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

Thank you, everyone, for joining in. We have Godawari Power & Ispat with us. It's the flagship company of Hira Group of companies, which is into multiple businesses, including mining, cement, real estate, technology and obviously, steel. Godawari Power & Ispat is an integrated player in the long value chain. So you're looking at iron ore mining, pellets, sponge iron, rounds, billets, ferros, everything. We have with us Mr. Dinesh Gandhi, who is the CFO at Godawari Power & Ispat. He has almost 3 decades of experience in the finance, accounts, financial planning and budgeting roles. And without further ado, sir, over to you to discuss the performance of the company and maybe more educational background of the participants also on what the company's journey has been. Thank you so much.

Thank you, [ Satyadeep ]. Thank you. Good afternoon, everyone. I'm Dinesh Gandhi. I'm representing Godawari Power & Ispat Limited. Now I'm sure most of you must be aware about the Godawari Power & Ispat Limited. But without taking much of your time, I'll just give you a brief. Godawari Power & Ispat Limited is a part of Hira Group of companies in Raipur. The group is mainly engaged into iron ore and steel-related business besides some proprietary kind of real estate in the group, but mainly into the metals business, right from mining to finished steel. Finished steel capacities are substantially lower as compared to what we do in mining and pelletization. And along with that, we have ferro alloys business also from where the group had started way back in 1990s -- sometime 1986-'87. So the group started initially with ferro alloys business, small capacity, but at some point of time in '94-'95, became one of the largest player of silico manganese manufacturers in Central India. And in those days, it was -- Chhattisgarh was part of the MP and ferro alloys business acquired in 1996 because of the shortage of power in MP. And as a part of -- after that, the group had diversified into the steelmaking by buying steel billets from Bhilai Steel Plant and setting up rolling mills, selling wire rods in the market. That time the business was very lucrative. And subsequently in 2000, the promoters decided to set up an backward integration plant for making steel billets to do this sponge iron route, assuming that the iron ore and coal will be available at competitive price in that area. And of course, the year 2000 was like -- 2000 was -- we have seen the iron ore, steel industry recently in, say, 2015 to 2017 period where nobody was touching the industry. So that time in 2001, the Godawari was formed, and we initially commissioned the sponge iron facilities with captive billet and power by 2003. And after that, we expanded the capacity of making steel to 0.5 million tonnes from sponge iron and gradually increased the power generation capacities and the finished steel capacity. But by 2007, we realized that the way the raw material costs are increasing in India and given globally, it will be better that to hold -- to have a hold on the resources first rather than going the -- making -- expanding the capacity on the steel side. So we decided to set up an iron ore pelletization facility using the iron ore fines procured from the NMDC and other open sources. And simultaneously, at that time we were allocated 2 iron ore mines by the government of India. And we were in the process of getting the regulatory approvals. And finally, we started one mine producing in 2010, along with the pelletization plant. That time, I'll tell you, the iron ore prices in domestic market was rolling at about INR 9,000 a tonne. And iron ore fines was selling at about INR 1,500 a tonne. The conversion arbitrage during that period was substantially higher for making pellet. And that is the reason we decided to set up on pellet plant in Chhattisgarh and another one in Odisha. And subsequently, we expanded the capacity of pellet plant in Chhattisgarh by 2013. And we became a sizable player in merchant pellet in domestic market by 2013-'14. And by that time, we had about 2.1 million tonne of pelletization capacity in Chhattisgarh and 0.6 million tonne in Odisha. And pellet is one product, which has survived Godawari Power and has contributed to the highest amount of profitability in the down phase as well as in the upcycle like we have seen in the last 3 years. Currently, we have about 3 million tonne of pelletization capacity, 3.2 million tonnes, including 0.8 million tonne pellet plant in Odisha. Our finished steel capacity continues to remain at 0.5 million tonne from making sponge iron into the steel billet and wire rod about 0.4 million tonne. Along with that, we have some ferro alloys capacities within our group, which -- and those group companies are now part of GPIL because they've have acquired the stake in those companies in recent past and integrated with -- they became the subsidiary of GPIL. So we have about -- close to about 80,000 tonnes of ferro alloys capacity currently, 3.2 million tonne of pelletization and 0.5 million tonne from sponge iron to finished steel with about 100 megawatt of captive power through waste heat recovery, coal-based power and biomass. These are the mix. Along with that, we have recently commissioned 70 megawatt of solar power -- solar PV. And we are in process of commissioning another about 85 megawatt going forward by March 2023. So that is -- all this power is to meet the captive requirement for the steel facilities. So we'll be having about 155 megawatt of solar power, which will reduce the carbon intensity in the company. And in between in 2013, we had set up one solar thermal power plant. We were first in India to set up thermal power project of 50 megawatt. But recently, in March, we have divested our 100% stake in that company. And we are utilizing the same cash flow, about INR 650 crore, which we got from divestment of solar business, putting the same money into the solar -- setting up 155 megawatt capacity, which will help us improve our operating margins as well as give us the carbon neutrality benefit as well for making the current steel. Our turnover in March 2022 was close to about INR 5,000 crores and EBITDA was INR 2,000 crore. Of course, last year was an extraordinary period when we sold pellet at an average price of about INR 12,500 a tonne. It went as high as about INR 18,000 a tonne and low of about INR 8,000 to INR 9,000 a tonne. The pellet business continues to support the profitability of the company. Current prices are down after the imposition of export duty on pellet. It has come down from INR 11,000 to about INR 8,000 to INR 8,500 a tonne. And finished steel prices have not gone down to that extent, because whatever prices in the steel has gone down is in the net products. Long product, the price fall is about 8% to 10%, which has taken place in the last 1 month. We believe that the demand for steel is going to increase after the monsoon is over some time from October. And hopefully, prices are here to sustain looking at the fuel cost, which is there in the global markets. Because of the high fuel costs, we think that the bottom of the prices are there at the current level. Like sponge iron at about INR 32,000 a tonne, and finished steel at about close to INR 50,000 a tonne. So over to you, I would rather more be comfortable with the question and answer. So I've just given you a brief background about the company, and I would be happy to take the questions.

Thank you so much, sir. Very brief and very strong introduction. [Operator Instructions] In the meantime, sir, a few questions on what's happening in the market. And we'll come to Godawari Power also. Specifically, on the balance sheet, which you didn't discuss on the deleveraging and from what [indiscernible]. But in the market right now, on the pellet front, given the duties that have been enacted, what are you doing -- I think you were selling pellet in the export market. Is there -- how -- who are the -- I am guessing you're diverting it to more domestic customers. Who are the domestic customers?

100% pellet is being sold in the domestic market now, export is ruled out, because export is uneconomical now. We are able to sell -- there are 2 things in the pellet. One is the normal 62 grade, 62, 62.5, 63-grade pellet and 65 grade pellet. We are selling higher grade pellet to the companies like Tata Steel. We have sold it to Essar also. Few consignment, we have sold it to JSPL also a few consignment. So that is the side of the market, which continues, because the -- and 65 Fe pellet with low alumina reduces the coal consumption in steel making. That is the reason there is a demand and the price is also higher by about INR 1,000 a tonne for the low alumina pellet. Besides that, we have a lot of sponge iron manufacturers in and around our plant. So almost 80%-85% of the production -- salable production is consumed in the Chhattisgarh market. The small manufacturers, they do not buy now the iron ore from NMDC or the Odisha market. They prefer pellet because they can buy the raw material in the smaller quantities. We can supply them 50, 100 tonnes every day, depending upon their requirement based on their plant size. So the requirement of the working capital is less. So that is how we market our product within the domestic market. And therefore, there is a pressure on the pricing.

Yes, so which is definite, there is more supply in the domestic market which is leading to some oversupply effects on price. But these customers that you're selling to, these are all opportunistic short-term customers when the, let's say, export duty is lifted, you'll again start exporting to the international market? These are…

No. Given the chance, we would like to export about 600,000 tonnes annually in order to balance the market. If you see the current market conditions, within the area in which we operate, close to about 500,000, 600,000 tonnes of annual excess production is there. And to that extent, that if the production is sold in the domestic market, that brings the pricing on -- pressure on the pricing. So our aim would always be export about 600,000 tonnes of production, like out of about 2.1 million tonnes of our operating capacity, 600,00 -- 700,000, 800,000 tonnes we consumed captively, another 600,000 tonnes in the export and balance can be easily sold in the domestic market. Currently, also, we are producing at 100% capacity and selling in the domestic market, but definitely, there has been some element of pressure on the pricing.

Yes, sir. I think the end users have always complained that why do we have 0 duty on pellets and this duty, which is basically incentivizing people to be a converter of iron ore into pellet. Now that we have a duty on pellet, do you think that FTR duty on steel is lifted and potentially on iron ore the duty on pellet would also be lifted?

Frankly, I think everybody has made its case before the Government of India, the Ministry of Steel and Ministry of Mines. Now let's see what the decision is taken by the government. Earlier the export duty was there on the high grade and the lump ore, okay? But what you are doing in pelletization is you are utilizing the iron ore fines which is lying in abundant in India, which was sold at a throwaway price. Before the pellet industry came into the market, the iron ore was sold at a throwaway price from the domestic miners. And even the companies who are buying like us, we were buying lump ore, 1030, 1040 from the NMDC used to make the size door and sell the price at a throwaway price. So what pellet industry is doing nothing but value adding on the iron ore fines, which fine do not use in the domestic market otherwise. So -- or else, you'll have to export the iron ore fine. And this industry is then -- is generating a lot of employment as well. If we are doing iron ore fines, which is sold at about INR 4,000 to INR 5,000 a tonne, and if you're exporting the same product at INR 10,000 to INR 12,000 a tonne in the global market, your value addition is 200%. And the government is getting the revenue on that, employment opportunities are generated through that. And otherwise, if you see the overall dynamics in the industry, today, we have excess production in India -- iron ore pellet as well as the lump ore put together. So the production has to find some market or else the value addition facility will have to be set up to convert the same into the steel. And in steel also, we have a surplus steelmaking capacity in India. Unless you export that steel out of India, the domestic market will not get balanced.

So, you're basically suggesting that -- because there's also some questions around that if a duty on steel is lifted, due to an iron ore -- leaving pellet aside for a second -- but even iron ore would also be lifted, right? There's no argument for having a duty on iron ore and maybe removing duty on steel.

Yes.

Because that brings me to the question on sponge iron players. If the duty on iron ore is lifted, the iron ore prices go up. And I think they're already battling with high thermal coal prices. So sponge iron producers like yourself and other independent sponge iron producers -- you mentioned the cost base, INR 32,000. Whereas given the thermal coal prices where they are, is there an opportunity to replace South African thermal coal with any other coal right now?

No.

Is it because of the ash content and…

Because of the ash content and then the plant operating efficiency. We used to operate our plant almost for about 10 years on the Coal India, linkages coal as well as the e-auction part of it. By washing your already 30%-40% cost was going up. And after that, the plant efficiency is hardly about 60%-65% because your feed rate goes down. So imported coal is the only solution for DRI manufacturer if you want to operate the plant at a 100% efficiency.

So right now, you're saying sponge iron producers at current costs are not making money?

They are making about INR 2,000 a tonne -- INR 2,000 to INR 2,500 a tonne. That is what the range is.

And let's say…

Because the sponge iron prices have gone down. Prior to that, I think their margins was much higher than that. Pellet prices have gone down recently by about INR 1,000-INR 1,500 a tonne. And of course, before that, pellet -- sponge iron manufacturers were not making the money, because the -- most of the pellet was getting exported. So that is also true.

Well, let's say, if the iron ore…

At that time, the coal prices were very low. The dynamics has changed in the current financial year.

Absolutely. But let's say if the duty is lifted on iron ore and pellet, the iron ore prices go up. Coal is where it is. Basically, the entire rebar prices in India will go up if the duty on sponge iron -- on iron ore is lifted, right?

Rebar prices have fluctuated almost at about INR 5,000 a tonne. This is what is our understanding of the market is. It went up to about INR 55,000 a tonne. Maybe INR 60,000 a tonne for a small period of time, but otherwise, on an average INR 55,000 a tonne. And currently, it is in the range of INR 50,000.

And, sir, on the demand specifically after the export duty and, sir, where have we seen demand in the last 1 or 2 months? I think the expectation is given that maybe after monsoons, you see recovery. But during monsoon, is it typically like in any normal monsoon season you're seeing that kind of a seasonal slowdown or is it more acute than that?

It is more of a seasonal slowdown, more of a seasonal slowdown. And we are still making 65 Fe pellet, which nobody else makes in India, and therefore, we are able to sell our product. Because our dependency on the local market is very low, because high-grade pellet we are selling it to the large manufacturers. So there 100,000 tonnes if we are booking -- order, 2 months of production is there. So about 600,000 tonnes, if I'm able to sell it in the domestic market to the larger steel manufacturers, then -- to that extent also we are able to reduce the pressure on domestic market. If the export duty is removed that -- which we ultimately want to export. But then the European market and other markets should also improve by the time. So this is a scenario wherein you have to depend on the domestic market only, whether the export duty is removed or export duty is not removed. Because Europe will take time to come out unless Ukraine, Russia war goes and the energy prices come to the normal, the steel production is also going down in the European market. So it will be very difficult to sell there as well. Or else, you make commercial grade of iron ore pellet and sell in Chinese market. There also, there is a pressure.

But you made representation to the government on all these…

Through the association.

And the expectation is that something may be announced soon.

Something may be announced, yes.

Coming specifically to Godawari Power, sir, I think I'll start with what was interesting was the WHRS. What's your power requirement and how much is being met by WHRS right now?

42 megawatt. If you talk about the effective generation, say about 30 megawatt.

And how much is that?

Because WHRS we does not run at 100% capacity. WHRS runs at about 65%, 70% utilization.

Okay. And how much of your total power requirement is being met by WHRS?

As I said, 30 megawatt. 30 megawatts through WHRS, about 18 megawatt through the biomass, 20 megawatt effectively, say, about 18 megawatt through the -- your coal-based power, Jagdamba and balance through the grid, which is now partially replaced through the solar power.

So about 30% of your power would be met by WHRS?

Yes.

And that is the waste heat from…

Coal, which we are charging in the sponge iron plant.

From that, okay.

Yes, yes.

Sir coming to the balance sheet of the company, obviously reduced -- it's a net cash balance sheet, if I'm not mistaken.

Yes, yes, that's right. In fact, I forgot to mention in the opening remarks, we had piled up a debt close to about INR 2,200 crore by, say, March 2017. And of course, we had -- of course, defaulted during the period from June 2016 to March 2017 for a period of over 8 to 9 months. But that was primarily because of 2 reasons. One, the iron, steel and the iron ore market had gone down substantially. Your HRC was selling hardly about $350. Pellet was selling at about INR 4,000 a tonne in domestic market. And iron ore was selling at about INR 1,000-INR 1,500 odd. And during that period, we had done a lot of CapEx in 2013 to '15 period, including the expansion project on the pelletization site as well as 50 megawatt of solar thermal power project investing INR 800 crore, which we recently divested. So that took our debt to INR 2,200 crore, and that coincided, of course, with the lower market demand and the lower pricing. And our mining had not started to the extent we wanted. We were at that time producing about -- hardly about 600,000 tonnes of iron ore from the captive mines. But from April 2017 onwards, we got the additional approval from the Ministry of Mines and after that, our production in the mines increased to about 1.2 million tonnes and 1.5 million tonnes, 1.8 million tonnes. And now we are going, say, up to 2.5 million tonnes to 2.7 million tonne in the current year. So definitely, that period was very bad for us for a period of about 1 year. And that led us to the request lenders to restructure our debt without any single rupee sacrificed either on interest or on the principal amount. It was the elongation of the tenure, which we had sought from the lenders for a period from 5 years to 14 years. And of course, when the market conditions improved subsequently in plus -- the next 3 years, we liquidated the entire long-term debt and made the balance sheet debt rate from the long-term debt. We continue to enjoy some working capital facilities fund-based about INR 200 crore odd at a group level, and non-fund based facility will close to about INR 500 crores. But we do not have any long-term debt as on the date on our balance sheet.

And the promoter pledges…

Promoter pledge also released with the -- we had given some pledge to the lenders at the time of restructuring scheme approved by them, and some shares were -- initially, when the project loan was sanctioned that time some shares were given to them. The pledge is 100% released now.

And sir, then given the balance sheet, now you have a dividend also. And given you're seeing some difficult markets in the near-term, is there a threat to dividend for this year?

No. See, dividend will continue to be driven by the dividend policy which we have announced. We aim to distribute 10% to 15% of our profits to the shareholders. And rest will be redeployed into the business. We do aim to set up new integrated steel plant initially starting with iron ore pelletization and pig iron plant and subsequently the value addition side. But for that, we are awaiting the planned acquisition and environmental approval. Once that is done, then we will freeze on our project and the investment size.

I'll come to that in a bit. Just on the earlier expansion plan was having HR and CR, I think, and then you'd changed the plan. Maybe can you talk about that background for that?

No, background was -- the anticipation internally between technical team and our promoter was there that we'll be able to commission the -- about 1 million tonne steel plant within a cost of about INR 3,000 crores, some odd amount. But when they did the detailed working on that, they realized that it is not possible to set up the kind of facilities, which we are thinking of setting up with the HR and CR, and therefore, that idea was dropped, because the cost was working out to be much higher than -- more than about INR 5,000 crores odd about for a 1 million tonne plant. So the idea now is to start initially by utilizing the raw material from your captive mines, because our mines -- reserves are now established to the extent of 165 million tonne. So we gradually aim to increase our mining capacity from 3 million tonne currently to 5 million tonne and subsequently from 5 million to 7 million and 9 million tonne and use the iron ore for converting into the pellet and pig iron, and sell the raw material into the market rather there, and maybe go up to the steel billet at a particular level. But then those projects will be set up in the phased manner, keeping the investment at a time not more than, say, about INR 2,000 crores, wherein you are able to keep your balance sheet and fund the majority of debt requirement through the internal approvals only.

Sir, INR 2,000 crores, you mentioned the cost of the entire project or annual CapEx?

No, no, no. The entire project -- without the value addition side, pelletization, pig iron, and maybe some other facilities.

Okay. And the INR 5,000 crore CapEx you were saying for 1 million tonne plant, that was a greenfield integrated steel plant…

Greenfield integrated steel plant, yes.

And this was a new location you were looking at or…

New location we are looking at. We have already applied for the land acquisition and awaiting the approval from the state government.

And this is -- what would be the configuration of this that you're looking at?

No. Initially, as I said, we will be looking with the pelletization and the pig iron plant rather than -- the value addition, we will move gradually.

So right now, this is only till pig iron…

Up to pig iron, that is what our thought process is. But we will announce in due course once the land acquisition and environmental approval is received, then we will make a suitable formal announcement, what is the size of investment, what is the size of the project as well.

Okay. And right now, you have not disclosed even the location, which state or…

Location is in Chhattisgarh. It will be in the radius of about 50 kilometers from Raipur where our existing plant location is there. So our aim is to make it happen only in Chhattisgarh, not outside Chhattisgarh where we have our raw material.

Okay. And I'm guessing till the export duty is lifted, you won't look at that plant until there's more clarity on the export duty.

I think the export duty might get lifted earlier because the way domestic market conditions are there. And we will still take about a couple of months before the announcement is done, because the environmental approval and the land acquisition will take time. So at least not in this financial year. But we'll make an announcement latter part of this financial year.

Okay. And you're saying this would be -- you're targeting all -- the cash for that will be met from internal accruals, do you -- not look at raise any…

Majority it anyway. We may have to take some facilities, but negligible looking at the size of the balance sheet.

So you're looking at being a net -- almost net -- no debt balance sheet for a long period of time?

Yes. We don't want to. We have reached to the size, taking the debt. Then burnt our fingers also in between. So the aim is to now gradually build it up through the internal accruals.

And the iron ore reserves that you talked about, what is the -- when do these reserves lease expire? Is it 2030 or…

I think first mine was started in 2010. So from 2010 it is 50 years, so 2060, and we are in '22, another 38 for Ari Dongri and 3 years later for Boria Tibu. So close to about, say, 40 years approximately.

Okay. And the reserve size that you've been able to extend to 165 is largely through converting resources into reserves and exploration?

Yes, through the exploration.

And I'll stop for a bit to see if anybody in the audience has any questions.

But let me clarify one point. These iron ore mines were allocated under the captive route. So it's not a merchant mine. And we are not supposed to make the payment of any premium on the royalty. The royalty -- as applicable royalty is paid. There's no premium, which is applicable for the auctioned mine. So these were under the allocation route.

Yes, sir, understood.

Yes.

[ Jashandeep ] has a question. [ Jashandeep ] will go ahead.

Is anybody from the audience?

Sir, am I audible?

Yes. Yes, go ahead.

Yes.

No, I don't think…

Yes, yes. Go ahead.

Yes, sorry. So the company has stated that it wants to become carbon neutral. However no roadmap or timeline has been provided. So if you can shed some light on the possible timeline and possible CapEx required to become carbon neutral, that would be great, sir.

See, we are currently working on that strategy. And hopefully, by the con call for December, we should be able to give you a roadmap on that. Our work-in-progress is there. We want to become the carbon neutral in steel, that is right. We have said that. And the roadmap is under work-in-progress currently. Hopefully, by December or March quarter numbers, FY '23, we'll be able to give a complete chart on that.

Okay, sir. And sir, one more question. So we are setting up solar plant as well. And you mentioned a part of the dependence on grid will be replaced by solar plant. So what type of cost saving are we projecting in our future cash flows?

See, if you see the current cost of coal, even the linkages coal and the coal through the e-auction, because you don't get the 100% of the linkages. And if you are producing the coal power -- coal-based power in smaller projects -- say, maybe 10 megawatt, 15 megawatt, 20 megawatt capacity turbines, your cost is not less than INR 4 to INR 4.5 per unit. That is the minimum -- bare minimum cost. But if we are setting up a solar project, your cost goes down to about -- on a variable side, hardly about 25 to 30 basis point. The only requirement is large land area. And for your information, we have a large land area available with the company fully paid for it, close to about 1,000 acres in Raigarh District, which we had originally acquired for setting up an coal-based power plant. But that is confined to these 3. And we want to utilize that land for setting up solar projects going forward, even for our expansion project. And the current projects which we are setting up, we have recently acquired the land for that.

So sir, if I'm able to understand correctly, the variable cost goes down by 25 to 30 basis points. If we are not putting in a large area. Now, we are saying the 100 acres area land will be used for solar power, so what's the incremental saving can we expect?

Sorry, sorry?

So about this…

See, whatever capacity I'm setting up currently, if I've understood your question right, will give me close to about INR 180 crores of EBITDA on an investment of INR 650 crores. For next phase -- when we go for next phase of our steel plant, that time we'll decide for the future solar project expansion. Whatever I'm doing currently, I'm just replacing whatever I was sold 50 megawatt solar thermal, I'm putting the same amount of money for setting up captive solar power, wherein I'm increasing by EBITDA from INR 100 crore to INR 180 crores.

Understood, sir.

So we got about INR 650 crore by divesting our IPP 50 megawatt in which we were selling the power to the NTPC. We are now -- we'll be utilizing the same power for an increased requirement in the steel plant. And partially, we are already buying from the grid and grid rate is INR 6.5 per unit.

And sir, any timeline on the consolidation of Jagdamba Power & Alloys?

Jagdamba is already completed. We have acquired that power plant. That will be the only coal-based power capacity going forward with us, 20 megawatt Jagdamba and about 20 megawatt we have in our ferro alloys business, Hira Ferro Alloys. Other than that, most of the power will be through the renewable resources.

Okay, sir. And just talking about the leverage. You had stated to [ Satyadeep ] as well that you want to be a net cash or maintain your leverage, right? So when we target leverage ratio, debt equity ratio that the company start keeping internally, if you can provide us the detail on that.

See, frankly, we have not taken a formal decision on this. But our aim is on a debt to equity side of not more than 0.5%. Or if you talk about the debt-to-EBITDA, it should not increase more than 1x.

Maybe just I'd give the participants also -- see if anybody has any questions. If anybody has questions, please raise your hand or type your question in the chatbox. I wanted to ask about the iron ore capacity increase that you have talked about to 5 million tonne and potentially 9 million tonnes over time. Is that -- have you already applied for [ CFC ] approval for that?

No, we are preparing for it. We are preparing from -- because we've got 2.3 million tonne approval recently for Ari Dongri expansion. Now we want to file for Ari Dongri expansion as well as Boria Tibu expansion and for which the -- whatever initial mining plan and other reports are required to be submitted that is being prepared, and then it should be submitted within this financial year.

In the what…

Our aim is to increase the capacity of iron ore mining, coinciding with our next phase of steel expansion where our raw material requirement will be increased. Currently, we are self-sufficient now.

So you sell the iron ore in the merchant market, right?

No, we do not sell. We are allowed 25%, but we don't sell and we don't aim to sell it.

Okay. Entire 100% is…

100% will be for captive requirement.

You said that you produce 65% pelletized, your iron ore grade is very high from the mines.

Well, iron ore grade is 62, but initially, you can say, average 60. We are required to beneficiate it. Initially, because you are -- whatever expansion we -- recently, we have got the approval. There's a lot of overburden which needs to be removed. So the grade initially is lower. And as you go deeper, the grade will increase.

And I'm not sure if you can discuss, maybe just ballpark, what is the cost of beneficiation typically operating cost of…

Cost of beneficiation other than the cost of mining will not be more than INR 300 to INR 400 a tonne, besides the capital cost.

Okay. And you said you are one of the few players who sell 65% grade pellet in…

Yes, yes, yes. 65% with low alumina. There's no iron ore available in domestic market as far as our information goes with the low alumina, alumina less than 1%. Normally the iron ore has 3% alumina.

Sir, how much South African coal do you need on an annual basis for your operation?

On an annual basis, say, 500,000 tonnes capacity, close to about 400,000 tonnes, 0.8 is the consumption.

0.8. And this is -- and for -- you've not seen any availability challenge as such for South African coal.

In fact, until August we had tied up with -- we were not buying the South African coal off late. For the last 6, 9 months, we had been buying the same quality of coal from one Australian mine with whom we have tied it up for about 6 months of our requirement. 100% of their mining used to come to us. So last consignment will come, I think, in this month.

The last consignment?

Yes, in this month.

So that this…

Yes. And that was linked to certain exchange rate with some discount because we had given them some advance money to them.

Do you think this is sustainable, you can replace South African coal with Austrian coal or…

That we are in discussion with the same mine owner. Once the agreement takes place or the formalization takes place, then only I'll be able to tell you on that.

But productivity-wise, there is no…

Productivity-wise, there is no problem. And it is cheaper than the South African coal.

And ash and all is not an issue.

No, no.

And what about Russian coal? Is it possible to replace Russian with South African?

We have been targeting that as well. But no commercial agreement has taken place as yet.

Well, I'm guessing because your prices are at a discount there.

Yes. But we are targeting it, but no commercial agreement has so far taken place.

Because we were under the impression that the -- it is difficult to replace South African coal because of quality for sponge iron, but you're saying…

No, no. There are select mines, which can supply you this kind of coal, which is South African coal. And in Australia, we got hold on one mine. And there some -- they wanted some money in advance, so we had paid them some money and had purchased the coal on a discounted rate linked to the exchange price, certain discount on that.

Okay. I'm guessing there's a mine there. I'm guessing there's going to be a lot of competition for that mine.

Yes.

But I think the -- doesn't look like we have any more questions. But I'll -- and thank you, sir, for coming and discussing the story of Godawari Power & Ispat. Thank you for your valuable time and your insights, and thank you for all the -- to all the participants also for joining in. Thank you so much, sir.

Thank you, [ Satyadeep ]. It is my pleasure, always. Whenever there is such opportunity, we'll be happy to participate. There's no problem. Thank you very much.

Thanks.

Thank you, sir.

Okay. Thank you, everyone.

Thank you.