India: Godawari Power and Ispat posts highest-ever quarterly pellet production in Q1FY23

Central India’s leading steelmaker, Godawari Power and Ispat Limited (GPIL), recently announced its Q1FY23 results.

Highlights-

• Iron ore production in Q1 was at 0.76 million tonnes (mnt), a marginal rise of 13% q-o-q as compared to 0.67 mnt in Q4FY22.
• The parent company’s (GPIL’s) pellet production stood at 0.67 mnt in the quarter under review, an increase of 9% q-o-q compared to 0.61 mnt in Q4FY22. Notably, this is the company’s highest ever quarterly pellet production.
• Total pellet sales from parent GPIL in Q1 stood at 0.41 mnt, a fall of 19% q-o-q as compared to 0.51 mnt in the previous quarter due to increased captive use of pellets for sponge iron production.
• Total steel billets output for the quarter stood at 93,470 t, a sharp q-o-q rise of 118% compared to 42,875 t in the previous quarter.

Highlights of the investors’ call-

• Average sales realisation edges down: GPIL’s average sales realisation stood at INR 11,596/t in Q1FY23, a marginal decrease of 3% q-o-q from INR 11,905/t in Q4FY22 because of a fall in market rates due to the imposition of export duty.
• EBIDTA up q-o-q: The company’s EBIDTA was recorded at INR 4,608 million in Q1FY23, up by 16% q-o-q as against INR 3,971 million in the last quarter.
• FY23 pellet output guidance unchanged: The company kept its iron ore pellets production guidance unchanged at 2.4 mnt for FY23.
• Adopted strategies to tackle export duty: GPIL was mainly exporting iron ore pellets prior to the imposition of export duty. As per reports, post 45% export duty imposition on pellets, the steelmaker diverted sales to the domestic market due to the company having a competitive advantage as it produces high-grade iron ore pellets. Meanwhile, Godawari increased its sales of sponge iron, steel billets, HB wires and ferroalloys.
• Acquisition of Jagdamba power plant: The acquisition of the Jagdamba power plant has been completed on 7 June, 2022.
• Shifting from RB1 to RB3 coal for sponge production: The company plans to shift from RB1 to RB3 coal for the production of sponge iron, although there might be a drop in production by 2-2.5% depending on the quality of coal being used.
• Coal mines acquisition plans: GPIL eyes to acquire captive coal mines owing to the company’s long-term requirements for coal.
• Solar plants replace grid power to improve operating margins: GPIL, in Q3FY22, announced setting up of three solar power plants with a total capacity of around 155MW with an aim to reduce their grid power requirement.

The first solar power plant with a capacity of 70MW in Rajnandgaon is ready in all respects except synchronisation with the grid. Another 25MW plant will be installed in Rajnandgaon (earlier Bemetara) and the power generated will be supplied to the company’s captive iron ore mines with an aim to increase the capacity of crushing. The land acquisition is in process and commissioning is expected by Q3FY23.

The third plant with a capacity of 60MW will be set up at Hira Ferro Alloys Limited facility in Bemetara for which the construction activities have started in mid-April 2022 and will commence by Q3FY23.

The existing 73MW power generation will continue to operate at that level. However, the company now plans to replace old turbines with new high-efficiency ones with a capacity of 48MW which will increase power generation by 11% without any additional fuel and operating costs. This is expected to commence by the end of FY23.