Godawari Power & Ispat Limited (GPIL) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. I'm Bharti, moderator for the conference call. Welcome to Godawari Power and Ispat Limited Q4 FY '21 Earnings Conference Call hosted by Go India Advisors. [Operator Instructions] Please note this conference is recorded. I would now like to hand over the floor to Ms. Sheetal of Go India Advisors. Thank you, and over to you, ma'am.

Thank you, Bharti. Good afternoon, everybody, and welcome to Godawari Power & Ispat Limited earnings call to discuss the Q4 and FY '21 results. We have on the call Mr. B. L. Agrawal, Managing Director; Mr. Dinesh Agrawal, Executive Director; Mr. Abhishek Agrawal, Executive Director; Mr. Siddharth Agrawal, non-Executive Director; Mr. Sanjay Bothra, Chief Financial Officer; and Mr. Dinesh Gandhi, Director. We must remind you that the discussion on today's call may include certain forward-looking statements and must be, therefore, viewed in conjunction with the risk that the company faces. May I now request Mr. Dinesh Gandhi to take us through the company's business outlook and financial highlights, subsequent to which, we will open the floor for Q&A. Thank you, and over to you, sir.

Thank you, Sheetal. Good afternoon, ladies and gentlemen. I welcome you all to this earning call on behalf of Godawari Power & Ispat Management to discuss the Q4 FY '21 numbers and financial year 2021 numbers. I hope you and your families are keeping well in these unprecedented times. I trust that you have all had a look at our results and earning presentation uploaded to the exchange and company website. I'll briefly discuss the results, and then we can move on the Q&A. I'm pleased to inform you all that FY '21 has been the best year of the company in the entire history. We achieved highest ever quarterly and yearly financial performance driven by operating -- strong operating performance. During the year, we had highest-ever revenue of more than INR 4,000 crores on a consolidated basis. We recorded consolidated EBITDA of [ INR 1,236 crore ] and higher ever PAT of INR [ 625 ] crore. As you're all aware after a [ debt ] of almost 4 or 5 years when we were in the debt reduction mode, the company did not declare the dividend, but we made an initiative by declaring INR 5 per share as an interim dividend. And I'm now pleased to inform all the shareholders that the Board has approved the dividend policy. And in line with the dividend policy, the Board has recommended payment of INR 13.5 per share as a final dividend, taking the overall dividend for FY '21 to the extent of INR 18.5 per share. The future dividend payment will continue to be governed by the policy approved by the Board in the yesterday's Board meeting. Our strong performance has resulted into robust cash flow generation. The company generated over INR 900 crore of free cash, which was mainly used towards the deleveraging the balance sheet besides some amount towards the CapEx and working capital. The company has reduced the debt by over INR 600 crores on a stand-alone basis and brought down the debt to INR 457 crore on 31st of March. We have further reduced the debt to INR 193 crore as on the date we are discussing. In addition to this, we have repaid about INR 50 crore of term loan in Godawari Green Energy, our solar project. And Ardent steel has been made debt free. Consolidated repayment for the full year is INR 723 crores in FY '21. In addition to the same, the company has repaid debt of INR [ 264 ] crore INR in GPIL [ INR 15 ] crores in the current year after March '21. The -- as you're all aware, our cost of borrowing has been reduced from earlier 11% to 8% during the FY '21. The impact of same is now visible in the interest cost of the company, which has considerably gone down. Our tax provision has been higher at around 30% in FY '21. Going forward, in all our companies, we are adopting the new tax regime. And our tax from FY '22 onwards, income tax liability will be around 25%, and we will be resuming to the new -- resume effective next financial year. The operational performance was driven by operate -- the financial performance was driven by the operating performance despite the pandemic year. And I would like to take this opportunity to record -- to put on record the efforts and contribution made by employees of the company for their dedicated, despite prevailing the year of pandemic. I take this opportunity to praise on record, as this effort extended by the government authorities at local level and at even at central level. Going forward, during the current year, the company will continue to invest on the CapEx to further increase the captive mining, iron ore beneficiation and increase in pellet -- steel pellet capacity is detailed in our presentation on Slide #8. We plan to complete this CapEx by FY '22. As regard to the increase in the Ari Dongri mining capacity, as we have guided earlier, from 1.4 million tonne to 2.3 million tonnes. The company has completed this presentation to the respective authorities for award of the approval. And we are expecting the approval any point from now. This has been, of course delayed to some extent because of the ongoing COVID situation and lockdown in Delhi, but we are confident of receiving the approval as the situation normalizes. I would also like to take this opportunity for the initiatives taken by the company and its official to [ hype ] the pandemic and extended full support to the local government authorities in fighting the pandemic. The company is not only supported by extending donation of INR 2 crores to CM Relief Fund, but also extended support to the government authorities by supply of oxygen, medicine, injections, et cetera, and has spent over INR 4 crore during the current financial year to help the state government fighting this pandemic. I would now like to touch upon a few of the strategic initiatives of the company. The company -- going forward company is imminent in carbon neutral growth. And to achieve the same we have decided to replace part of our solar thermal capacity. So part of our thermal power coal based thermal power capacity with 250-megawatt Solar PV project to meet and to meet our increased requirement for higher billet capacity, which we are in the process of enhancing. We are utilizing the existing land parcel, which we had acquired earlier for setting up a coal-based power plant. Parcel of the land is close to about 362 acres, which will be sufficient to set up this 255 -- 250-megawatt of the project. The cost of project has been estimated by -- is approximately INR 750 crores. And this will be funded mainly out of the internal accrual, although we will be required to take some banking facilities for opening the letter of credits, availing buyers credit, et cetera, et cetera. If you see the dynamics of the project on the Slide 4, you will see that the plant will run at about 17% to 18% PLF and is expected to generate 37 crore unit of electricity per annum and an annual EBIT of INR 770 crore based on the replacement cost of power, which will be replacing going forward. This will not only -- it will be commissioned by Q3 FY '23. This will not only help the carbon neutralize the company, but also help structure the increased sustainable EBITDA going forward. We are -- as you are all aware, we are in the process of divesting our request stake in solar power subsidiary company, which is currently giving us a return of 12%. We are in the advanced negotiation with the prospective buyer, and we hope to close this transaction during the current year. And -- as and when this transaction is finalized, we will make a suitable announcement to the exchanges. The funds utilized realized from this equity, realized from this project will be funded -- utilized for the solar project. The solar thermal project was giving us an internal rate of return of about close to about 12%. We expect higher return by investing this money into Solar PV project, which is expected to give us more than 24% internal rate of return. This stake will in GPIL make also -- GPIL is 100 free -- debt-free company from long-term debt. Also, the company will continue to avail the working capital strictly through going forward from the lenders. Our future growth strategy will continue, barring unfortunate circumstances, we continue to enter our current level of operation of 90% to 95% of the plant in various dividends. We believe that once the environmental approval is received, company will be self-sufficient in meeting its iron ore requirement by end of FY '22. We will continue to leverage our portfolio flexibility to maximize profitability. Our next phase of growth, as you're all aware, we have signed an MOU with the Chhattisgarh government. The investment in the new steel business will take close to about 18 to 24 months prior to the major CapEx can be committed on their side. Before that, we will complete our investment into the solar. And after that, whatever cash flow is generated we utilize for the next phase of growth in the steel business. With this, I once again thank you for participating into our call and now open the floor for question answers.

[Operator Instructions] The first question comes from Parthiv Shah from Tracom Stock Brokers.

Is my voice audible?

Yes. Yes, yes, Parthiv.

Congratulations to you guys for a fantastic set of numbers and unbelievable number in terms of the dividend that you shared. I'm not going there. Sir, my first question is regarding the mining benefit. So as I understand, and I want to pencil in that the benefit of additional mining, maybe, say, we would get from H2 of FY '22, assuming the permissions come, you're ready for your further CapEx there. How can I pencil in this benefit? Because as I understand, around 20% to 30% of current ore inventory you're buying from the market and your landed cost of the mined ore is lot, lot less. So at the current prices or a range that you had defined, what sort of additional EBITDA incremental can be pencil in for H2?

See, Parthiv -- so far as, if you've seen my last year number, we would have purchased about 20% of our requirement from the market. And this was written average cost of about INR 5,000 a tonne. Going forward, the current prices of iron ore, as you are all aware, is very high, which is in the range of about INR 9,000 to INR 10,000 tonnes. So our company, as of now, in the current year is planning in a manner wherein whatever inventory is there, we are first trying to consume that. Whatever inventory is there at the mine, we are trying to bring it at the plant so that we are required to buy the minimum iron ore in the current year. And once we receive the approval. We will be definitely able to increase the volume immediately and simultaneously, we will continue to incur the CapEx on the mine. That is mainly for the crushing plant, et cetera. So definitely, we maybe require to take about around 10% or so of the market, but we will try to minimize even this 10% purchases from the market and try and actual utilize from the captive mining. Now the savings will depend definitely on the prices going forward, how the prices behave in the market.

Great, sir. And sir, also want to understand, how is the pipeline for our high-grade pellets? And what approximate volume are we targeting for FY '22 for the high-grade pellet? And what is the additional benefit in terms of current index levels of realization that we get in high-grade pellet?

Abhishek, you will take this? Abhishek -- okay, Parthiv, I think Abhishek is not able to listen. So Parthiv...

No. I'm here. Dinesh Ji, I'm here.

Okay. Okay. Sir, please be on the line, yes.

Parthiv, so on the high-grade side, the additional -- the incremental -- the pricing which you're currently getting in the market is close to $20, $25 per tonne of pellet compared to the normal pellet of 53.5%. And on the volume side, going forward, we should -- we are targeting to sell close to 40% to 50% of our entire mentioned sale of high-grades.

[Operator Instructions] Next question comes from Pritesh Chheda from Lucky Investments.

Yes, sir, congratulations for good numbers. Sir, I have one question. What would be the replacement cost of your asset of this 2.1 million tonne of pellets and 0.5 million tonne of sponge, along with the iron ore mining. If one has to put some thumb rule, what should be the replacement cost of this asset as on date?

I would like Mr. B.L. Agrawal to answer this question. B. L., sir, over to you.

Yes, Dinesh.

Yes, sir, there is a question that, what is the replacement cost of our mine as well as the steel plant, which we have set up in Godawari Power?

And Pellets.

Yes. Including pellets and everything.

Okay. And it -- the replacement cost, our steel capacity is currently 4 lakh tonnes and going forward by the end of this year, it will be 5.5 lakh tonne. The year-end capacity is also increasing from adjusting 5 lakh tonne to 6 lakh tonne. Pellet capacity gone from 2.1 to 2.4 million. Mining capacity likely to be from 1.4 million to 2.3 million. Mines definitely there is no large CapEx involved in the mining. These are the mining -- is being done through contractual workers. But if I talk of the replacement cost of the individual assets in Godawari Power Ispat, including all divisions that is, pellet, power, sponge iron and steel. So till end date it will take not less than INR 4,000 crores. And mine, the premium has gone so high, lending from 95% to 135%. So if we have to improve the mining, it's not possible for anybody, right. That cannot include the replacement costs of mining into these numbers, but replacement costs for the CapEx, including Godawari Power & Ispat will be not less than INR 4,000 crores as on date.

So that will include 2.1 million tonne or 2.4 million tonne of capacity?

Yes. Yes.

All included, 2.4 million tonne of pellet, 0.6 million tonne of sponge and the captive power.

Yes.

Okay. Okay. And the incremental capacity, when it is supposed to kick in?

We see the pellet incremental capacity has already, we have issued environmental clearance. So that is already operational from the current quarter itself. Steel, we are gradually ramping up our capacity by the end of this year, we'll be able to achieve 5.5 lakh tonne. Mining also we'll achieve 2.5 million tonne by the end of this year. And beneficiation plant, which is currently 1 million tonnes, will be 3.3 million tonnes that is likely to happen sometime in, maybe in next month itself.

Next question comes from Bhavesh Chauhan from IDBI Capital.

Sir, congratulations on a very good set of results. Sir, my question is that, that today, we are generating a lot of EBITDA from pellet not only EBITDA, our volumes in pellets are very high. So what is the management's strategy to move towards more and more products like billets, iron ore, et cetera. So our dependence on pellet becomes very low. Is there any such plan after this solar power CapEx that we have announced?

Yes, [ Pritesh ]. As you are aware, we have signed an MoU with the state of Chhattisgarh for setting up an greenfield steel facility going forward. But initially, we are in the process of searching for the land and land acquisition will start. And the actual CapEx on this will start only after 18 to 24 months. Till then, we will continue to leverage on our existing capacities. And wherever there is a scope, we are increasing the capacity, as mentioned by our MD, Mr. B.L. Agrawal. We are increasing the mining capacity 2.3 million tonnes. So that the volume growth, and even the steel pellet capacity to 700,000 tonnes in the current year is already said by 5.5 lakh tonne. Similarly, sponge iron is increasing to 600,000 tonnes. So it's not that we have been continuously on increasing the value addition on pellet. About 2.5 to 3 years ago, we were highly doing value addition of 200,000 tonnes. Now we already reached to full integration of 400,000 tonnes. And going forward, we are aiming it to 700,000 tonnes at the existing location. Before we move on the greenfield CapEx maybe in 18 to 24 months. And in the meanwhile, we will definitely complete the solar expansion, so that we are counted as in -- taken as in [ giving back ] carbon-neutral company. And most of our captive power will be green power only.

Yes. That's helpful. Sir, lastly, what was our EBITDA or EBITDA per tonne Ardent in this time, in this quarter?

Ardent was about close to about [ 2,500 ] approximately.

[Operator Instructions] Next question comes from Shantanu Mantri from MKVentures.

Sir, big congrats on fantastic numbers. Sir, I just have a couple of questions. One is on the pellet realizations right now. So we just heard you saying that current prices are somewhere around INR 15,000, is it that right?

Yes.

And yes, it's around 15,000. And we are looking to export around the -- export to domestic mix. I heard you saying that it will be around 75% to 25% -- 75% exports, 25% domestic. So our blended realizations would be much higher than the current INR 15,000? Am I getting this right? Because the export prices are much higher...

No. But you have to take -- what you have to is, it's a blended realization going forward. As you said, INR 15,000, if it's INR 15,000 to INR 16,000 a tonne, that is on the export basis. So far as we are concerned, we are selling maximum, we are guiding for the prices, which are on export basis. So -- and this is the blended realization.

All right. All right. So this also includes your increment in high-grade pellets. So when you say this INR 15,000 that factors in that as well?

Abhishek?

Firstly, yes. So when it comes to export and blended into domestic, so there is current charge mix, yes [indiscernible] would be blended average realization at the moment.

All right. All right. Understood. And...

Actually all domestic export and high-grade as well, obviously.

Okay. Okay. That makes it very clear. And sir, just one last question. So I heard you saying on CNBC, you've given a guidance for FY '22 EBITDA. So say, somewhere around INR 1,700, INR 1,800 crores. So even if we factor in all the CapEx, still, as for my calculation, our calculations will be left with some good amount of cash. So any plan of resolving shareholders with that?

I think we have already, like, number one -- the expected or the guidance, which has been given by Abhishek on the CNBC is based on the current pricing. Now the actual cash flow will depend upon the pricing going forward. That is how you should take it, number one. Number two, we have already guided what will be our distribution policy on the dividend as for the dividend policy. So we will continue to reward the shareholders based on the dividend policy announced by the -- approved by the Board.

Next question comes from Vikash Singh from PhillipCapital.

Congratulation on very good set of numbers. Sir, I have two questions. Firstly, in terms of our pellet exports, now with some problem happening in terms of longer lead timing for the vessels, a higher pricing of higher freight. So are we experiencing any problem with respect to dispatching our material from the port as of now? Or the lead time has increased or even the Chinese demand has come down, anything that sort of happened as so far?

No. So yes, mostly on the logistic side, I don't see -- so there are delays regarding -- there have been cyclone. But on a delivery side, there has been no issues till now. We were able to deliver all our commitments as per the contracts. And I think this positions us in [ indebtedness ] goal. So going forward, I'm sure the packing quality will definitely -- consider -- it's a team Indian vessel, one and only in port. So at the moment, I don't see any reason why the pellet should getting -- all in order at the moment.

So is after some price correction in the export market for iron ore, is the all-in ex plant in addition for export still better or now its lower? If you could just tell me that?

See, at the moment, we are covered till mid of July, we have order books till mid of July. So it is too soon to say how the market is going to proceed because it's still mid of May, and we still have 2 months in the book for the orders. So yes, I would say, it's too soon to give a call right now. But if something drastic happens, and of course, the prices might go down to certain extent. But if you're using the fundamentals, I don't see much of correction happening at the moment now.

Okay, sir. Okay. And my second question pertains to -- are this -- solar power plant CapEx. So just wanted to understand that on one hand, we want to sell our solar thermal power plant. On the second hand, we are adding this 250-megawatt. I believe -- I understand that, that is because you want to be carbon neutral. But wouldn't -- would that say, it's still more profitable than we doing sponge iron capacity increment and use waste heat proportionately higher. And so overall, that strategy wouldn't have been given you some volume growth also, which we are currently lagging right now? Or -- so just wanted to understand the entire thought process of selling solar thermal and adding INR 250 crore in the solar power, again. And instead of going with sponge versus waste heat kind of the power generation strategy. If you could explain, it would be really helpful.

So Vikash, it is like this. Our divestment plan for the solar thermal, which is an IPP and most of our investors had given us feedback that we should exit out of the not own business. And it is not yet we have decided to exit this business now. As you know, this is on the discussion stage for almost for a couple of years now. So far as solar thermal is concerned, we definitely want to divest this project, but you should appreciate that whatever money is realized, net of debt. #1 is going into Solar PV, which is -- which will give the higher returns. Our returns is on Solar PV, solar thermal is hardly about 12% or so going forward. And the expected return on Solar PV is closer to 24%. And as I said in my opening remarks, this will not only give long-term sustainable EBITDA to the company, at the same time, we are utilizing our idle land, which is land we had invested about close to INR 80 crore, INR 90 crore earlier. And at the same time, it is giving me much needed power for my increasing steel billet capacity. So we are increasing the steel billet capacity from 400,000 to 700,000 tonnes. And for that, I need the additional power. And if I have to go, then I have to fully depend on grid, not less than INR 6 per unit. Okay. So this Solar PV, which we are earlier -- it's not that it was not on our cards earlier. We were earlier going through the group captive mode. We were in discussion with the many -- but now since we have a cash flow, and I don't have a utilization of cash flow for next 2 years. At the time we start, as per your suggestion, this solar and other capacity, whatever is possible in our existing premises, at existing plant, we are already doing it. Okay. So it's not that we are not increasing on its own iron ore, steel billet or mining or pellet, wherever there is a scope at existing location, we will complete it by next 1 year or so. And after that, we will start the CapEx at the next location, for which I don't have the land as of now. We are in the process of searching the land. The land acquisition will happen, then we have to go for environment approvals. So what, why, do is a case in between. While your suggestion is taken, we should is -- we spend in the core business of iron and steel. So the solar thermal is for the core business of iron and the steel. So rather it is giving me an opportunity that I'm having of one project, which is -- I'm divesting in one project, which is giving me lower returns and utilizing the money and at the same time, making the company debt free, because I will not take any major debt for my Solar PV project. So just taken an example. I already guided for INR 170 crore of EBITDA from Solar PV, whereas, my existing solar thermal is giving me an EBITDA of close to about INR 80 crore to INR 90 crores annually.

Okay, sir. Okay. And sir, just one clarification. Since our sponge capacity would now be lower than the billet, so we would be buying a lot of metallics from the outside, right? So which would be kind of a -- would fetch on the conversion margin to us.

Let me correct on that. So currently, our capacity of billet is 4 lakh tonnes, which will be around 5.5 by the end of this year. Our sponge capacity will be 6 lakhs. So it will be a complete integration. So we won't be selling any sponge in the market and directly that's a production going forward in steel making. And we are also -- we're also using scrap to a certain percentage of 10% to 15%. That is how the perception is. So the remaining metallics, which needs to be converted into steel will be in the form of scrap. We only bank funded from the market. It is already in the form of scrap and doesn't further continue to be the form of scrap.

Okay. No. So basically, just referring to Slide 8 of your presentation, which is 0.7 million tonne of billets. So if I back calculate, so basically, the gap, whatever the additional is getting converted from the billets, we will be getting only the conversion margins on those, right? 0 point -- anything above 0.6. So basically 1.5 lakh tonne of the billets would be sold on conversion margin going forward in the longer term.

Yes. Yes.

[Operator Instructions] Next question comes from Chetan Shah from Jeet Capital.

Sir, just one small clarification. When we spoke about divestment of this energy, are we referring to both Godawari Green and Godawari Energy both or we're just talking about one entity?

We are just talking about one entity, Godawari Green Energy, which is an IPP in Rajasthan. Godawari Energy is a company in which we are holding this 300-something acre of land which I have mentioned. And this land, we are utilizing it for Solar PV. Eventually, the solar GEL will be merged with GPIL going forward, as you know, at an appropriate time.

Right. So sir, this Godawari Green Energy, what is the debt in this specific entity, if you can share that specifically number, please.

INR 350 crores, approximately.

Next question comes from Sachin Kasera from Svan Investments.

Congrats to the management for a very good set of numbers. My question was regarding the CapEx. So this solar power plant, the entire CapEx you plan to spend in the current financial here?

Not in current financial year, partially in the current year. And partially, it will go in next year, as we have guided for commissioning in Q3 FY '22.

Okay. And other...

Sorry, FY '23. FY '23. Yes.

Sure. And I believe you have mentioned INR 135 crore or INR 140 crore of CapEx for debottlenecking, that should happen in the current financial year?

Mostly, it will happen in the current financial. It may -- some portion makes below in the next year, but mostly, it will be the current financial year.

Apart from that, I believe you have signed an MOU with Chhattisgarh government, I think in INR 2,500 crores of Capex and in between, the Board had also taken an approval for some acquisitions as far as NCLT is concerned. So can you give us some understanding on how much you plan to spend on both these 2 activities in '22 and '23?

See, Sachin, the approval, which we had taken about a month ago from the Board for acquisition, we were looking for a target acquisition in a particular company. But that has not materialized for some or the other reasons. And whatever money you would remember that we have guided that we will be investing, advancing some money to ARC. We had advanced the money. We have got it back and repaid to the lenders also out of that. So nothing on the card on so far as of the day for the acquisition.

And greenfield MoU with Chhattisgarh, how do we plan to spend the CapEx in '22, '23, '24 -- how will...

See, as I said, it will take at least 18 to 24 months before we shall spend -- start spending money on the project, barring land acquisition. So that will definitely be done prior to that. And that will be -- we definitely plan to do it in a phased manner, but detail plan will be announced in due course of time. It is still -- before we finalized on the project, get the ground approval, then we will definitely guide on to the market as to how and when it will be completed, in what manner it will get completed.

Next question comes from Ashok Agarwal an individual investor.

Yes. Congratulations on the best fantastic performance in the quarter 4 and the year as a whole. My question or the suggestion is that in view of such an amazing performance, cannot management consider issuance of bonus shares?

Ashok ji,, we will take your suggestion, and we'll deliberate in the Board internally and maybe, if some decision is taken, then we'll definitely get back. And maybe a suitable announcement may be made in this regard, but we have taken your suggestion.

Next question comes from Bachh Raj Nahar from Mili Consultants.

Congratulations on superb results. Yes, just two questions, basically. One is that, company you have the mines, captive mines, they are making final full steel production. Their EBITDA level, whether it is TATA long products or TATA Steel, their EBITDA level is INR 29,000 to INR 30,000 per tonne. So -- rather and they also held up what style production capacity like, they have their sponge iron as well as they have pig iron. And whatever is the market condition, they switch over, basically. And by that process, they are really doing fantastic job, whereas, we -- while selling the pellet, our EBITDA margin might be currently 12,000, depending on the price of the pellet. But rather we can, of course, you have announced the greenfield projects, and that may take a long time. So whether it could be some other way around basically, whether the -- in short-term the pig iron plant or additional sponge iron plant can be set up or rather, we can also have some contract manufacturing. By this, we can increase our bottom line substantially because of the current market of the final steel products now.

Sir, I appreciate your point. [Foreign Language]

Your suggestion is will taken. But you see the margins of TATA Steel going more than INR 25,000 a tonne on EBITDA basis, it's mainly in the flat products, mainly in the HR and CR coil. We are into the long product only. And we have planned our expansion going forward, mainly in the product map in the long products. And there is no possibility updating our pellet, converted into flat products because there is no player in the secondary segment to have the flat product capacities. If we stick up the long product, so the EBITDA margin during the long product remains again INR 15,000 a tonne maximum. If you talk about our pellet, we have 1-tonne history, the condition of pellet is 1.5. Our margin in the pellet is -- can be spotted is going to be about 10,000 million tonne and to make the steel, 1.5, INR 15,000 a tonne. So whether we buy for the land product, or whether we sell the pellet directly in the market makes no difference as far as the total EBITDA is concerned. So there is no point that we get our pellets material -- the local manufacturers and no local manufacturer have such a big -- huge capacity to consume our additional pellets. In that our capacity, 2.4 million tonnes, and we will internally consume about 0.8 million tonnes or 1.6 million tonnes, we require about 1.2 million tonne of the outsourcing, which is now possible in the market. But definitely -- we are looking mainly in the flat product for the CapEx, not in the land.

Okay. Okay. And the second question is, of course, on the -- again, depending on the availability of the iron ore, that is also on their side only. Whether since you have -- going to have mine capacity of 2.3, pellet capacity of 3.3 to make, so whether you will be able -- you have to procure 1 million tonne extra going forward every year. So there are two questions, whether are you planning to increase the position clearance for 3.3 million tonnes of iron ore from your own mine? And second thing is that, whether you can, again, increase your basically, the profitability by sourcing, though the price of iron ore presently is very high. But at that price also there will be a contribution, which is, for new that the more steel. And by that way, you can sell your pellets full and you can procure, I don't know, by which, you can produce sponge iron and like that, or whether this kind of availability is possible basically. This is my two points. I thought I should mention.

Yes. Let's just clarify. Firstly, our mining capacity will be going forward will be 23 million tonnes after expansion. I expect that will be there. So I know it will be captive for a trade current consumption because we don't have to buy any iron ore from the market to produce pellets. So that is important point. Secondly, selling entire pellets the market and procuring lumps for sponge iron from the market so that decided that supply chain because the quality of ore available in the market is not as good as a pellet basically in terms of [indiscernible] because we are also exporting our entire -- by road. We have 2 mills of iron ore that we are to be export base. So the phosphorous contained really much higher -- so we won't be able to export the iron ore. So this supply chain will totally build on commercial, which is to be a natural for us. So we will keep using pellets for our internal consumption and make primary steel which will be exported or sold in the metal market. That will be the way going forward. So this supply chain will totally build on commercial, which is to be a natural for us. So we will keep using pellets for our internal consumption and make primary steel which will be exported or sold in the metal market. That will be the way going forward.

Okay, sir. Thank you and one small question. In one of your 2 months -- 2 quarters back in presentation, you mentioned about one of the mines, you will be upgrading and selling to cement industry or something like that. Is there any progress on that front?

Yes. So we -- the beneficial permission, which we have taken from 1 million to 3.2 million. So that is work in progress. Once we're able to achieve a quality with the cement can -- cement plant can buy, we will start setting the tailings, which is by definition the INR 20 crore of it with [ 5, 10 ] taken by cement plant. That will probably take another 6 to 8 months from now on. On the consumer side.

[Operator Instructions] Next question comes from Sameer Joshi, an individual investor.

Congratulations for good set of numbers. I have 2 questions. One is in respect of solar plant of 250 megawatts, is it only for captive use? And if yes, how much EBITDA is expected to be accrued because of this plant? And how -- second question is, how do you see price realization going on till FY '22? Thanks.

Your first question is on the solar PV, 250 megawatt. So solar PV 250-megawatt is 100% for the captive requirement. This is number one. And if you would have seen by our presentation we already guided, it is expected to give us an annual EBIT of INR 170 crores at the replacement cost of power.

Okay.

Yes, yes. And what is your second question, sir?

Second question was an into price realization, maybe going till FY '22?

See, as it is difficult to predict the price realization going forward. But definitely, what is the overall commentary is there. And we are talking of the growth in the global as well as Chinese market. We believe that prices are here to stay for some more time.

Next question comes from Mr. Chirag Patel an individual investors.

Am I audible?

Yes.

Congratulations for the good set of numbers. I have one question. Like we are moving to solar based energy for our production need. So what cost savings are we going to witness going forward compared to what currently we are doing?

See, our blended cost, what we are drawing from the grid currently and what we are expected to draw from grid and our coal-based power is close to about INR 5.5 per unit. And the variable cost or the operating cost of solar PV is not likely to exceed more than INR 0.50 per unit. So we are definitely aiming for a saving of INR 5 per unit in our electricity cost on about INR 37 crores unit annually.

Next question comes from Varun Mehta from Wealth Leak Investments.

Sir, I just wanted to know what would be the cost of borrowing going ahead as the working capital would be needed? And if you could just throw some light, what is the demand scenario from the Chinese market right now? We are hearing, the prices have corrected. So are you still witnessing a good demand for your -- as you're focusing more on exports now?

Yes. See, our rate of interest by opening market is at 8%, close to about 8% per annum. And so far as Chinese market is concerned, we definitely continue to sell maximum of our product in the Chinese market. The recent fall in the prices is more of an carbon, what we believe is carbon the speculative pricing. If you remember about a month ago or 1.5 month ago, the prices were rolling at about 180 -- [ $180, ] [ $190 ] kilo kind of bend. After that, all of sudden, the prices had spiked to about $230 in interest to market of the iron ore with CIF China. This has now pulldown to close to about $200. So I don't think the overall situation changes from that. Definitely, some carbon has taken place on the speculative pricing.

Okay. Right. And sir, we are exporting majorly to China or like we exporting more countries and going ahead and doing demand?

Currently -- highest -- carry on.

Yes, we are doing it. I mean, it's China, Malaysia and then Indonesia. And on the finish side, in terms wire rods delivering to Philippines, Africa, Thailand. So you're not -- not only China, pellets are individually China, China and Malaysia, and the finish side is going to all other countries, Philippines, Indonesia, Sri Lanka, even Africa we supplied the quantity wire rods.

Right. And sir, are we looking at good inquiries right now at the current price, what is coding in the market?

See, it is like a cash coming situation because the buyers are rating, where the market is stabilized. So it is something like we need to have patience. The financials have been strong. There has been a price correction. But eventually, the demand is there. The buyer is only waiting to see the better price is going to stabilize to get the buying get started there.

Next question comes from Satin Wadhwa from Profusion Capital.

Can you just shed some light on in terms of forward contracts on pellets, what have you already taken bookings for pellets for the month of June and July, if any? And what kind of liking for exports and for domestic sales?

You see at the booking levels, we are covering mid-July, domestic and as well as exports that finally, 70%, 80% is going by exports. And the pricing we're looking at is with the average realization of close to INR 3,500.

So that means even if prices were to fall, there will be no impact in first quarter, right? In the June quarter?

Definitely, definitely. We usually prefer to a have 45 bps to 50 bps to quarter, that is how we prefer to operate the plant.

Next question comes from Anuj Bhargava from [indiscernible] Grading.

Congratulations. Very good set of numbers. [Foreign Language]. I have some questions primarily on -- you've got such large exports. I have not heard you mentioning anything on U.S. dollar hedging or whatever is your prime currency in which you are hedging. You also mentioned in your note, a small 25 megawatts of Jagdamba Power. And I'm just wondering what is the play over there? And the third thing is you have this very large parcel group now, which is in the Hira Group. How does Godawari fit in, in this whole group, and what is the group vision there? So these are my principal questions, and then if there is something I can talk on that. And I'm keen to know what is the reserve situation of your iron ore mine. So are we looking at 20-year life, 30-year life, 40-year life on the iron ore mines?

Continue with this question, please?

I will answer to the -- our life of the iron mine. And with the current deceleration already done, we are covered till next 20 year. But thereafter for 5 years, we'll do some more exploration because till now we have incurred iron ore to depth of 150 meters. But after the removal of about 50 meters, we will further explore and go down. And if you are lucky, you can get more iron ore and maybe covered for the further period. But as of now, we are covered till 20 years from now.

On the ForEx hedging side, so since giving lot of export. So we always make sure we are covered on the ForEx side as well. So all our export shipments this year booked till now are already ForEx based at a level of 75 plus/minus 0.25 level. So then so we'll have to do the massive license, then the dollar is depreciated. We keep a close margin on that.

[Foreign Language] Okay. See, Jagdamba, so far as Jagdamba is concerned, we had -- the Board has approved the merger of that company, divesting the power business for just Jagdamba power and merging it with the Godawari power. Unfortunately, this merger has got delayed because of the tender met situation. Recently, on hearing in the Infinity was happened for convening the meeting of the shareholders of the company for the company, and we are awaiting the orders for that. And this power is for meeting our existing requirement is still, Jagdamba already meeting our requirement for last 2 years. And I think you had asked about the group structure also. So far as group structure is concerned, we have given the same in our presentation also. Besides Godawari, under the Godawari Group, we have Hira Ferro Alloys, which is an associate company of Godawari Power in which Godawari has invested INR 48 crore, rest is rent by the Promoters Family. Other than that is Jagdamba, but Jagdamba's not part of GPI, it is an associate of GPI and the remaining equity is held by the elder brothers of Mr. BL Agarwal. So that doesn't come under despite Hira Group per say is a larger group, in which his brothers are there, but those businesses are separate. And the promoters of Godawari Power, wherever it has a mistake is part of Godawari Power. Yes. And some maybe stake is there in the Promoter family, which we may decide to integrate going forward with the GKL or if appropriate decision may be taken in due course of time. About hedging -- sir, hedging is like this, our realizations are all short term, maybe about one month, 1.5 month, we sometimes keep hedging the realization depending upon our view on the market. And sometimes, we keep it open because we have imported coal as well. So for export and import, partially, we are already hedged. And so -- because we're importing large quantity of coal, South African coal for our sponge iron plant. So partially, we are hedged. So -- and partially, we keep on covering depending upon the market conditions. So I don't think there is major ForEx resources there on the company as of now.

So that means you -- since you're importing from South Africa, your calorific value requirements of the plant may be very high. Is that right?

Yes. Yes, yes, yes.

Okay. That's one. Okay. Fair enough. Well, good going, very delighted at what you have achieved, all the best.

Thank you.

Next question comes from Kamal Bhageria from Hi-tech Corporate.

First of all, I would like to congratulate the for excellent performance in Q4 and for the year as a whole to the management and the entire team. My question is, you have excellent realization, and most of the steel industries are getting very good results in the March quarter. What is the price realization currently as compared to the March quarter, whether is there any change or whether it has gone downside? Or what is the current synergy, number one? Number two, what is going to the price realization in the future, keeping in mind that China has changed some policy decisions for pooling internets, metal international prices. So can you throw some light going forward what is going to -- what management is thinking as far as the international meta market is concerned?

[Foreign Language]

Yes, I'm taking the question. Yes, what you said is very correct. China radically taken a very bold call to divide the speculation in the future in Asian market on our commodity, not only any steel, but all from all metals, the aluminum, steel, copper everything. There are a certain spike on the global prices, including China, in all these commodities in the month of May. And after this announcement, the sudden spike of the prices has already pulled down China. And last, I am observing on day-to-day basis. Now prices of all these commodity are more or less stabilized for the last 3, 4 days. The further announcements, which were done by the China is in the month of April -- sorry, in the month of March, China is 47.5 million tonnes globally, ever highest, in the history China. Now they have withdrawn the [ 13% ] tax benefit in the export segment. Definitely this is done to avoid the export from China, at the same time, China is looking for the reduction in the pollution over there, and they restricted in some region, the production cut. They also remove the import duty on various items in the country, it already has been done to increase the availability of both steel and super import to meet their ever-rising demand in the China. China, everybody is aware, China has given a huge stimulus package during this pandemic, not only China, but the whole world, and there will be ample liquidity in the whole world. And that is the reason, all commodity has gone up all-time high. There is liquidity in the market. The prices are not going to come drastically. Maybe there's 5% correction here and there, but not a drop in the near future. Now to fill the gap of the Chinese export, which I believe will come down to almost 50%. Say, from 80 million tonnes, maybe China is I would like to say at about 40 million tonnes only. Where these additional 40 million tonnes, which is required globally will be met. There are only 3 countries: #1 India, #2 Japan and #3 Korea. India is not in a position to export more than 1.5 million tonnes per month. And that would be very optimistic. I don't believe that China will be in a -- India will be in a position to export more than 1.2 million tonnes. As far as Korea and Japan is concerned, they also cannot export more than both together, 0.5 million tonnes. The steel there is gap of about 2 million tonne per month, globally. So where is the supply will come, either the global requirement has to go down as the prices go up, we have recently absorbed beside our announcement in China, the prices have come down only in China, not in any other country. Europe is still high. All other countries are still sitting at the highest level of price. But one thing is very clear, the price cannot go for a long to keep on going up, going up, going up, ultimately, that is going to impact the downstream industry. So there has to be some level of price. I think the steep prices in all of their commodity prices already pick now, I don't feel any further scope or much increase in the price. But at the same time, I don't feel that there will be a dip downside on the global market in the commodities, maybe 5% not more than that.

Yes. Yes. My second question, sir, as I understand, the international prices -- Indian prices as compared to international prices are initial sector is around -- down around 15%. So even if the international prices go down by another 5%, as you say, it should not affect our Indian consumption. As such, we are having a lot of infrastructure projects being announced by the government are going at. So how the company sees its future as far as the steel prices of -- international steel prices are concerned, whether we are going to get affected by international prices or Indian market prices are already low 15%. So our company as a whole, the realization for the current year will not get affected?

Yes, I am pretty sure that there is more much scope in reducing the steel prices because their Indian prices are already low as compared to the export of the overseas marketed. I don't feel any reduction in the prices in the domestic segment in the near future. That may happen only when the international market will come down by more than 15%, which I don't expect in any future at all?

Next question comes from Harish Kumar Gupta, an individual investor.

I think I may have missed the answer of my questions, but like if you have answered already please done it for me, what was the realization of pellet prices in March quarter? And what is -- right now, I think it is around INR 15,500. But what was the realization in quarter for?

March quarter numbers we have given in presentation it is close to about pelletization is INR 11,700 average.

Okay. And right now, it is hovering around INR 15,500.

Yes.

Next question comes from Vaibhav Agarwal, an individual investor.

Sir, my question was regarding the Chinese steel pricing only, like China has come down a lot on having the speculation on futures and et cetera, coming down. And there is a collection of about 20% on Chinese HRC prices this month. So don't you think that realization would be impacted in the next few months? You have answered this question, but just wanted your opinion once more.

I would -- I've already explained what is the view? So what additional you want to understand?

No. Mostly, it has been answered. So it's okay.

Next question comes from A.M Lodha from Sanmati Consultants.

Am I audible?

Yes.

Yes, yes, congratulations on a good set of numbers for this quarter as a very good outrun -- outlook given the -- and you said on [indiscernible] rating. Sir, my -- I have got 2 question, we are having a land of 362 acres. As we mentioned in the sales core of the investor presentation, it was required in 2010 and '11 something. And can you tell us what was the course at that time, wherein company has incurred?

We -- as I said, I think, in the opening remarks, it is close to about INR 80 crores or so.

My second question then, the prices have gone up consistently in last 1 year. And we as investor having difficulty in either acquiring or selling the sale in the national processing and BSE is not good. So in line with other ETL companies like JSW, Jindal Steel & Power, you would like to add some liquidity in our stock ourselves. So this is one suggestion from the investors that we should consider an appropriate time, the combination of the import. And the company repaid or return the loan, the term loan. We see the company should get all the fair close with respect to release.

Sir, I will take your last question first. So far as release is concerned, we are still are waiting first part of the release, for which I think 2 banks have already approved and are awaiting approval of one more bank because of pandemic, it gets delayed. So some shares are likely to get released very soon. Rest of the remaining share since we are closing down over our debt, most probably in the month of June, we would be approaching lenders now since we have repaid the long-term and all our pay share should be released. And I'm most likely 100% confident that the shares will be released, but it will take procedural time now from the lenders.

Okay. Regarding liquidity.

Sorry?

Liquidity now -- we suggest...

What is your suggestion in increasing the liquidity? And how can we help in that?

Something is [indiscernible]. We have all denomination since our [indiscernible] have gone up to INR 1000. So what is required is we suggest...

I got your point. You're talking about splitting the shares. Okay. So let us debate, we take your suggestion. We will debate in board meeting. And if the Board agrees, then we will definitely -- we will definitely consider your decision and a suitable announcement is and when it is approved by the Board, we'll definitely.

Next, we have a follow-up question from Chetan Shah from Jeet Capital.

Sir, just one small question. So in terms of current years, CapEx will be approximately INR 300 crores. Is that what I have understood it rightly, about 130 million or normal ongoing CapEx and about INR 180 crore to INR 200 crore of a solar power plant, which we are going out with? Or I have missed out something.

Yes as we have said, about close to about INR 150-odd crore is for our expansion and the various de-bottlenecking Capex, that is where. Solar, maybe around INR 200 to INR 300 in the current year, depending upon the progress we are able to make in the project.

Okay. Okay. And is there any normalized maintenance Capex, which we do every year, which is about INR 50 crores, INR 60 crores, will that be over and about it, right?

Yes, that is about INR 20 crore, INR 25 crore approximately may be required. So that could be there. Of course, we have not mentioned about it.

Thank you, sir. Due to time constraint, that will be the last question for the day. Now I hand over the floor to Mr. Dinesh Gandhi for closing comments.

Ladies and gentlemen, thank you very much for participating in the conference call of Godawari Power and Ispat Limited to discuss the results. In my closing comments, I would like to state a few facts, which I believe you are all aware of it. We -- as you would have seen with our dedication, we have repaid the entire debt of the company in last 3 years. And whatever is remaining is likely to be repaid going forward and the company will definitely be a debt-free company. Similarly, if you would have seen over the last 3, 4 years number, our contribution from captive mining is increasing in the company. And going forward, we are increasing it to 100% that will drive our EBITDA going forward. Definitely, whatever savings we are able to make. Similarly, whatever investments, which we have recently committed into the solar PV that will also drive our sustainable EBITDA. So I believe that over a longer period of time, we are working on a model wherein we are able to ensure that we are able to expand our consistent sustainable EBITDA in a longer-term manner. So with this, I would like to close this call. Thank you very much for participating. Thank you all.

Thank you. Thank you very much.

Thank you very much. Thank you, everyone.

Thank you, Bharti. And thank you, Sheetal.

Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha conference call service. You may disconnect your lines now. Thank you, and have a pleasant evening.