Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gujarat Mineral Development Corp Ltd (BOM:532181, Financial) has set ambitious volume targets for lignite, aiming to exceed 9 million tonnes in the current year and improve further in the next.
- The company has been declared a preferred bidder for multiple coal blocks in Orissa, indicating a strategic expansion beyond Gujarat.
- Significant progress is being made on multi-metals and rare earth projects, with regulatory clarifications and RFPs expected by the end of the financial year.
- The company has a robust growth plan aiming for a 4x increase in revenues by 2030, driven by lignite, coal, and critical minerals.
- The Akrimota Thermal Power Station is undergoing an overhaul and is expected to turn from a loss-making to a profit-generating asset by the next financial year.
Negative Points
- The company faces significant CapEx requirements, with plans to spend over INR 3,000 crore annually for the next several years, which may strain financial resources.
- There is a dependency on the successful operationalization of new projects, including coal blocks and multi-metal assets, which carry inherent risks and uncertainties.
- The lignite business, while currently profitable, is subject to price volatility and competition from imported coal, which could impact margins.
- The underground copper asset presents operational challenges and delays, with significant complexity in its development.
- The company's ambitious plans require maintaining a debt-equity ratio below 1, which may limit financial flexibility and increase leverage.
Q & A Highlights
Highlights from Gujarat Mineral Development Corp Ltd (BOM:532181) Q1 FY25 Earnings Call
Q: Can you provide your volume targets for FY25 and FY26, especially with Tadkeshwar back in production?
A: For FY25, we aim to exceed 9 million tonnes of lignite. For FY26, we plan to improve on that. Our coal blocks in Orissa are in advanced stages, with groundbreaking expected early next financial year. The multi-metal project is progressing, with RFPs expected by the end of this financial year. For rare earths, we have been nominated by the Government of India to take the Ambadungar project forward.
Q: With the expansion into Orissa, will you look for more coal or lignite blocks outside Gujarat? When can we expect production from multi-metal or rare earth projects?
A: We are open to all good business opportunities. We have recently bagged our third coal block in Orissa, Kudanali-Lubri, which will require over a year of exploration. The multi-metal project involves a two- to three-year timeline, with significant progress expected by the end of this year. For rare earths, we are looking at a three-year horizon.
Q: Can you provide guidance on the current lignite business and the transformation underway at GMDC?
A: We have a robust growth plan aiming for 4x growth by 2030. The core lever is our existing lignite business, targeting 15 million tonnes by the end of the decade. For metals and critical minerals, significant work is underway, with strategic importance for the nation.
Q: What are the expected margins for lignite, and can we expect similar volumes and margins as FY23 for FY25?
A: Lignite pricing is now aligned with imported coal. Margins have decreased from over 50% two years ago to around 30% now. We aim to exceed 9 million tonnes this year, with current margins reflected in Q1 results. We are pursuing two strategies: Mission 18.0 for 18 lakh tonnes of lignite sales in the monsoon quarter and Mission 2000 to increase active customers to over 2,000.
Q: When will coal start generating revenue, and what are the CapEx plans for FY25 and FY26?
A: For our larger mine, Baitarani-West, we target groundbreaking in Q1 of '26, with production commencing soon after. CapEx plans are ambitious, exceeding INR 3,000 crore this year and for the next two years. Our debt-equity ratio will not exceed 1.
Q: What is the current power generation capacity of Akrimota Thermal Power Station, and what changes can be expected post-PPA amendment?
A: Akrimota has a capacity of 250 MW. The plant is currently undergoing an overhaul, expected to be completed by December. We have onboarded a Tier 1 contractor for O&M, aiming to turn this asset profitable by next year.
Q: What are the financial return metrics for coal block bids, and how will the CapEx be financed?
A: We target a minimum IRR of 15%, not going below 12%. CapEx for this year is INR 3,030 crore, with similar amounts for the next few years. Our debt-equity ratio will remain below 1, supported by internal accruals and early coal project activations.
Q: What is the diversification strategy for critical minerals like copper, lead, and bauxite?
A: While lignite remains our core focus, contributing over 90% of revenues, we are operationalizing coal blocks in Orissa with a capacity of 26 million tonnes per annum. By 2030, we aim for 4x revenue growth, with significant contributions from critical minerals.
Q: Can you elaborate on Mission 18.0 and Mission 2000?
A: Mission 18.0 targets 18 lakh tonnes of lignite sales in the monsoon quarter, while Mission 2000 aims to increase active customers to over 2,000 within a year. Both initiatives are progressing well.
Q: What are the current cash reserves, and how will the CapEx be managed?
A: Current cash reserves are slightly below INR 2,000 crore. We have aggressive CapEx plans, but our debt-equity ratio will not exceed 1. We expect to generate significant earnings from existing and new projects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
