Gujarat Mineral Development Corporation Ltd

Transcript of Analysts/ Institutional Investors Meet We had vide our letter dated 18th August, 2022 intimated the Stock Exchanges about the schedule of Analysts/ Institutional Investors Meet on 20th August, 2022 at 11.00 AM 1ST through audio Conference Call. We send herewith a copy of Transcript of the said meet which took place on 20th August, 2022. The said transcript along with the audio is also uploaded on the Company's website i.e. www.gmddtd.com. You are requested to kindly take note of the same on your record. Thanking you, Yours faithfully, rat Mineral Development Corporation Limited s Company Secretary End: As above Gujarat Mineral Development Corporation Limited (A Government of Gujarat Enterprise) CIN : L14100GJ1963SGC001206 Khanij Bhavan", 132 Ft. Ring Road, Near University Ground, Vastrapur, Ahmedabad 52 Phone: 27913200/27913201 e-mail:cosec@gmdcltd.com.website:www.gmdcltd.com

Good morning, ladies and gentlemen. I'm Steven, the moderator for this conference. Welcome to the Conference Call of Gujarat Mineral Development Corporation Limited arranged by Concept Investor Relations to discuss its Results for the First Quarter ended June 30, 2022. We have with us today, Shri Roopwant Singh, IAS, Managing Director; Shri Kulshrestha -- Chief General Manager & Chief Financial Officer; Shri H. K. Joshi, Senior General Manager, Technical; Shri Swagat Ray -- General Manager, Project Planning & Development; Mrs. A.K. Iyer -- General Manager, Accounts; Shri Rajat Das -- General Manager, Marketing and Sales; Shri J.N. Dave -- General Manager, Power; Shri P.R. Shah -- General Manager, Geology and Shri Joel Evans -- Company Secretary. At this moment, all participants are in the listen-only mode. Later, we will conduct a question-and-answer session. At that time, if you have a question, please press ‘*’ and ‘1’ on your touchtone telephone. Please note that this conference is being recorded. I would now like to hand the floor to Shri Roopwant Singh -- Chairman and Managing Director. Thank you and over to you, sir. Roopwant Singh: Good morning, friends. We welcome you all to the first conference of this financial year. The year has started well, for GMDC. The company has been on a correction course for the past three quarters and whatever results are visible now have been due to the concerted effort of the entire team and a very supportive board. I would not like to repeat that as well, they are evident and in front of you. We welcome you all for sparing time and we invite questions and queries from your side. Thank you so much. Moderator: We will now begin the question-and-answer session. The first question is from the line of Amit Dixit from Edelweiss. Please go ahead. Amit Dixit: I have three quick questions if I may. The first one is on realization. While realization increased QoQ for every mine, but for Mata No Madh for some reason, there was a slight decline. If you can explain that. That is the first question. The second question is essentially on our mining costs. So we have seen that mining costs have gone up maybe because people cost might have gone up or shipping costs might have gone up. If there are some other elements to it and how do we look at it going ahead? And the third question is if you can throw some light on the BCG draft report that was supposed to be tabled around this time?

We start with Mata No Madh. Mata No Madh project is currently the backbone of the organization and is the largest contributor to the kitty of lignite that is available for supply to the energy sector and for market sales. This year in this quarter, we have supplied a large amount to ATPS and KLTPS. The reason is ATPS was not doing well in the previous quarter compared to this Q1 of last year to this one. The performance there has improved, and an essential requirement is regular sustained supply of fuel. And second is the KLTPS plant which belongs to the state power utility, that was under a major repair and overhaul in the last financial year. That has also come into operation this year. So, the supplies to both these plants have increased. The pricing for the fuel there is regulated by a government formula, which is very conservative. And though there is action underway to update that formula, so that GMDC is able to get adequate realization or reimbursement for the efforts put in, but the realization from Mata No Madh being low is principally on account of more supply to the power sector. As far as the mining cost is concerned, Amit, you are well aware, there has been a huge upward correction in the fuel prices. The fixed cost component for our lignite production is in the range of 9% only. The rest of it comes from the variable components, that is work and diesel. Out of this, diesel accounts for more than 50% of the cost. We are bulk consumers. So, there has been a huge correction in the range of Rs.80 rupees to in excess of Rs.120 for bulk supply. So, that has had an impact on the mining cost, the way you see the cost has gone up significantly. BCG report, yes, their engagement with us is divided into three phases. Phase-I was identifying opportunities, and the subsequent phases are moving towards those opportunities. So, phase-I has completed. And we have a report of actionable points. They can broadly be divided into improvement of processes and new initiatives at our level. But the larger initiatives would require more deep diving and we would be coming to you with those larger initiatives in the subsequent interactions with the investor community. But at the moment you would see us acting on three, four fronts. There would be an effort towards greater digitization and automation of operations in the mining operations that we do. There's going to be a thrust on that. Our customer outreach and the entire customer experience we seek to upgrade by regular interactions taking feedbacks. There is also a lot of discussion on reclassifying the customer base, which is very crudely classified into small and large and there is an anguish from the smaller players that they do not get the benefits or they're treated at par with much larger players. So you would be seeing action on these immediately. The larger things would require deeper studies and those studies and those actions have been initiated. We shall be coming to you with those initiatives. We've had spoken about those initiatives in our earlier con calls and discussions and we shall be updating you. Thank you, Amit. Moderator: The next question is from the line of Vaibhav Badjatya from Honesty and Integrity Investment. Please go ahead.

So, I just have two questions. One is on the pricing and other is on the volume. On the pricing front, we have seen significant slowdown in our price hike. So, just in that context, I want to know that what is still the differential that you see, I don't want exact number, but broad differential that you see between imported coal and lignite based on Surat delivery, you can just broadly highlight what's the difference? Is a slowdown in price revision driven by more Russian coal coming into Gujarat or there is some rethought from the new management that probably we should slow down due to inflation concern on the pricing front, that's the question on pricing? And second question is on the volume front. So, we have seen Morbi area announcing significant one month shutdown. So, is it likely to kind of change our volume outlook, which we have kind of targeted for 10 million tons, is there any risk to the volumes or do you expect that after Q2, probably from Q3 onwards, there will be sharp recovery. So, just wanted your views on these. Roopwant Singh: On the pricing, as we have discussed earlier, the pricing strategy, which was changed last year, made the entire marketing and sales division responsive to its main competitor, that is imported coal. We had a target number that we were able to achieve and we were holding on to a differential. And as you would have seen in March, appropriately comparable imported coal price for 4200 GCV stabilized. So, we broadly stabilize near that level with a significant differential. And last month, there was slight uptick, and so, we made some minor corrections, and now, there is that price of imported coal has further eased. So, we are sensitive to these needs. And as I have stated earlier, we are committed to our MSME sector. We shall be supplying them at a enter differential cost, but we will at the same time not miss out on an opportunity. We are fully sensitive, the management is supportive and the board is very supportive of these efforts. And the volume is quarter one we held out good numbers, 2.5 million tons, although this quarter monsoons have been extremely good, which does not usually turn out to be very good for lignite mining. There has been very good rain in all geographical regions in a very small period of time. So there was a strain on supply, the stocks got exhausted and allocations went down. Morbi also took a month off. That was more on account of the supercharged imported coal prices rather than us. As far as the volume ramp up is concerned, we are committed to that. And you would have seen RFPs for significantly expanding the capacity of Bhavnagar project, which are live right now. Vaibhav Badjatya: But just a follow up on the volume. Because there's a lot of problem on the gas availability as well in the pricing of it as well. So are you seeing significant shift from there in terms of kCal cost for the gas and coal, are you seeing that it is becoming more viable for the customer to probably shift to coal by doing some CAPEX?

This shift in the industry keeps on taking every few years. Something has their opportunities. And from what I have gathered, many of the larger plants have equipment to take care of both needs, but they shift occasionally, like, for example, the Surat cluster a decade or ago, and now shifted to gas and then shifted back to solid fuel. So, this is a call which they take because the margins they seek to maintain them. So at the moment, the shift is in favor of solid fuels. And now with solid fuel prices, imported fuel prices going up, they're still sustained. This is what our feedback is. Moderator: Next question is from Parthiv Jhonsa from NVS Brokerage. Please go ahead. Parthiv Jhonsa: Sir, I have just a very couple of broad-based questions. Sir, in Q1 your revenue was almost more than doubled with excellent PAT. So, just want to know with the target of this 10 million tonne Russia, what is your perception of how the other remaining three quarters will be? So, what is your overall view when you are saying that you will foray into that rare earth elements mining and everything? And with this new couple of mines on the block, what will be the total overall opportunity for the company? Roopwant Singh: Very briefly, we are chasing 10 million tonne. Second quarter is going to be slightly late because of excessive rains. In the last two quarters, we will have to do a lot of catching up. To achieve that, I mentioned Bhavnagar tender. These are two very large RFPs which have been floated. We will take care of entire northern Gujarat, central Gujarat and southern Gujarat once these become operational. New mines, yes, you should see operationalization of these mines within the next two financial years. You would be seeing RFPs for MDOs or turnkey contracts very, very soon. Parthiv Jhonsa: Sir, my last question is with this new goal is again firming up, how do you perceive our prices, lignite are going to firm up or are they already in good space or just the movement of the pricing of the metal? Roopwant Singh: I didn't understand the question. Parthiv Jhonsa: No, no. So I just wanted to understand are the prices firming up now, for the material for lignite or the energy range bound or what is the current scenario? Roopwant Singh: So, like I said in the earlier question, in March, the price is for imported coal our competitor had stabilized. We need a certain differential and we maintained it. There was a slight spurt. We caught it. Now, those prices are easing. And we are sensitive. Moderator: Next question is from the line of Rabindranath Nayak from Sunidhi Securities. Please go ahead.

Sir, I have a few questions regarding the plans for monetizing the bauxite and the lignite for core products. Any volume and value proposition for these impact on top line and bottom line for this year and next year, if you can guide something? And regarding this RE reserve, you have already good results is my understanding. The reserve is pertaining to lithium or cerium or what is the timeline if possible for top line or the bottom line on this? And regarding this, we have already appointed the strategic consultants for six months already. So, what is the key projections you have, any broad suggestions they have said, we can wait for some suggestion from that could be helpful for our understanding? Roopwant Singh: Let me answer it in the reverse order this time. BCG has been onboarded. Phase-I is over. Their recommendations for our organization can broadly be classified into three categories: One is improvement and the second is diversification and strategic play. The improvements are on processes, marketing, sales and internal governance mechanisms, that activity has already kicked into action. And we would see hopefully the results in the coming quarters, because they are an evolving thing, some of these actions take a lot of time, but the activity has started. The second larger one, why they were here is for diversifying the company, taking it beyond lignite and making the company future-proof from its reliance on a single fuel. There have been very good suggestions and they have advised on the wide array of opportunities that this company sits on, namely, the reserves of limestone, silica sand and multi-metal assets, etc., So those are things on which we have made our preliminary analysis and in the coming months, a lot of study and further research has begun on each of these. We shall be updating you on each of these initiatives, because they are large initiatives subsequently. This would not be the right time for us to say on each of them. As far as the RE initiative is concerned, yes, a study is underway. We had hoped it would be over and we would be able to give you answers, but it would still take some time. But what I can say is the initial prognosis seems encouraging. We have as a key to the study that is underway. We are planning to further take up exploration in our Kadipani reserve also for these metals. You should see an RFP for that in some time. Bauxite, yes, it was languishing. We were sitting on unsold assets. Recent initiatives include open auction-based sales. Number two, beneficiating the quality so that we are able to find willing takers. Three, improving the relation and hand- holding of our joint venture partner so that off take goes up to maximum capacity. And similar initiatives are underway for smaller, but again, important manganese asset also. Bauxite, this year, hopefully should end well and so for manganese also. Rabindranath Nayak: Regarding this RE, again on this topic, so, is there any chance that central government will take part in the business or takeover business in future or is there any chance for the company to divest holding RE business to central government or how we should look at it in future? And what kind of reserves, cerium reserves or if you can give some name of the reserves what we are having in RE, that would be helpful, sir?

I understood the second part of the question. What is the first part of the question? Rabindranath Nayak: First part is the company which is there in the central government space, whether that company can participate or in future if RE business will become big and the central government will take that business from you, or take part in some stake in the RE business, so, if you can guide something on that? Roopwant Singh: Well, I can't guide you on something which has not happened and which may happen if it's required. It is a sector which is closely controlled by Government of India and Department of Atomic Energy. Whatever initiative that we take would be in consultation and directions from them. And as far as what kind of reserves are there? We have a good concentration of light rare earths.The metals and everything, we shall be sharing subsequently. Rabindranath Nayak: So magnetic rear earths, we don't have in reserves, is that correct? Roopwant Singh: Please note, we have light rare earths. Moderator: The next question is from the line of Deepak Poddar from Sapphire Capital. Please go ahead. Deepak Poddar: I just wanted to understand more on your EBITDA per ton. I mean, quite fantastic EBITDA per ton close to about Rs.1,800 to Rs.1,900 per ton this quarter. So can you indicate the sustainability, how sustainable is that? Roopwant Singh: Deepak, I will repeat again. We were working towards a stable differential from the imported coal. We arrived at it. At the moment, the prices seem to be easing up. So, we are watchful and what our internal analysis and market analysis says that in the proximate future, we see imported coal holding some price and we hope to sustain that differential. Deepak Poddar: So if that differential is sustained, ideally our EBITDA per ton is also likely to sustain, right? Roopwant Singh: Yes, this is 91% of our lignite revenues. Moderator: Next question is from the line of Rishabh Shah from RS Capitals. Please go ahead. Rishabh Shah: I just want to understand the thought process. Understanding even the government company and going forward there might be sudden changes for the top management level. So, what is the thought process behind ensuring the company outlooks people with the current momentum continues for a longer period? Second thing, I believe in the last call, you mentioned that the total market for you is around 25 to 28 million tonnes. So, is this primarily the major market is from imported coal only? My third question is, is there a possibility or an opportunity to cater to a market outside Gujarat also? And my last question is, I believe we

So, my first question pertains to the improvement that we are expecting on the power side apart from thermal power, I believe that there are some movement which is also happening towards renewable side. So if you could update us on that, will be really helpful? And my second question pertains to the movement towards rare earth side. I think we believe that Mackenzie has been roped in for taking this to the next level and there were some articles which have been publicized where we are looking for some strategic partner also to go into that direction. So, if you could update us what is the movement on that side, and when can we see some sort of announcement or some development, which could take us to the next level? I think it is a long journey for us, but, we are also looking for hiring some professional person who have an understanding of these minerals, which was also publicized. So, if you could update on that side will be really appreciated? Roopwant Singh: As far as the thermal power asset is concerned, I think I spoke about that just now. So, I will not speak on that. As far as the non-conventional energy is concerned, we are making efforts to develop our in-house system to strengthen our governance of these assets. Capital in the range of Rs.1,200 crores to Rs.1,300 crores over a period of a decade was invested in these non-conventional assets. And we have not developed the kind of in-house capabilities that are needed to monitor these assets so that they are able to deliver well. So, we are currently in that exercise. You'd have seen advertisements for recruitments of experts on these fronts. Hopefully, we'll be able to squeeze out more juice from these assets, because it is more of a governance and less of a technical issue. So, please expect improvements on these fronts in the coming months. As far as the rare earth journey is concerned, yes, McKinsey has been onboarded. Yes, their study is underway. Hopefully, it is in the right direction, but it will still take some time. We have not floated any advertisement for onboarding a partner. But yes, we are going to hire professionals who will be able to analyze the ore and other aspects better so that we develop in-house capabilities moving towards in this direction. You should see some advertisements for further studies and further exploration of these assets by GMDC in the coming weeks. And we shall be coming forward with more clarity as this is an emerging area and our studies get concluded. Bajrang Bafna: Just one quick question on that side. Recently, we've heard the government that they will allow some private miners to enter into lithium mining in our country as well, and very recently and then NMDC has announced that they will start exploiting these minerals in Karnataka and maybe outside India also. So, any ballpark assessment that we are also getting some note from the government that to explore this opportunity as well in our country? Roopwant Singh: Government of Gujarat, this year has made a provision to set up a special lab dedicated towards the RE exploration analysis and to set up a core library for the same. The government is very well aware and they are moving in that direction. I can speak for our government. The initiative of Government of India to broad-base the number of players in

The next question is from the line of Rabindranath Nayak from Sunidhi Securities. Please go ahead. Rabindranath Nayak: Can you please guide us what is the contribution of revenue this year and next year beyond lignite and power or includes the renewable power? Roopwant Singh: So, revenue at the moment 91% is coming from lignite and the rest break ups Mr. Kulshreshtra, would you like to say something? L. Kulshrestha: Maximum revenue comes from lignite 91%, from power is around 7%, and remaining 2% is from other minerals. Rabindranath Nayak: What is your target for this year and next year? L. Kulshrestha: We are expecting revenue from lignite, that would be around 90% and then 3% from bauxite and 6% - 7% from power, remaining from other minor minerals. Rabindranath Nayak: Next year, any idea sir? Kulshrestha: I'm talking about FY'22-23. Rabindranath Nayak: FY'24? Roopwant Singh: Next year sales will improve as our new projects come. We shall be sharing those details as our tenders and strategy formalizes. Rabindranath Nayak: Our gas position is almost 50% of reserves and we have hired a consultant for improving a business further. So it is going to get better in coming few years. So in this context, one question is, is it unfair for a shareholder to expect a bonus issue kind of thing or it is absolutely say something on this? Roopwant Singh: I wouldn't be able to say something on it and we have a very generous board, let us see what they say. Moderator: Thank you. The next question is from theline of Deepak Poddar from Sapphire Capital. Please go ahead. Deepak Poddar: Just wanted to understand why our tax rate was on the higher side last year, and how do we see that going forward?

We made a correction in that and we moved ourselves to a lower slab and I would request our general manager, accounts to please comment on that. Anupama Iyer: This is Anupama. Last year, we have moved from old regime to new regime. But due to change from old regime to new regime, we have made some adjustment in our deferred tax which we will carry. So last year effective tax rate was higher, but this year onwards, it will be as per new regime and will be in the range of 25%-26% only. Moderator: The next question is from the line of Keshav Garg from CCIPL. Please go ahead. Keshav Garg: Just wanted to understand that you have around half a dozen of associates and joint ventures. So is there any activity in these or are they dormant? When can we expect revenues to start from these joint venture and associates and also from bauxite and basically non-power, non-lignite streams that we are looking at? Roopwant Singh: Very direct reply. Only two of these joint ventures are operational. One is for bauxite and one is for manganese. You should see an improvement in the offtake that they're going to take in the current year. Bauxite is going to benefit the quality so that they readily are able to absorb it and use it. Manganese, we are also working on looking at multifarious aspects to improve the returns that are there, not a lot, but still. Some of them are non-starters and many of them are in the closure phase. So request only to focus on these two; But if our studies and work on advice of BCG and McKinsey come through, you should look at larger joint ventures more robust with a better governance structure in the coming years. Keshav Garg: Also, when can revenue start coming in from bauxite and manganese? Roopwant Singh: You should see an improvement this year. Moderator: The next question is from the line of Keval Kumar, an individual investor. Please go ahead. Keval Kumar: Are there any plans for diversification in metal sector for mining or manufacturing? And my second question is company is having a huge stock of bauxite at the end of last financial year. Whether the company has taken any steps for liquidation of bauxite stock, and whether the company is profitable in bauxite mining or not? Roopwant Singh: I will start with bauxite. We're sitting on stock of bauxite in excess of 1 million tonnes which is eight to nine years old. There has been significant degradation in the stock. We made open auction for part of it. Option was partly successful; some of it has found takers. At the same time, this old stock is going to be beneficiated and RFP for some trials in a few days. Once it has beneficiated, brought up to the level of what customers want, you should see offtake there. We are not very aggressive on mining bauxite, but we are aggressive on offtake and