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

Ladies and gentlemen, good day, and welcome to Godawari Power & Ispat Limited Q1 FY '25 Earnings Conference Call hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Lahoti from Emkay Global Financial Services. Thank you, and over to you, sir.

Thank you, Aditya. Good afternoon, everyone. Welcome to Q1 FY '25 Conference Call with Godawari Power. From the management side, we have the with us today Mr. Abhishek Agrawal, Executive Director; Mr. Dinesh Gandhi, Executive Director; and Mr. Sanjay Bothra, CFO. I will now hand over the call to the management for the opening remarks. Over to you, Mr. Gandhi.

Thank you, Amit. Good afternoon, everyone. I welcome you all to the earnings conference call of Godawari Power & Ispat Limited to discuss Q1 FY '25 earnings results. Our financial results, press release and earning presentation is available from the website of the stock exchanges as well as the company. I believe you had a chance to review the same. I will take you through the results posted, we will have a question and answer session. I'm delighted to announce that GPIL has delivered a strong performance in Q1 FY '25, marking great beginning to the new financial year as we celebrate 25 years of our journey. The profitability increased significantly mainly due to cost reduction benefit on account of debottlenecking CapEx done in the earlier year and commissioning of iron -- sponge iron, steel billet capacities, et cetera. Coming on the operation -- coming on the operational performance for Q1 FY '25, and we'd like to share that the company is on track to achieve the volume guidance given at the beginning of the year. The production -- achievement of production volume is available in our presentation. Production volume across divisions are higher on Y-o-Y basis. Captive iron ore production was higher by 3% Y-o-Y lower 9% quarter-on-quarter. Production volume of iron ore pellet was higher by 24% Y-o-Y, 3% quarter-on-quarter. The negative production volume of other Iron and Steel Products was higher by 5%, decrease 4% quarter-on-quarter. Captive Power generation increased by 52% Y-o-Y whereas the same increase 11% quarter-on-quarter. In view of the increased production volume, sales volume numbers were higher across the region. Sale of Pellet increased by 49% Y-o-Y, 9% lower quarter-on-quarter. Sale of other Iron and Steel Products were higher by 4%, [ 7% ] and 9% quarter-on-quarter. The realization of iron ore pellet increased by 3% and 4%, respectively on Y-o-Y and quarter-on-quarter basis to INR 10,500 a tonne. Realization for finished steel products decreased in the range of 5% to 6% on Y-o-Y and increase 7% to 8% quarter-on-quarter basis. Coming on the consolidated financial performance, revenue from operations net of trading sales increased by 12% to INR 1,342 crores on Y-o-Y basis due to increased production volume and sales and realization of pellets. Quarter-on-quarter revenue declined due to reduced sales volume resulting from maintenance shutdown on steel [indiscernible] and discounts. EBITDA increased by 33% Y-o-Y and 24% quarter-on-quarter basis to INR 408 crores. This is primarily due to higher volumes as well as cost savings and operating leverage on account of debottlenecking done by the company in the last 2 years. EBITDA margin increased significantly to 30% as compared to 23% in Q1 FY '24. PAT increased 24% and 31% Y-o-Y and quarter-over-quarter by INR 287 crores. GPIL has a healthy balance sheet with net balance as on 30 June was INR 1,261 crores. Update on the CapEx plan and other strategic matters, as you are all aware, the company has taken growth plan by nearly doubling the iron ore mining and pellet capacity setting up an integrated steel plant with 4x current capacity. In this result, I would like to obligate that increasing the mining capacity from 2.35 to 6 million tonnes, setting up the 6 million tonnes beneficiation plant. Rest of the approvals are expected to be placed by December '24. The project of increasing pellet capacity from 2.7 MTPA to 4.7 MTPA is running on schedule and is expected to be commissioned by June 2026. The company has received the permission to establish for additional pellet capacity along with associated facilities. With regard to integrated steel plant of 2 million tonne capacity, the public hearing for the same has been completed is reported earlier. Environment impact assessment study is now finalized as we filed with the MoEF for final presentation. The process is expected to be completed by December '24. After receipt of environmental approval, consent to set up the steel with state pollution authorities, the production -- the implementations will start after the mining lease for project land is executed with the government authorities. The project will take about 36 months from the groundbreaking ceremony. I'm happy to announce that modification of Rolling Mill for the manufacture of Structural Steel has been completed and the production of Structural Steel has been started. The Structural Steel will be partially used for captive -- manufacturing of Galvanized Fabricated products for supply to various agencies like Indian Railway, Power Grid, discom, et cetera, for which company has applied to the said uses for approval as an approved vendor for the supply of Galvanized product made by the captive iron rolling mill as well as the steel billets from GPIL by the existing manufacturing facilities. These two rolling mills unit is already registered with Indian Railways and other authorities for supply of Galvanizing. We were earlier procuring the Structural Steel from the market and supplying it. Now with our captive steel billets as well as the roll product, it will be supplied which will be substantially cost and value accretive. The strip mill, we are also commissioning an strip mill along with this rolling mill with a separate line, and that is expected to be commissioned by September. After that, our ERW pipe grade will source the [ increase ] from the captive unit. Coming on the update on solar projects, 20-megawatt captive solar power plant for meeting the power requirement of the rolling mill and fabrication division has been completely synchronized. Further, GPIL has planned to set up an additional 70-megawatt solar power project to meet the power requirement of the upcoming pellet plant, which we expect to commission by Q1 FY '26 coinciding with the commissioning of pellet plant. For this project, the company is in process of acquiring the land for the same. GPIL has been working towards the net zero carbon emission has now laid down a clear target of becoming net zero illusion by 2050. Last 2 years, company is focusing on the increased power requirement through captive solar projects, which has resulted in carbon reduction from 2.75 tonnes CO2 per ton of a steel in FY '22 to 2.43 tonnes in Q1 FY '25. Further company is initiating various energy efficient key and decarbonization projects like focus on energy-efficient and R&D projects to cut on CO2 emissions by 9% by switching the fuel in the new pellet plant from coal gas to natural gas. And also utilizing the waste gases of pellet plant and other units to generate additional power. The Board has approved an investment of INR 75 crores for this project with the efficiency project, which will generate an additional power of 11 megawatt without requiring any additional fuel. The project -- expected payback for this project is about 2 years with a cost saving of INR 38 crores per annum and this is expected to result in additional carbon reduction intensity by 259,415 tonnes. As a part of the simplification of Group structure, the company has further increased its stake in Alok Ferro Alloys from 78% (sic) [ 78.96% ] to 88.34%. This is direct stake held [ 97.62% ], along with the stake held through Hira Ferro Alloys Limited. GPIL has always attempted to reward its shareholders through consistent dividend payment, buyback, bonus, split of shares, et cetera. Following the same thought process, the company has recently completed buyback of 21.5 lakh shares at a price of INR 1,400 per share in July '24. Board has further approved special dividend of 25% on face value of INR 5 per share each on the occasion of 25th Anniversary of GPIL will falls on 21 September 2024. The board has further approved the split of equity share from face value of INR 5 per share to INR 1 per share each. Coming on the market outlook . On the international front, global iron ore prices have dropped to around 1,000 -- sorry, $100 dollar per tonne from highs of $144 per tonne for January '24. Property sector in China continues to weigh on the steel sector and sentiment. However, based on industry reports, sea borne iron ore market remain in deficit for FY '25 and should help stabilize the prices around current level. World Steel Association is forecasting steel demand to grow by 1.7% to 1,793 million tonnes in 2024 and another 1.2% to 1,815 million tonnes in 2025 despite China's steel demand plateauing. Iron-ore supply is largely stable in 2025. Rio Tinto's project in Guinea is expected to start in December '25, depending on it's ramp up. Some surplus can happen in 2026. On the domestic front. Iron ore prices, NMDC [ Fe64 ] has seen a significant increase to INR 4,610 (sic) [ INR 5,110 ] per tonne up from INR 3,660 per tonne in January '23. The NMDC has reduced the prices yesterday. The prices have recovered well from the lows seen post imposition of export duties. On the other hand, pellet prices touched a high of INR 11,000 per tonne during the year in June '24 and has dropped correctly to around INR 9,000 per tonne mirroring global prices. India remains one of the bright spots globally for the steel demand. WSA forecasts India's steel demand to increase by 8.2%, in '24 and '25 144 million tonnes and 156 million tonnes respectively. WSA predicts India's steel industry will experience significant expansion, propelled by sustained growth across all sectors reliant on steel industry, particularly driven by robust infrastructure investments. The current falling domestic steel prices in the recent past is mirroring the impact of increased import from China and heavy monsoon impacting the construction activity. To conclude, I extend my heartfelt thanks to all employees, regulatory authorities, stakeholders for the unwavering support throughout the journey of our company for 25 years. I'm also grateful to all the shareholders and the investors community for their continued support ever since listing of the company in 2006. We look forward to ongoing support from all our stakeholders, coupled with our experience promoters management team and solid balance sheet, operational efficiency, advancement of -- advantage of captive iron ore mines and mid-cap CapEx [indiscernible] for a significant growth in years to come. With this, I conclude my opening remarks. We will now open the floor for question and answer.

[Operator Instructions] Our first question is from the line of Amit Dixit from ICICI Securities.

Congratulations for a good set of numbers. I have 2 questions. The first one is essentially on the integrated steel plant and the proposed capacity expansion of 2 million tonnes. Now in the past, as well, at least if I recall correctly 4 years back, we had a similar endeavor to expand. I think at that point time it was 3 million tonnes capacity. And now this is an integrated steel plant that we are talking about. So I just wanted to understand the final product configuration of this, what kind of products are you targeting for overall sector?

See on the product side, currently, so we are very much looking at flat products, which is HR coils. Since we're already into long products, so we have no intention of getting to long products. So we are focusing on flat products for the new steel plant of 2 million tonnes.

So will these be narrow coils or your typical...

It will be narrow coils, which will be -- so that, which we will be able to -- so what we're targeting is we should be able to produce right from 1mm thickness and the width should be 12.50 mm above, so up to, say, [ 15mm - 16.50 mm ] so the entire range from narrow as well as to the wider ones.

And in this present configuration that you have thought about, you are stopping at narrow coil, there is no intent to go...

No, there is no narrow coil thought. We will -- we are focusing on the wider strip, which is used for all the applications, automobile and piping, everything else.

Okay. And we also want to go further downstream by putting cold rolled coil, let to say at some point in time or...

Yes, of course. So with the current environment permissions which we have applied, so we have included the downward stream as well, which is the cold roll and the further processing. But at this stage, we will stop at making hot HRC. And going forward, we will start investing in downward technologies. That's what I get...

Typically blast furnace route.

See, at the moment, so because of the economics of the location and since natural gas is imported into India, so gas with DRI commercially becomes quite challenging to achieve the desired number. For the moment, it's going to be blast furnace but of course, we will be currently working with other industries to see how can we replace [ coke ] with other technologies going forward.

Okay. Wonderful. The second question is on Galvanized Fabricated products, pretty interesting product, if I look at it. But the sales volume, we have seen that it declined Y-o-Y and Q-o-Q as well, I mean, and then we also saw that among all your products, Q-o-Q realization for this product also declined though it's the premium product. So I just wanted to understand that whether it was only because of elections or there is some other thing that is also happening.

There were 2, 3 factors for the lower volume. One was, the state election, and right next there was country election. So that was one part of it. But apart from that, so there are also a small mishappening, there was fire incident in one of the [indiscernible] because of which entire -- one line was down. Luckily, there was no harm, but still it took time to come back to online. So that's another reason though it was a small incident. And third was, since we are still buying billets from the market and actually more with the conversion again. Now with this commissioning of mill, the margins will go up substantially, and that will also help to increase our volumes. So there are 2, 3 factors to -- for the volume to go down this quarter.

Our next question is from the line of Vikash Singh from PhillipCapital.

Congratulations on good set of numbers. Sir, my first question pertains to the operating performance, while the volume and realization was down. Our operating performance has improved largely on the other expenditure. So what are the items which are different from the previous -- on a Q-o-Q basis -- largely on the power cost.

Yes, mainly on power cost because the commissioned -- our power generation is higher by 52% and the solar capacity, which is commissioned in the last year, new turbine, everything is aiding to be operating efficiency.

There is one more thing, which is adding to that difference in the operating costs is so last quarter, there was a decent amount of volume of export of pellets raw out of India. So the way accounting method is for integral exports, so the additions comes at the selling price, but the entire cost to deliver to that port comes in operating costs. So that is why there's difference also in the operating costs for this quarter compared to the last quarter. For this quarter, there were no export volumes of pellet.

Understood. So even considering that -- we should assume that the larger part of the operating cost decline would be sustainable because it came -- majority have came from the power side and only few from the...

Yes, definitely. So going forward, with the current coal dynamics and with our completion of our backward projects in terms of power, we think we can maintain this operating cost going forward as well.

Understood, sir. Sir, my second question pertains to our growth CapEx. If I just look at the Slide 9 of your presentation, our Crushing and Beneficiation plant was supposed to take 15 months from the environmental clearance. While our Pellet and Iron Ore mining probably would come earlier, so is that -- we can assume that we would -- for the pellets, we will support pellet from the outside iron ore sales or alternatively look at it, are high-grade pellet sales would decline for few quarters significantly. How should we...

No. I think there is probably some confusion understanding. So my current mining, let's make expansion and the beneficiation in the mine and my credit fund, all this will come into operation steadily in sync with each other. So because the beneficiation that we're putting up in the mines is mainly for beneficiating the BNQ, which is the lower quality iron ore. But apart from that, we're able to raise the production of our iron ore grade, which is high grade. So that will keep supplying to my pellet plant. So if everything goes well, we are confident. We will not be in a position to buy iron ore from the market, next, which is for FY '26.

Understood. Currently, we are buying that Boria Tibu...

We are currently after once -- since we have shut our -- one of our mines last year. So we are currently buying about 20%, 25% of the requirement from the market.

Understood. And sir, my third question pertains to our JV. If you look at that, we have 3 JVs shareholding between 30%, 33%. So do we have the -- does that JV has the option for us to buy out our stake in those JV in future point of time or we would something similar to what we have done 2 years back in the consolidation of the group. So just wanted to understand, is there an option for us to buy out those JVs and who are the partners there?

Vikash, I think you are talking about Raipur infrastructure, expected [indiscernible] captive coal mines [indiscernible]. Now Raipur infrastructure, there are 3 partners, Sarda Energy, Godawari Power and there is a company-called Vandana Global. We are in the process of winding up this company, or distributing whatever surplus funds are there. This JV is not operating. It's a nonoperational company, and we are in process of winding it up. As regards to Chhattisgarh Captive Coal Mining, similar process is being updated, except that in the anticipation of recovery of some money, we are holding on to this company. Otherwise, this is also a nonoperating company. And Chhattisgarh Ispat Bhumi is a no-profit organization. This is a JV between the industry -- operating in that industry area, Siltara industrial area and government of Chhattisgarh, and it's a nonprofit organization. It is for the management of the industrial area. So all these companies are not contributing anything to the profitability or revenues, et cetera. So two will get wind up, one will continue to stand the way it is there.

Understood, sir. Sir, just one last question. I'm slightly surprised with the kind of the realization call basically, which we have experienced because a couple of our peers have seen the realization gain on the sequential basis. So just wanted to understand that is there any timing difference what we are experiencing right now because some of the quantity probably was prebooked and we couldn't get -- enjoy the higher prices, which had during April, May though something else in there? And secondly, how should we look at the realization in 2Q and the cost of production in 2Q?

So Vikash you are talking about quarter-on-quarter realization or year-on-year?

Yes, sir. 4Q versus 1Q. So 1Q realization for Sponge everything was 5% down. But if I just look at the steel prices of the [indiscernible] or a couple of your peer group who operate in the similar vicinity, they have shown Q-o-Q realization improvement. So that was a surprise that why it hasn't flown to us.

See, especially in steel billet and MS Round, there is a production volume degrowth. And maybe it was a piling train. So there could be this difference would be because of the timing of the production fall at maintenance shutdown, it could be one -- Q-o-Q realization was higher by 15% -- sorry, sorry, [indiscernible] realization -- Q-o-Q realization across the division is higher except galvanized fabricated products. So iron ore pellet is Q-o-Q 4%, sponge iron 7%, steel billets 7%, MS Round 7%. So Y-o-Y number, you are referring to...

No, no, I'm referring to the quarter-on-quarter numbers, 4Q versus 1Q, we had on an average 4% to 5% fall in the realization.

This is Y-o-Y, not quarter-on-quarter.

Yes, sir Y-on-Y, exactly.

This is Y-on-Y, not quarter-on-quarter. So [indiscernible] numbers in presentation again and we can discuss offline also if you cooperate.

I'll call you offline. And how should we look at the realization of spot basis versus and cost spot basis versus what we had experienced in the 1Q FY '25?

See, definitely [Technical Difficulty] and that we continue to do the [indiscernible] down market, but still [indiscernible] because of strategy of DRI in Chhattisgarh region. There will be [indiscernible] total and so the license period compared to [indiscernible] and we can expect a Q1 realization [indiscernible] continuous to sustain.

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

So my question is on iron ore mining expansion side. So as you said that we are expecting an approval from December '24. So how much ramp-up you expect in Q4. And any color if you want to put on FY '26, usually how much time it takes to ramp up that mine.

In the guidance, we have given 2 million tonne [indiscernible] basis. We have assume there will be some production of additional capacity throughout this financial year because the current mining capacity is 2.3 to 2.4. So expect we should be able to achieve 3 million if that was heading in place by end of Q3. And from FY '26, we should be able to ramp up the capacity at a much faster pace and coincide with our Department of the pellet lot.

Okay. Understood. And just one follow-up on the cold rolling and further downstream assets for your steel plant of 2 million tonnes. So our current CapEx is INR 6,000 crores, is it -- does it include CRM or it is on the approval...

No, no, no. So as I mentioned [indiscernible] for cold rolling, there will be no downstream products in the first page, but we will add through the same conditions. So in power we will start [indiscernible] down later. The first is we are going to take some [indiscernible].

Okay. Understood. And last question is -- if we are seeing the weakness in international iron ore prices, and currently, they are hovering near $100 per tonne. And there were reports that Simandou iron ore mine is also expected to come in future, which will increase the supply of iron ore in global markets. So from that perspective, how do you see the pellet prices, which for our pellet prices, especially the price trend for future?

See, when it comes to Godawari per se. So from already past few months, [indiscernible] between the best pricing for Godawari and export market Godawari because [indiscernible] capacity which people are building up in Chhattisgarh, there has been no addition of [indiscernible] indication in terms of pellet supply or additional iron ore. The [indiscernible] has been the same, which is an NMDC and [indiscernible]. So we feel, do we [indiscernible] iron ore in this area, the [indiscernible] build be on the higher side effective for the domestic [indiscernible] of the industrial market. For today example also they will get $20 more by selling in domestic compared to the industrial market. So we are not in the industrial market for the last few months. And going forward, we don't think so, we'll be in a position to, even think of export. Domestic is quite strong right now in terms of iron ore.

[Operator Instructions] Our next question is from the line of Jatin from Swan Investments.

Yes. So I mean just wanted to understand the key reason behind the sequential decline in the overall production volume because once you [indiscernible] in the opening remarks, you indicated it because of the de-bottlenecking response on the below, there was a benefit during the quarter. But if you look on the overall volume, we have seen a decline. So what was the reason behind that?

The reason was the plant has annual shutdowns for the entire year -- monsoon and depending on the retirement of the [indiscernible] when you [indiscernible] we need shutdown the units. So quarter 1 for our there is [Technical Difficulty].

So in terms of the operating efficiency, the benefit of the power that we actually had in the last quarter that will now continue for the remaining part of the year.

[indiscernible].

Yes. And sir, last question. I mean we have seen the delays in getting approval. And as per our latest update, we expect it to -- we expect the mining approval and integrated plant approval to receive by December '24. So I mean, is there any further requirement by the center or by the state in terms of giving the approval that can be expected because the approval...

[indiscernible] EC from there and then a better [indiscernible] board. So the positive fact so many to flags and due to last one there was elections [indiscernible] will get say delayed, but which is we are really done. We are trying our best to move as such as possible. So we are confident we as committed by Q3, we should have the approvals in place.

[Operator Instructions] Our next question is from the line of Manav Gogia from Yes Securities Limited.

Congratulations on the strong set of numbers. So one question I wanted to know, would you be able to quantify the average imported coal cost per tonne for the quarter?

You mean Q1?

Yes, Q1.

So you want [indiscernible] DRA cost or you want the landing cost of the raw material.

From a landing point of view.

Okay. So landing point of view, our average cost in Q1 was about INR 12,500 -- sorry, INR 11,500.

And how has it shaping up in Q2 right now?

Q2 is more or less same because we do a lot of planning in terms of -- we maintain a winter of 2 months. Q2 is -- looks on a similar level. There might be slight increase in Q3 with the current national market, but demand is we are confident the market should pull back. But Q1, Q2 are on the similar lines.

Okay. And sir, one question on the realization for me. I don't know if I missed this. What sort of corrections are we seeing in terms of pellet pricing and long product pricing as of now during the monsoon.

See, as of now, as around 8th of August, so prices are down by almost 10% compared to last quarter. So on acute numbers, there is about INR 44,800 [indiscernible] steel billet is about INR 39,000 back to market, so there's a [indiscernible] of almost 10%.

Our next question is from the line of Chirag from New Asset Management.

So wanted to understand that traditionally, you have been a long steel producers. So what was the real incentive for you to diversify, do plans and how you plan to compete with them even in the flat steel production. And what could be a cost of production for HR coils.

See, the reason for the diversify of steel seeing the long market, there is a huge supply from secondary market as well, right? [indiscernible] in wire into [indiscernible]. So secondary market is quite big in India, which consider almost 40% of the entire key production. And that market is growing. But the secondary steel market cannot venture -- cannot make a flat product quality material. So that is the reason to diversify through a flat product to move away from the competition and feel the demand because of the automobile and with the infrastructure growth. We got -- get into flat is much beneficial compared to nonproduct. And if you also price in the last 4 years since COVID. So flat is almost INR 4 or INR 5 higher in terms of [indiscernible] compared to a long product of tiny players only. [indiscernible] INR 50,000, so that's why we go for INR 55,000, so that's also another reason we've ventured into flat, we want to enter the flat product.

So how much will be a cost of production for HR coil?

See, the operating cost is about [indiscernible]-- between INR, 2,000 and 2,500 piece. But of course, depending on other ones, it's difficult in size. But yes, operating costs are only about $30.

And so since you are setting a blast furnace and you know going forward there are lots of issues coming out with respect to the position coming from the blast furnace and all. I have asked to go towards electric arc furnace or will you still stick with the blast furnace.

See, it's very, very difficult to comment. Right now, we want to -- mining in pellets. We don't want to be only pellet players. It's better to hedge your iron ore bet. So we want to use iron ore premium [indiscernible] the value we have and it value-added, so that is the reason. And because of import and natural gas, currently, the blast furnace is viable commercially. Importing gas and making steel through DRI route, it's quite expensive at the moment because of import of natural gas into India. So we see Middle East for reason. Middle East has cheap gas, but they don't have iron ore. So they import iron ore, but they have their own gas. So it's all about location dynamics. So currently, we will proceed with the blast furnace only and finally will explore with other than the steel dump of carbon structure [indiscernible] throughout the world.

Our next question is from the line of Chirag Singhal from First Water Fund.

Congrats on good set of numbers. There's couple of questions. First, on the integrated team. So what is the effect on lesser expecting from this plant based on the normalized [indiscernible]?

So sorry, come again, please? Can you please repeat the question?

Yes. What is the effect on for the integrated steel plant based on the normalized [indiscernible]?

I'll take up. Chirag you're asking about the asset turnover. So if you set up a 2 million tonne capacity and just for example, the selling price of INR 50,000 a tonne, it comes to about INR 10,000 crores turnover and CapEx is INR 6,000 crores based on our estimate. So it is more than 1.3x, 1.4x.

Okay. Got it. And is this expected to come sales wise or we expect this entire capacity of 2 million tonnes will be online by end of FY '28?

No. So it is going to come, everything going to come together because it indicates capacity, so everything will be going up together.

Okay. And just one more thing on coal consumption cost. So what was the coal consumption per tonne in Q1? And what is the trend in the current quarter?

Coal consumption in terms of pricing or in terms of especially consumption?

No, in terms of the consumption cost for the company.

My forecast, as I mentioned earlier, the forecast is domestically [indiscernible] from second half of Q1 and continues to -- so coal cost will be slightly lower compared to Q1 because our imported coal costs almost remain the same, flat. So we can see a slight reduction in the coal cost for 2Q.

Okay. Can you quantify like how much would that be maybe in the...

Monthly, we consume about -- last time monthly, about 90,000 to 1,00,000 tonne on a monthly basis units, so 50% is imported coal which will remain flat and other 50% is domestic, there will be reduction in that cost.

[Operator Instructions] Our next question is from the line of Chintan Patel from an Abans Investment Managers.

Congratulations on a good set of numbers. Sir, currently, we have a captive power plant around 236 megawatts, which can save up to INR 200 crores of power cost. And we are adding another 70 megawatts on the solar side and 10, 11-megawatt on waste gas side. So put to all together, what would be cautious on a power side?

See, currently, so there is a slight [indiscernible] decision in pending. Our current solar capacity stands at up 145 megawatts, which is already operational.

Now it is 165 megawatts.

Yes, and another 70 megawatts will be in pipeline. So that will make it to 235 megawatts, 240 megawatts. And on the captive side, we have about 28 megawatts of biomass, then we have 42 megawatts of gas base, and the remaining is cold-base. So if you want to know the average power cost till date today average power cost -- everything is about INR 3.50. And on the addition of the -- taken up a 10-megawatt and further solar, it will further come down going forward.

So how much will it come down?

We expect to be about something about INR 3.1 going forward once everything is up and about.

Our next question is from the line of Rakesh Roy from [indiscernible] Omkara Capital.

[indiscernible] justified. So how much [indiscernible] realization increase year-on-year in quarter 1, quarter 2, [indiscernible]. So this is due to higher grade period in this quarter or just any other region?

No. So see, our volume of the charges of high-risk pellet and the number that has remained the same for the year. But in Q1, especially since there was an increase in steel prices plus as I mentioned due to a shortage of iron ore in the domestic market, especially in this Chhattisgarh region, the prices were on the upside compared to last quarter. And Q2 also remains on similar levels.

Okay, sir. And sir, my last question, sir, [indiscernible] NMDC removes iron ore prices so this may impact on our future evaluation in Q2 or Q3.

It's very difficult to comment because usually we have an order book of anything between 30 to 45 days, plus iron pellets, I sell [indiscernible] it attracts premium. I don't think NMDC pricing really expects on pellet sizing because we have a few customers who really demand our pellet because of the quality we make. So, I think we should be able to achieve the current realization in Q1.

[Operator Instructions] Our next question is from the line of Pradeep Rawat from Yoga Capital.

So we have 2 mines and one of the mine, Boria Tibu mine is currently nonoperational. So when could we expect commercial production from this facility?

See, as we mentioned last time as well, so we are working on turning the integrated plant inside the mines and start [indiscernible]. Because today, drilling, mining, milling the quality of what we are getting, it's not commercially viable. So we are working on the [indiscernible] plant. We have started working on the desired approval. So fully, I think by once the new steel plants, which gets commissioned in, say, FY '28 or FY '29 whatever, we are trying to coincide the production of the mine with that. So you can say in 3 years from now on, the mine should be operational, big beneficiation.

So we would be sending raw material from this mine to our key plant.

No, no -- exactly. So we will be beneficiating. We'll be making a rate which is technically usable and then we'll be transferring to our new steel plant. That's the whole plan. That's whole idea.

Okay. Okay. Understood. And my other -- I have one basic question. So is there any extra amount of royalty that the miners have to pay if they sell the ore in open market without any value addition.

See, for miners like companies like us, which have mines which were allocated as per the Mining Act. So the [indiscernible] policy says from a captive mine can sell 50% of their iron ore in the market, but then they have to pay additional royalty of 1% to 3%, in royalty and royalty which comes about additional 150%. So about today's royalty structure, I will have to pay INR 1,000 more as a royalty to the government if I want to sell my iron ore in the market.

Okay. Okay. And I have another basic question. So I wanted to understand why like Tata Steel and JSW Steels are bidding 100% plus premium for captive mines. So don't they get such kind of rates from open market -- by procuring iron ore from open market. So why are they bidding 100-plus -- 100% plus premium?

To be very honest, it's very difficult to really comment about my fear, what strategy they have in mind, what is their thought process. It won't be right for me or on my part to comment because it's their operation, their strategy. So, it's better if you can probably [indiscernible] them only. I would not make a comment on that.

Our next question is from the line of [indiscernible].

Congratulations for the figures. Sir, as you know that Godawari produces 2 brands currently, Fe63 grade pallet and Fe66 [indiscernible] pellet. So may I know the ratio of the production of high-grade and low-grade, and is it viable for exports? Are you considering any chance for the exports?

So the ratio is 1/3, 2/3. So produce about 33%, which pellet and remaining is high-grade pellet Fe66. And in terms of export, no, we are not exploring any export opportunity. One that we mentioning again and again, domestic market is quite strong, and we are happy to select in the domestic because the [indiscernible] much better compared to export right now.

Sir, my -- one more question, another. As we have witnessed the capacity expansion of pellet plant is undergoing and by we have also witnessing the reported production guidance has been lower from 2.6% to 2.4%. So any reason behind the lowering the production guidance?

Yes. So there is an annual shutdown plant for 1 of the 2 plants, which will take about 50 days of operations. That happens every 4 to 5 years in cycle. So that is why we have lowered the guidance in this financial year from 2.6 to 2.45.

And when can you expect this shutdown?

Okay, the shutdown is already undergoing. So it was planned for Q2. Shutdown is already going and the plant will be in operation in the next couple of weeks. But for the full year the guidance remains the same which is 2.45, yes. We will achieve that.

Our next question is from the line of Aman from Augmenta Asset Managers LLP.

Sorry for repeating that question. So can you highlight your strategy on the structural steel, like how it can be and are we really testing the waters? Or what is the outlook on the same going forward? Like what is -- what can be the potential of the same? And given that we are coming up with the integrated steel plant, so just wanted a detail thing on the strategy for the structure.

To be honest, with the kind of capacity which are coming up, especially by the bigger players when you talk about 50 million, 40 million, but we do 30 to 35. So it is kind of scary to probably enter that market. But the advantage we have -- don't have -- our iron ore mine which are at zero premium. So the only rationale behind going at this investment is to hedge an iron ore bet, but we don't want to be exposed to iron ore pellets because a lot of capacities of [indiscernible] pellets are also coming from India. For example, Lloyds itself is about to clear about 12 million tonnes in the next 5 years. So to hedge the iron ore best, we want to make value-added and of course, there is competition in everything and there is competition everything going forward as well whether [indiscernible].

No, I think Abhishek, question is on the structural steel.

The [indiscernible] new indicates are 2 million.

Yes, I just wanted to know the strategy about the structural steel, the rolling mill which you have modified.

Sorry, sorry. My apology, I did not understand the question correctly. So on the structural steel side, we were already into galvanizing, so currently, we were buying their opponent from the market, galvanizing it and supplying to railways, punching towers and all those projects. So now with the backward integration by modifying rolling mill, EBITDA margins will go up. Our volumes will go up because now our dependency on the [indiscernible] side will drastically go down, plus the rolling lines, we will be able to produce the desired billets in Godawari itself. It's a complete backward to forward integration, where right from billets to finished steel will be done in the same roof. Eventually, the volume will go up and [indiscernible] margins as simple as that.

So to add on that, prior to this thing, prior to this modification of rolling mill, we were acquiring the billet from outside, right, the desired billets?

Yes, the desired billets some are being produced from Godawari, but not the entire requirement. Rest were being purchased from the market.

Okay. And also, Abhishek, can you throw some light on the [indiscernible] market currently, given that the prices are down, the manganese ore prices are increased and there was some disturbance on the Australian mining front, but this might have restored, I see. So what is your outlook on the ferro alloy market as a whole going forward, given that the prices have consolidated around the same level? So how are you looking at the ferro alloy thing currently?

Okay. So as you mentioned, the mining effect on -- in Australia, it happened few years back [indiscernible] that still continues and the latest bid is the mines will be out of production for next another 6 months. So we're looking at a production supplier from end of Q3, earlier Q4 of financial year. So that impact it's still ongoing. So the prices of high grade manganese ore which is say [ 44 ]is on a very higher side. But current index is about $9, which was 4.5 months back. So that impact is still there. See on the finishing side, definitely, the domestic market is quite weak because the demand of [indiscernible]. So there is pressure on the ferro alloy. But for us. Since we are always exposed to some kind of imports of manganese ore we are in early position because of the lower prices, which we have [indiscernible] now. So as for a company, we are in a decent position not as bad as the market. But as a whole industry, the market is quite big. [indiscernible] also increased prices of 40% in last auction hopefully should be used going forward, but yes, the market expect anything at the moment.

So even the -- basically because the ferro alloy market is basically a largely an export market. So we are trying to see, despite the domestic market is weak, the export markets also have consolidated the prices or consolidated about INR 1 lakh per tonne level, right?

No, prices are much below than that. So because we are into silico manganese, which is quite a commercial grade. So the prices are -- in the export market is below that, which currently, it's not viable in export. But as the demand is also quite weak.

Our next question is from the line of Manav from YES Securities Limited.

Again, one question on pellet. We usually attract to premium of INR 1,000 to INR 1,500 per tonne on the high grade pellets. I wanted to know if -- can we expect this number to go up also in the near future, the demand starts coming in quite strongly for the high-grade pellets?

Sorry, can you please come again?

Yes. So sir, currently, the premium on the high-grade pellets is between INR 1,000 to INR 1,500 a tonne. I wanted to know if this number can go up as well if you see strong demand for the high-grade pellets on the market.

Definitely. I would say we have already achieved a band of say between INR 1,300 to INR 1,500 per tonne slowly, slowly. And I think the most important part in the pellet is below 4%, which is a very important element for making steel in through secondary route, so that is gaining a lot of attraction in the domestic market. So people who are looking to make quality steel. So they are eventually getting convinced if we have 2 [indiscernible]. So [indiscernible] said, really, we are there. But yes, the value of our product is going up day by day.

Okay. Okay. So just to follow-up on that only once the beneficiation plant comes in, that will roughly be an additional cost of -- can I assume INR 250 to INR 300 a tonne for beneficiation of the ore.

So that is in plan because putting up these [indiscernible] capacity of pellet. So overall at a volume of say, 4.7 million pellet going forward, the cost of beneficiation remains the same [indiscernible] pellet that will increase.

Okay. Sir, one question I had on the HRC plant. So the HRC plant, we'll be targeting the automotive industry, if I'm correct, right?

It's a combined application, automobile being one of them, so then there are 5 manufacturers. It's a very light application. So with the kind of quality we are targeting to produce, we won't be confined to a single market. So we want to [indiscernible] for every basket.

Sure, sure. And sir, just post the credit plant expansion, which is coming in Q1 of FY '26 and up till the HRC plant comes online. I just wanted to know what sort of market will GPIL be catering its iron ore pellets to? Will it be with the state of Chhattisgarh and what sort of capacity and consumers are coming up over the 1.5 years where this market will be opened.

See, Chhattisgarh itself, there will be additional decline of close to, say, about 6 million of iron ore pellet because of there is [indiscernible] capacity coming up in Chhattisgarh. That's because [indiscernible] is going forward as well in the new plant. So we will be able to get a different markets who are looking for quality. Exports will always be open. Of course there is an opportunity, we will definitely start exporting again because our pellets are very receptive in outside market as -- so these options are open right now, it's difficult to envisage 1 year from now on, but the options are all open.

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

So just 1 color on the recent Supreme Court ruling that the states can levy tax on mineral rights. So from that perspective, what are your thought process means? Are we -- can we expect some demands from the state government going forward?

We should be -- to be honest, something which would never [indiscernible] would like to. But we can comment because it is a state matter. It's a [indiscernible] state government, Jharkhand just passed in assembly to impose INR 100 tax on the mineral -- mine in the state. So we really can't comment. Hopefully, nothing is imposed. But if there is any position, we have to comply.

Ladies and gentlemen, that was the last question for the day. I now hand the conference over to the management for closing comments.

Thank you all participants for joining to the conference call of the Godawari Power & Ispat Limited. We believe that we have adequately addressed all your queries. So if you have any further questions or need additional information, please feel free to reach us out or Investor Relations at Go India Advisors. Once again we sincerely thank you for your active participation and unwavering support. Thank you. Thank you all. With this, we close this call.

And on behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.