India: Godawari pellet output drops 22% in Q2FY'25, co reduces iron ore guidance

• Pellet sales drops by 4% in H1FY'25

  
  
  

• Iron ore output remains stable y-o-y
  
  

Godawari Power and Ispat Limited (GPIL), central India's leading steelmaker, witnessed a 22% fall in pellet production to 508,200 tonnes (t) in Q2FY'25 against 651,700 t in Q1FY'25, revealed its Q2FY'25 results. Conversely, the company's pellet production stood at 1.16 million tonnes (mnt) in H1FY'25, stable y-o-y, while sales of the same fell 4% to 700,442 t in H1FY'25 compared to 730,353 t in the year-ago period.

Meanwhile, iron ore production in H1FY'25 was at 1.09 mnt, largely stable y-o-y, but a q-o-q decrease was observed due to heavy rainfall and delays in obtaining approval for the capacity expansion of the Ari Dongri mines. Total steel billet output for H1FY'25 stood at 121,812 t, a y-o-y increase of 20% compared to 101,878 t in H1FY'24.

Notably, the FY'25 iron ore guidance was reduced significantly from 3 mnt to 2.35 mnt.

Investors' call highlights

Financial performance

• EBIDTA down y-o-y: The company's standalone EBITDA was recorded at INR 621 crore in H1FY'25, a 6% drop as against INR 662 crore in the same period last year.
  
  
• PAT falls y-o-y: GPIL's profit after tax (PAT) fell 10% to INR 429 crore in H1FY'25 from INR 480 crore in H1FY'24. Profitability declined due to lower realisations from finished products and the absence of exceptional income recorded in the previous period.
  
  

Sales, production guidance

• Average pellet sales realisation rises: GPIL's average sales realisation stood at INR 10,569/t in H1FY'25, a rise of 5% from INR 10,055/t in H1FY'24. The company has an ambitious capex plan aimed at nearly doubling its iron ore mining and pellet production capacities. This includes establishing an integrated plant within the existing forex capacity limits to support future growth.
  
  
• Transition to natural gas: The company has decided to switch from coal gas to natural gas in its new pellet plant, to achieve a 64% reduction in CO? emissions.
  
  
• Commencement of structural steel rolling mill: The company has completed modifying its rolling mill for the manufacture of structural steel (214,000 mtpa capacity), and production for the same has started with the arrival of raw materials (steel billets) from GPIL's integrated steel plant. The structural steel will be partially used captively for the manufacture of galvanised fabricated products for supply to government agencies such as Indian Railways, power grid and state discoms, etc.
  
  

Upcoming capacities, projects

• Delayed nod for mining capacity expansion: The approval to increase iron ore mining and beneficiation capacity from 2.35 mnt to 6 mnt has been delayed due to factors beyond the company's control. Now, it is expected to receive approval by Q4FY'25, following environmental clearance. The beneficiation plant is expected to be commissioned within six months, as part of the groundwork is already complete because the company has revised its iron ore production guidance from 3 mnt to 2.3 mnt.
  
  
• Pellet capacity increase in FY'25: The project to increase pellet capacity from 2.7 mnt to 4.7 mnt is progressing as scheduled, with project expected to be commissioned by June-July 2025. Additionally, all equipment orders have been placed by the company, with construction over 50% complete. Equipment shipments from various vendors are set to begin within a month. The public hearing for the 2-mnt greenfield integrated steel plant was completed earlier in Q2FY'25.
  
  
• GPIL's solar power expansion: GPIL is planning a 70-MW solar power plant, with land acquisition underway. This project will supply energy for the upcoming 2-mnt pellet plant, G10. Aligned with its commitment to sustainability, G10 remains focused on reducing carbon emissions, aiming to achieve net zero by 2050.
  
  
• Energy efficiency, decarb initiatives: The company has launched various energy-efficient and decarbonisation projects. The capital expenditure for the first stage of these initiatives is INR 75 crore, which is expected to generate additional power without requiring extra fuel. The projected payback period for this investment is approximately three years.
  
  
• Focus on domestic market: GPIL has not been active in the export market for the past ten months and does not have plans to engage in Q3 either, as domestic demand remains robust. Based on current demand and price realisations, it will continue to prioritise sales in the domestic market.