Godawari Power & Ispat Limited.
Your Company is a responsible contrarian in India?s mid-sized
steel companies. When most companies were only integrating forward to manufacture finished
steel, GPIL was extending backward towards mine ownership (securing its resource base) and
then forwards into a hot re-rolled wire rod mill.
When most steel companies were focusing on maximizing output across the
steel value chain, GPIL focused on generating renewable energy to moderate costs. When
most steel companies were focusing growing their capacities (and hence, Balance Sheets),
GPIL was focused on repaying debt and strengthening its Balance Sheet.
By doing so, GPIL has emerged as a dependable, responsible and
sustainable steel company.
And one of the most exciting proxies of India?s mid-sized steel
sector.
Our MD?s overview
Performance review
I am pleased to present a year of record performance of your company. A
few years ago, we embarked on a journey directed to make our organization robust and
resilient to business cycles. We invested in backward integration to strengthen our
business model. I am happy to say the results of those strategic changes are now visible
across our financials. Your company finished with revenues of Rs. 5,399 Crore, 36 Per cent
higher than the previous high; EBIDTA of Rs. 1,864 Crore was 64 Per cent higher than the
previous peak and profit after tax of Rs. 1,481 Crore was 136 higher than the previous
high. Your company finished the year under review with net cash of Rs. 564.5 Crore. EBIDTA
margin strengthened 600 bps to 35 Per cent while Return on Capital Employed strengthened
1100 bps to 42 Per cent.
The Board declared a final dividend of Rs. 8.5 per share on the
expanded share capital following a split of equity shares 1:2 and bonus shares in the
ratio of 1:1.
Green Energy
Your company has divested its investments in non-core solar thermal
power plant (IPP) and decided to invest the proceeds in captive solar power project. Your
Company is setting up a 155 MW of solar power plant with an investment of Rs.625 Crore, a
clean cost-effective energy source for captive consumption providing the company with
predictable annuity revenues. Out of this 155 MW, the 70 MW solar power project is
expected to commission in the second quarter of the current year and balance capacities
are expected to be commissioned by the end of FY23. This will not only help the company to
reduce thermal energy consumption by 25 Per cent, but also increase in return of capital
invested, as compared to return on investment in solar IPP project. This will empower the
business to make a decisive leap towards carbon neutrality possibly the first in
India?s iron and steel sector and strengthen the company?s quest to emerge as a
responsible ‘green steel? manufacturer with environmentally conscious customers
who seek to moderate their carbon footprint through responsible procurement.
Iron Ore Mines
I am pleased report that with the additional exploration activities
undertaken by the Company in both the iron ore mines, the iron ore reserves have already
proven to be around 165 MT (4x of earlier estimates). Your Company proposes to obtain
environmental clearance to enhance its iron ore mining capacity from present 3 million
Tonnes to 5 million Tonnes in about three years and eventually 9 million Tonnes in five to
seven years depending on growth plans.
Expansion Project
Your Company is proposing to set up 1.5-million-ton green field steel
plant in Chhattisgarh and have already applied for the land acquisition and environmental
approval. Further details on products to be manufactured and capital investment is under
working and shall be finalized upon completion of land acquisition and receipt of
environmental approval. Further in order limit the initial capital investment in the
project, the Company will focus on setting up facilities for manufacture of Iron ore
Pellets and Pig Iron/DRI and subsequently integrate to finished steel making facilities.
Your company?s endeavor is to integrate business from mined resource at one end to
the manufacture of ore-intensive steel products at the other, coupled with renewable
energy and accrual-driven investing, which will empower your company to be amongst the
last ones standing during an industry downtrend. In the meanwhile, your Company is
investing Rs. 500 Crores in FY23 in addition to the investment of Rs. 625 crores in solar
project, in existing facilities for iron ore beneficiation, enhancement in steel melting
capacity and setting of new power generating turbine for energy efficiency and higher
power generation without additional input cost, which will help Company in improving the
efficiency in its operations resulting in increase in operating margins. The capex will be
primarily funded through internal accruals.
Outlook
Your company is engaged in building a responsible business where a
number of operating priorities will converge: enhanced scale, deeper integration, cost
leadership, accrual-driven investing and an enhanced role for renewable energy. We believe
that this complement will enhance business scalability and responsibility that translates
into longterm sustainability.
BL Agrawal, Managing Director