4. Q3 is already running so that will be Q4 and then FY2026 you can see the entire volume of pellet into production the new pellet plant.

Rucheeta Kadge

Okay pellet by FY2026 and Sir as you have mentioned that you will not be selling this extra mining capacity in the market, right?

Abhishek Agarwal

Yes, we will not be.

Rucheeta Kadge

You will not be doing it?

Abhishek Agarwal

Because we want to preserve the iron ore for our captive consumption plus as per the new law, we will have to pay additional royalty for selling anything in the market and so we have no intention of selling anything in the market.

Rucheeta Kadge

Okay.

Sir one more thing currently a ballpark number basically, your EBITDA per tonne is around Rs.6099 so do we see this settling at the current rate or we see it deviating and what would be the reason?

Abhishek Agarwal

As I mentioned earlier also depending on the market scenario if the markets sustain at these levels we are confident of making the current EBITDA levels and of course if things go here and there of course there can be diversions but we are confident with the festive season over and the demand is going to be picking up going forward, we should be able to maintain such EBITDA levels.

Rucheeta Kadge

Okay Sir understood.

Thank you Sir.

Moderator · Conference Operator

Thank you.

The next question is from the line of Anant Mundra from Mytemple Capital.

Please go ahead.

Anant Mundra

Thank you for the opportunity.

Sir how much of our current power sourcing is from the grid?

Abhishek Agarwal

See from grid we are not importing.

We do import, but the portion is hardly would say 2% or 3% on an entire requirement because we have commissioned our first solar panel at 70 megawatts under the banking policy of the state government and so whatever we are importing from the grid is mainly an account of solar power we generate and then the remaining is from that grid power so in terms of you can say about 2% or 3% of the entire requirement only.

Godawari Power and Ispat Limited November 06, 2023

Anant Mundra

Okay so it is majorly captive?

Abhishek Agarwal

It is majorly captive.

I will say 98% to 99% captive only.

Anant Mundra

Alright and Sir Boria Tibu also we are planning a beneficiation plant right?

Abhishek Agarwal

Yes we are.

We have started to apply for the required approvals and other things and we will be putting up a beneficiation plant in Boria Tibu going forward.

Anant Mundra

So until then I think the plant is going to be shut unless obviously you said?

Abhishek Agarwal

The plant will not shut.

We will be operating at a low volumes because as I mentioned earlier at the current prices the mine is commercially not viable so it is better to operate at a minimum level than to put up a plant going forward and bring the ore to the plant for usage.

Anant Mundra

Okay and so we are not planning any expansion at Boria Tibu?

All our mining capex is happening at Ari Dongri?

Abhishek Agarwal

At the moment it is happening at Ari Dongri, once everything is finalized in terms of Boria Tibu we will share the required capex and enhanced capacity and everything else.

It is at a very early stage probably going forward once we have all the details in hand we will definitely share.

Anant Mundra

Alright okay.

Thank you.

That is it from mine.

Moderator · Conference Operator

Thank you.

The next question is from the line of Jinesh Shah an Individual Investor.

Please go ahead.

Jinesh Shah

Congratulations Abhishek and entire team for the excellent set of numbers.

The first question is as I understand the current product mix for pellet is 50:50 for 62 and 66 do you have any plan to improve that percentage for this high grade pellet in this financial year?

Abhishek Agarwal

Thank you for the congratulations.

No see there is a confusion.

Right now the production of high grade is about 65% compared to 63 of 35% but in the merchant sale, the ratio is 50:50 because the remaining is used in our in house for steel making, the high grade pellets and going forward the new pellet plant is going to come up will also be producing high grade so the charge mix will change.

It will be about 80% will be about high grade and 20% will be normal grade pellets.

Godawari Power and Ispat Limited November 06, 2023

Jinesh Shah

Okay the next point is regarding your capex plan on slide number 10 and page number T10 of the PPT where you have mentioned that you will be taking 15 months for iron ore mining and iron ore beneficiation vis-à-vis the pellet plant will take 13 months but based on today's conversion, what I understand these 3 million capacity will be available by next financial year?

Is this the right understanding?

Abhishek Agarwal

So see the mining and the pellet plant, so the 13 months were desired from date of once you applied for the permission.

Once we have the permission which will happen probably next couple of months.

The execution time of the project will be about 15 to 16 months so we see the entire capacity of pellet coming into production in FY2026.

Jinesh Shah

Okay but in that case you will be having your iron ore mining beneficiation plant will be?

Abhishek Agarwal

That is the whole idea.

We have parallely applied for permissions for our iron ore mine expansion as well and once we get the permission so gradually we will also ramp up the capacity so that there is no lag between the new pellet plant and the new mining capacity so that we remain fully captive going forward.

Jinesh Shah

Okay the next point is regarding your integrated steel plant which you are increasing from 0.5 to 1.5 million tonne with the investment of Rs.2500 Crores?

Are we looking at any opportunity in terms of inorganic in terms of acquisition of any existing steel plant?

Abhishek Agarwal

We have always been open for any growth so given if there is an opportunity where we feel that there is value to a certain asset we will definitely look for it but to be very honest we have not come across such at the moment and parallelly if we have the required approvals then we were happy to go with the Greenfield today.

Jinesh Shah

And what will be the ROI or payback period for this 1.5 million steel plant?

Abhishek Agarwal

See it is too early to call but given the current market scenario we can see additionally EBITDA of say 1000 over the EBITDA of the current complex so we will go by that look and the second question is depending on the capex.

They may charge Rs.2500 back if it remains Rs.2500 or if it goes up and it goes down so it will be difficult but with our own captive mines we do not see ROI of more than two and a half to three years to be very honest.

Jinesh Shah

Okay thank you.

Moderator · Conference Operator

Thank you.

Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to the management for the closing comments.

Godawari Power and Ispat Limited November 06, 2023

Dinesh Gandhi

Thank you participants for joining us with the conference call of Godawari Power & ISPAT Limited.

If there is any question left to be answered or if you need some more clarity on the company's performance, you can approach us directly or our investor relation agency Go India Advisors.

Thank you very much for joining this call and with this we conclude this call.

Thank you very much.

Moderator · Conference Operator

Thank you.

On behalf of Go India Advisors that concludes this conference.

Thank you all for joining and you may now disconnect your lines.