GODAWARI POWER AND ISPAT LTD. — Call Transcript 2022

Nov 16, 2022

REF: GPILINSE&BSE/2022/4881

To,

1. The Listing Department,

The National Stock Exchange of India Ltd, Exchange Plaza, Bandra Kurla Complex, Bandra (E), MUMBAI -400051 NSE Symbol: GPIL

1. The Corporate Relation Department, The BSE Limited, Mumbai, |St Floor, Rotunda Building, Dalal Street, MUMBAI -400 001 BSE Security Code: 532734

Date: 16.11.2022

Dear Sirs,

Sub: Submission of Transcript of conference call held on llth November, 2022.

This has reference to conference call held on 11`h November, 2022 for Analyst/Institutional Investorsffund House/Investors etc., please find attached herwith the Tranascript of Conference Call.

The aforesaid information is also being hosted on the website of the company viz., www.godawaripowerispat.com.

Thanking you,

Yours faithfully, For GODAWARI POWER AND ISPAT LIMITED

c-ve--`

Y.C. RAO COMPANY SECRETARY

Encl : As Above

CHANDR A RAO YARRA Digitally signed by CHANDRA RAO YARRA DN: c=IN, o=Personal, postalCode=492007, st=Chhattisgarh, serialNumber=9370AFCE8F71B28F5 B5DEEE1ACDA0C81F2F93D91967B0 645C7B97E9B1DDF4A87, cn=CHANDRA RAO YARRA Date: 2022.11.16 12:47:20 +05'30'

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"Godawari Power & ISPAT Limited Q2 & H1FY 23 Earnings Conference Call"

November 11, 2022

MANAGEMENT:	MR.ABHISHEKAGRAWAL-EXECUTIVE
	DIRECTOR
	MR.SANJAYBOTHRA-CHIEFFINANCIAL
	OFFICER
	MR.DINESH GANDHI -EXECUTIVE DIRECTOR.
MODERATOR:	MS.SANA KAPOOR FROM GO INDIA ADVISORS

Moderator:	Ladies and gentlemen, good day and welcome to Q2 FY23 Earnings Call for Godawari Power& Ispat Limited, hosted by Go India Advisors. As a reminder, all participant lines will be inlisten-only mode, and there will be an opportunity for you to ask questions after thepresentation concludes. Should you need assistance during the conference call, please signaloperator by pressing "*" then "0" on your touch-tone phone. Please note, that this conferenceis being recorded.
	I now hand the conference over to Ms. Sana Kapoor from Go India Advisors. Thank you, andover to you.
Sana Kapoor:	Thank you, Aman. Good morning, everybody and welcome to Godawari Power & IspatLimited Earnings Call to discuss the Q2 and H1 FY23 results. We have on the call, Mr.Abhishek Agrawal, Executive Director; Mr. Sanjay Bothra, Chief Financial Officer, and Mr.Dinesh Gandhi, Executive Director. We must remind you that the discussion on today's callmay include certain forward-looking statements and must be therefore viewed in conjunctionwith the risks that the company faces.
	May I now request Mr. Dinesh Gandhi to take us through the company's business outlook andfinancial highlights, subsequent to which we will open the floor for Q&A. Thank you, and overto you, sir.
Dinesh Gandhi:	Thank you, Sana. Good morning, ladies and gentlemen, and thank you for joining with us onthe earning calls today for Godawari Power & Ispat Limited. I trust you all had a look at therevised earnings presented uploaded on the stock exchange and the company website. Thepresentation was required to be revised primarily on account of two errors in the presentation.One is relating to the H1 average selling price of the pellet sold, which has been revised. Andnumber two is, the capacity of another solar power project which is under construction, whichwas only mentioned as 38 megawatts against 25 megawatts. So, capacity continues to remainat 25 megawatts.
	I will briefly discuss the result and then we can have the Q&A session after this. Before Idiscuss the quarterly performance and H1 performance in detail, I would like to discuss on thefew strategic updates. As you are all aware of the state pollution control authorities havegranted us the consent to operate for the enhanced pellet capacity from 2.4 million tonnes to2.7 million tonnes. We are revising our guidance for production of iron ore pellets from 2.4million tonnes to 2.6 million tonnes in FY23. For the H1 FY23 GPIL is already 50% of therevised targeted capacity and producing about 1.31 million tonnes of pellets.
	Our CapEx guidance continues to remain at about INR500 crore for the current year. We havealready incurred INR179 crore in the first half of '23. The guidance continues to remain thesame, despite imposition of export duty and this projects are primarily related to the costsaving and efficiency improvement related. The solar power project will help us improve ourcost of power, grid power which is more than INR5.50 per unit. Against that, our generationcost will be hardly at operating level at about 30 basis point, 35 basis points. Similarly, thedisplacement of turbine will improve the power generation at the same operating cost. And theCapEx at the mining will help us to beneficiate the overhead mining and reduce the cost ofproduction for the company.

The only project which we have kept on hold is the Steel Melting Shop where we are still working on the revised capacity and the products to be manufactured and after that we will make a suitable announcement in due course of time.

Regarding the Greenfield Steel project, which the company had announced earlier, the status is, it continues to be, we have not yet been able to acquire the land and the land acquisition is getting delayed. And we have filed for the environmental approval for the project which is under consideration of the central ministry. Once the land acquisition is done and environmental approval is received, we will be able to freeze our investment plan and we will guide the market accordingly in due course of time.

Coming on the performance, the market price of iron ore for Q2 FY23 is INR4,500 per ton, whereas our captive blended iron ore cost is about INR3,000 a ton. This shows the competitive advantage of the captive iron ore that GPIL has. In Q2 FY23 GPIL iron ore mining and pellet production has increased by 34% and 17% on a y-o-y basis. Production was HB Wires, Sponge Iron, and Fabricated products has also increased on y-o-y basis. However, production of Ferro Alloy has reduced primarily because the market for the Ferro Alloy prices have gone down and we took this opportunity to do a maintenance shutdown of the Ferro Alloy plants, HIRA Ferro Alloy and Alok Ferro Alloy.

Similarly, you would have observed our pellet realization has gone down by almost INR3,500 a ton as compared to the pellet realization in the Q1 FY23. And if you look at our numbers, the fall in profitability is mainly on account of fall of pellet realization because our cost of production remains same overall account of the captive iron ore mining. And if you take the impact of the reduction in pellet selling price from what INR11,500 to INR8000 something, INR3,500 into 550,000 tons of pellet, comes to about INR200 crore and to the extent that there is fall in EBITDA of the Company and the fall in pellet realization, as you are all aware, is on account of imposition of export duty. And simultaneously, reduction in the international selling price of iron ore prices.

Now, coming on the financial performance for Q2. Consolidate revenue increased to INR1,307 crore up 3% y-o-y basis but decreased 22% quarter-on-quarter basis. The main reason for decrease is majorly because in the realization of the iron ore pellets. The total expenses looks to be increased by 28% y-o-y but actually the expenses are looking higher on account of reduction in the selling price. So top line is higher, expenses have not increased substantially. Expenses continues to remain at the same level, except the prices of coking coal and y-o-y basis.

The consolidated EBITDA at INR231 crore, which is down 50% quarter-on-quarter and 47% y-o-y basis. The drop, I have already explained, the drop in EBITDA is mainly because of the fall in the price of the iron ore pellet. Also, consolidated PAT from continuing operations is attributed to down 48% sequentially to INR168 crore.

Now, coming on the market outlook. Starting with the international outlook. The iron ore prices have already fallen to about $80 from $158 as of 1st of April. The demand and consumption of steel and other commodities remain subdued in China due to COVID and real estate crisis, and in the rest of the world, due to interest rate hikes, and the energy crisis. Expectation is that, in H2 FY23, things will improve due to China's stimulus to support economic growth. However, uncertainty remains due to China's zero-COVID policy.

Godawari Power & Ispat Limited November 11, 2022

	Iron ore prices post correction are expected to stay in the range of $80 to $120 for the rest ofthe year. Also, import of iron ore pellet of China is reduced by 33% in January to September2022 compared to same period last year because of the sustained crude steel production cutsand weak domestic outlook.
	Coming on the domestic outlook. Government has levied export duty on iron ore from 30% to50%. On pellets from nil to 45% and steel from 0 to 15% in May 2022 This has led to sharpdrop in the domestic iron ore prices. NMDC has cut iron prices by approximately INR2,000per tonne. Iron ore production in FY23 is estimated to be lower. Pellet prices decreased fromINR14,000 a ton in April'22 to INR7,450 per ton and is presently trading at INR8,000 a ton.
	Domestic iron ore prices have likely bottomed out, at much higher level than historical levels.The support has come from the cost curve which has moved up by INR1000 per ton toINR1500 per ton post the auction of iron ore mines. At current iron ore prices many domesticmines have become unviable. Some support has also come from improvement in domesticdemand of steel due to increased off take from Infra projects. Going forward improvements inthe prices of iron ore and pellets will depend on the impact of the export duties. However,downside remains largely protected due to the cost curve of iron ore.
	We can now open the floor for question-answers. Thank you very much.
Moderator:	Thank you very much. We will now begin the question-and-answer session. And first questionis in the line of Prashant Kumar Kota from Emkay Global Financial Services. Please go ahead.
Prashant Kumar:	Hello, sir. Good afternoon and thanks for the opportunity. I really appreciate the very detailedpresentation and the data pack that you gave. It is like one of the best in the sector. Sir, myquestion is regarding your view on iron ore pricing, generally internationally and in India andto that extent, pricing of pellets, assuming, if remove the government angle aside? Just basedon the current dynamics, what is your view and how do we see this from here, sir?
Dinesh Gandhi:	So, it looks like the international prices are at about $80 is almost bottomed out to some extent.If the demand and China stimulus comes through then the prices should improve from here onrather than going down from here. The $80 should be the lower prices of this iron oreinternational market.
Prashant Kumar:	Got it. And sir, your view on the domestic side, pellet side? Can we largely say they havebottomed out after this government intervention? Steep fall.
Dinesh Gandhi:	Steep fall has already happened in pellet prices. Rest of the steel prices, as you may be aware,in long product, the prices are more or less stable, maybe INR1,000 here and there, the pricesare fluctuating, but mostly stable. Iron ore pellet prices have corrected only because of theimposition of export duty and of course, the reduction in demand in international market. Soboth have impacted the iron ore pellet prices and we believe that iron ore pellet prices atINR8,000 and 5% or 7% down from here should we stabilized.

Prashant Kumar:	Understood, sir. Understood. Sir, my second question is more to do with the social angle,social aspect of or what you as a company do. So basically, apart from running a profitablebusiness for the shareholders, we also understand from sources that you do a lot of CSRactivities in the mining regions around your mines, sir. It's always very important to do that,given the local communities' development upliftment, etc. So, all those activities that you doare still continuing without any…Am I right?
Dinesh Gandhi:	Yes. I think we had highlighted at some point in time we continue to transport our entire ironores from mines to our plants by the road. We have an opportunity to reduce the cost bytransporting by water. But in order to get the employment to the local population, who owningthe trucks which are flying between Godawari Power Plant and the mines exclusively, they getemployment and of course, that elevated our cost structure by INR300 per ton to INR400 perton, but on account of development of region where our mines are located, we are continuingwith road transport.
	Similarly, we have done a lot of CSR activities. I think each and every village house is pakkanow. There is school facility. There is hospital facilities, you know, all those facilities areavailable. The roads in the village are now pakka road. So, all those activities are beingcontinuously done by the Company.
Prashant Kumar:	Great, sir. Really great. Really glad to hear that and fantastic and wish you all the best.
Abhishek Agrawal:	And as a company we also believe, we should give it back to our society. That is ourresponsibility.
Moderator:	Thank you. Next question is from the line of Jyoti Singh from Novama. Please go ahead.
Jyoti Singh:	Hello. Good morning, sir. I have three questions. One is, looking at your consol numbers, Iguess there are losses in your Ferro Alloy business. In case how do you look at the demand andsupply scenario of this segment, Ferro Allow in India? Shall I go ahead with the otherquestion?
	The second is, as you've mentioned, that you will be doing a CapEx as per the plan. Are youconfident that you will be able to achieve the guidance of INR500 crore, because in H1, youhave done around INR180 crore. Please let us know your plans regarding the Greenfield SteelProject. And third is on your coal sourcing mix. So how do you think the coal sourcing mixlooks like and how much coal did you import in your second quarter and what is the inventoryof coal as of date?
Abhishek Agrawal:	Dineshji, let me take this question. Good morning, ma'am. So, on the first question of FerroAlloy, see, we need to understand India is a big exporter of Ferro Alloy, whether it's zincmanganese ferro or any kind of, right and primarily biggest market is Europe and you allunderstand because the energy crisis in Europe and Ferro being quite an energy intensiveindustry, so, a lot of capacities have gone in steelmaking. I was reading an article yesterday, soArcellor Mittal itself, you know alone as a group has reduced their production by almost 10million tonne across Europe, entire Europe. So, that is the reason that pellet prices has droppedsignificantly. That is one of the major reasons, and in India, there is an oversupply of FerroAlloy. So, export is part of a good mix when you want to balance the entire demand and supply

	in India. So, at the moment I will see Pellets prices will be under pressure for sure. Goingforward as well.
	On the coal side, at the moment, I have told this earlier this as well, we are importing coal forour DRI operation. We've already doing that. And we still continue to import. We import fromAfrica. We import from Australia and currently, we imported from Russia as well. So,depending and as all are aware, currently, finally, the coal prices have started cooling down.They've almost cooled by $100 in last six weeks. So, we are trying to obtain minimuminventory so that we can take advantage of the lower price. And for the power plant we aresourcing domestic coal. We have linkage from Coal India, as well as we are buying from thedomestic market.
Jyoti Singh:	Okay. And what was your coal import in Q2?
Abhishek Agrawal:	In terms of volume or in terms of number?
Jyoti Singh:	Both.
Abhishek Agrawal:	So, see, we usually import on monthly basis or 45 days basis because we want to go with themarket because the market is very volatile. So, we imported about 1.5 lakh tonnes in Q2 andthen the average price would be about INR18,000 landed to plant.
Jyoti Singh:	Okay. And your CapEx guidance?
Dinesh Gandhi:	CapEx is, as I said, we have done INR179 crore in the first half. The major work on the solarpower plant where we only invest more money has started after the monsoon. So, except theCapEx on the Steel Billet side, everything else is expected to be completed in the current yearitself, including the capacity for mining, both for the solar power plant 25 megawatts GPIL, 60megawatt, HIRA Ferro Alloy and our replacement of turbine. So, these are main componentsof the CApEx, which is the remaining CapEx and likely to be completed in the current yearitself. So, entire INR500 crore, including INR179 crore already done will be completed in thecurrent year. And in some ways, it could be 5% or 7% of the CapEx here or there, but largelywe are on line.
	And one more point I want add about the loss in the Ferro Alloy business is, we are holding alot of inventories of manganese ore, which we have procured at a higher prices and the same isgetting consumed or consumed during the last quarter and continues to get consumed andtherefore the impact of inventory loss is also there, as against the pellet inventory where we arenot impacted because the our inventory of pellet was hardly seven, eight days and iron ore thecost is fixed because of the captive iron ore. So, the inventory loss is mainly there with us inthe Ferro Alloy business.
Moderator:	Thank you. Next question is from the line of Mitul Sha from Reliance Securities. Please goahead.

Mitul Shah:	Thank you for taking my question. Sir, compared to Q2 how has been the trend during thisOctober, November in terms of the demand situation? And also, if you can give us somedetails on the thermal coal price trend in current quarter compared to Q2?
Abhishek Agrawal:	Yes. So, demand in terms of key or overall demand on in terms of pellets?
Mitul Shah:	Overall demand and specifically in terms of pellets are our pellet is relatively better qualitycompared to…
Abhishek Agrawal:	Ok. Right. So, on the overall demand side, see that the demand has really little on the sluggishside because of the monsoon. Usually, steel industry, the demand is always on the sluggishside because of the monsoon season and thus there were a lot of correction because of theimport and export duty. So, there were a lot of changes in the supplier and buyer side.Everybody was concerned about the prices further going down. So, buying was bit skeptical.And with monsoon over, so, November to April will be the peak period for the steel industry.So, it opened. The demand should come back soon.
	On the pellet side, the demand is really good for us at least because of our entire production,we almost produce 65% of high-grade pellets. So, at the moment also we stand at order bookof almost 45 days. So, we have order books till end of December. So, for us on a demand sideof pellets, we have no concern at all. We are very much covered for next 45 days and theinventory is quite low in the part, for the pellet side.
Mitul Shah:	Sir, just a clarification, in initial, you highlighted the demand was suppressed. That was for Q2or for October, because my question was primarily on October side.
Abhishek Agrawal:	Okay. So that was I think Dineshji mentioned, that was of Q2. On October side, again I amsaying, the demand was still sluggish because of the festival season. As I said, the demand willpick up post Diwali, which is November season, but on the pellet side, pellet being another rawmaterial, considered as raw material, so demand was still there back then and demand is stillthere right now also. And as I mentioned, right now, we have order book of 45 days. So, on thepellet side, we have no concern at all. Our order book is quite healthy.
Mitul Shah:	And sir, during your discussion with your key major customers, wherein we are saying that's adefinite slowdown on Europe side and China to some extent. So overall global demand isunder pressure. So, what is indication coming from client, top client side during yourdiscussion for next six months to one year point of view?
Abhishek Agrawal:	See, as we mentioned, I mean, it is very true. There is global meltdown in terms of steelproduction, because of the, one is the energy crisis and secondly, the inflation, especially, withcountries like Europe. They are going through heavy inflation. See, as I mentioned earlier,many big steel companies are reaching their production as per the demand but eventually, it'show competitive you are. And with the iron ore mining, we see, if somebody has to die, wewill be the last in the list. So, as I said, we are very much comfortable in terms of demandlevel, because our volumes are not so big and on pellet side, we have been able to tap three,

	four big buyers in India, which are regularly buying from us. So, I don't see any concern goingforward as well.
Mitul Shah:	Sir, in terms of thermal coal pricing trends compared to Q2, how has been the situation inOctober, November current quarter?
Abhishek Agrawal:	See, usually what happens, we are usually covered for two months with the inventory that is inthe plant, stock and the materials in transit. So, the entire stock, the prices which have startedcooling down in coming Q4 of this financial year, but at the moment as I had mentioned in thelast call also, the prices are standing at INR18,000 a ton for DRI and for domestic, the averagemix of linkage and the domestic purchases is about INR5,500 per ton from our partner.
Mitul Shah:	And sir, how has been the trend of the prices of this pellet price and steel prices in currentquarter?
Abhishek Agrawal:	Post Diwali, the prices have been quite stable.
Mitul Shah:	Have they stabilized or still continue to decline in November also?
Abhishek Agrawal:	No, no. So, pellet prices are hovering about INR8,000 ex-plant Raipur for the pellet which isbeing manufactured by others in India and on the steel side, the prices are about INR44,000 perfillet and Sponge is about INR30,000. So market has been quite stable post Diwali. There wasa downfall pre-Diwali but post Diwali the market has been pretty stable. And we are hopingthat as the demand comes back, the prices should go up further.
Mitul Shah:	We expect prices upward revision in coming months and Q4 or it should stabilize?
Abhishek Agrawal:	See, it is very difficult to ascertain what prices should go up but I think as Dineshji mentioned,we feel the prices have bottom out to certain extent. We don't see a downfall from here.Probably, 5%, 7% here and there, you can't say but we assume this is a benchmark whereprices should not go below this.
Mitul Shah:	Sir, anything on the hedging as currency fluctuation is too much this time and we are doingsizable import of the coal and few other things?
Abhishek Agrawal:	See, early earlier it was a natural hedge for us when we were exporting pellets. So, that wasnatural hedge but after the export has been stopped, we do a close monitoring on daily basis.Keep track of the dollar fluctuations and all the news evolving around it. For example, in lastfew days, dollar has come down from almost $82 level to $80.6 level. So, we keep a closetrack and depending on the market situation, we keep hedging our import, export exposure.

Mitul Shah:	Sir, what would be the net exposure right now as a percentage of sales?
Dinesh Gandhi:	Currency exposure?
Mitul Shah:	In terms of import versus export earlier as sir, highlighted that we used to do sizable exports.So, it was a natural hedging. But now export has come down significantly and import wouldstill remain same. So, then, what is the parity now net?
Dinesh Gandhi:	Our overall exposure in the forex market at consol GPIL level will be close to about INR700crore, total exposure.
Mitul Shah:	INR700 crore for this FY23 or now?
Dinesh Gandhi:	As of now, it is about close to INR700 crore exposure is there.
Mitul Shah:	Sir, lastly on the CapEx side, as you highlighted, INR500 crore still we are maintaining andthere in no sizable spillover to next year, how one should look at next year's CapEx or majorityof CapEx is being done this year or it will continue to be similar range in the next year also?
Dinesh Ganhi:	Next year CapEx we'll be able to guide it by end of the current quarter or maybe at the time ofthe Q1 call. We have to start work for our Greenfield Steel Project, but the land acquisition andthe environmental approval both are delayed and it's taking time. So, once we get theapprovals, then only we'll be able to guide how much the CapEx we can do it in the particularyear, upon receipt of that approval. Otherwise, whatever this CapEx is currently what is likelyto be completed by the end of the year. So, for next year CapEx, we will be able to guide indue course of time only.
Mitul Shah:	But any indication, directionally would be higher or lower than this current year? May not bethe number.
Dinesh Gandhi:	Maybe similar kind of CapEx in the next year. Close to INR500 crore a year. It won't go muchbecause when we get the approval, then we'll place the order for equipment etc. So, I don'tthink it's going to go beyond INR500 crore, INR700 crore and we will be able to meet theentire CapEx through our internal accrual.
Moderator:	Thank you. The next question is from the line of Vikas Singh from Phillip Capital. Please goahead.

Vikas Singh:	Good afternoon, sir. Sir, I just wanted to understand that at the high inventory high costinventory, the entire impact has already been taken by 2Q or some of the impact would flowinto the 3Q and how the blended price you are expected to move in 3Q?
Dinesh Gandhi:	So, most of the inventory related is already taken because we had an inventory loss onmanganese ore prices only. Rest of the prices are mark-to-market and I don't think there's anymajor inventory loss is there in the company. So, it is mostly covered into Q2.
Vikas Singh:	So the imported thermal coal, which would have come at a higher cost that is also mark-tomarket by 2Q and 3Q we won't see any inflation because of that?
Abhishek Agrawal:	No, we won't see that.
Vikas Singh:	Understood sir. My second question pertains to net cash. So if I just do the math, we wouldhave earned some cash during first half, but our net cash position kept on declining. So,barring INR179 crore of CapEx, where the rest of the capital cash has been deployed because Idon't see much of the inventory creation for us during the first half?
Dinesh Gandhi:	No, no, on net-net basis, the money has been deployed in CapEx, as well as in your currentassets. If you see, my net current liabilities has gone down by INR300 crore and current assethas gone down by INR100 crore only. In addition to that there is a dividend payout of INR118crore.
Vikas Singh:	Understood, sir. And sir, during my first question, I also asked that how the average pricesmovement we are expecting in 3Q versus 2Q in our major products, such as pellet and spongebillet? If you could give us some insight into it.
Abhishek Agrawal:	Can you come again, please?
Vikas Singh:	So, current prices versus your 2Q average? How they have moved as of now?
Abhishek Agrawal:	Okay. So, on the pellet side, the Q2 average was about INR8150 and it's currently we stand atabout INR8200. So, it's almost at the same level. On the Sponge side, the Q2 average wasabout INR33,000 per ton. Currently, the prices stand about INR30,500. So, there's been a dropof about INR2500. On the billet side, was about INR47,000 per ton. Currently, the prices are atINR44,000 per ton. So, there is a drop about 8% on sponge and billet side. Pellets remained thesame.
Vikas Singh:	Understood, sir. So, one more question regarding the international scrap prices which havebeen on a declining trajectory. So, does that impact our sponge and billet prices domesticallyor we remain fairly insulated? So, what's your take on that?

Godawari Power & Ispat Limited November 11, 2022

Abhishek Agrawal:	See, when it comes to domestic industry, scrap prices do not effect so much. But what hashappened lately because of the domestic side, the scrap being bit high, a lot of people haveimported bulk metals into India for their own consumption as in trading. For example, evenGodawari, we import about 1500 scrap on annual basis. For the first time we imported a bulkof scrap which is going to arrive in December because if you compare, you're melting cost ofsponge, so scrap melting is much more viable at the current level. So, depending on the marketsituation, it does impact here and there. The impact is not very big, but it is there. You cannotignore it.
Vikas Singh:	Understood, sir. Sir, just one last question regarding our solar power plants. So right now, ifyou could give us some idea about the cost savings per unit, which we're having on that andhow does that move in a couple of quarters down the line?
Dinesh Gandhi:	See, GPIL, 70 megawatt has already been commissioned and we have started using the powerin our steel smelting plant, integrated plant in Siltara. There, we are buying power from thegrid for INR5.5 per unti. Now, so against this, our cost will be less than INR1.75 including thegrid charges, the power banking charges. So, net-net there will be more than INR3.5 per unitsaving. The 25 megawatt power plant, where the effective power generation would be about4.5 megawatt, we will be using in our mines. So, mines, we're buying power at about INR12per unit. The grid tariff for mines is higher. So there will be replaced with the power cost ofINR1.75 from the solar. So, the entire saving will progress to the profitability. So, againstINR12, you take INR2 cost, so INR10 saving is expected there. Similarly, HIRA Ferro Alloys,we because of the very high cost of coal, we are using the power from the grid rather thanrunning the coal-based power plant and same will also get replaced with the solar power by theend of the current financial year. So, net-net, our steel melting and Ferro Alloy business, weexpect the saving of about INR3.5 per unit and in our mines, our savings will be close toINR10 per unit.
Moderator:	Thank you. Next question is from the line of Jatin from Invest Savvy. Please go ahead.
Jatin:	Thanks for taking the question on the call. On the power saving, you said 70 megawatts andthe other 25 megawatt plant, there will be 4.5 megawatt which will effectively be produced.So, this is, while in megawatts terms, it is fine, but how many megawatts were actuallyproduced? Megawatt hours were actually produced? For solar power, in a month, how manyhours and how many days is it operational?
Abhishek Agrawal:	No, no. So, just to clarify, it will be difficult to answer that directly. You can consider a17%PLF on annual basis. For example, if it's a 70-megawatt solar power, so, 70 megawatt into 117,so 12 megawatts will be your generation throughout the year.
Jatin:	So, 12 megawatts into 365 into 24?
Abhishek Agrawal:	Exactly. Into 1000. So, basically, it is 12 into 24 into 365 into 1000 means about 10 crore unitannually. 10.5 crore unit annually. That is how the calculation is done.

Jatin:	So, basically you are saving, INR3.5 to INR10 depending, and this 4.5 megawatts is alreadytaking that 25 into 0.15 and converting to 4.5?
Abhishek Agrawal:	Yes, yes. Exactly.
Jatin:	So, this will show off in your cost savings or this will show off in your…?
Dinesh Gandhi:	Cost savings.
Abhishek Agrawal:	Cost savings, So, as Dineshji mentioned, in mines, we are currently importing power from thegrid and then the average bill is about INR11.5 per unit, which will come down to about INR2.So, saving about INR9 to INR10 there. And on the plant side, the INR5.5 generation cost oncoal side, we will save about INR3.5. So that was what Dineshji mentioned previously.
Dinesh Gandhi:	Even the grid power, we are buying small quantity of power from the grid.
Jatin:	So, if I do a rough math, there is a saving of about INR75 crore a year based on what you havesaid. So, that is obviously a very heavy number. If we look at the impact of dollar movementon your business, is there a connection between the dollar, overseas price you're saying $80 toone $120 is what you expect it to trade at. Dollar has moved up, then does that mean that yourrealization will be better in India?
Dinesh Gandhi:	Export is not allowed, my dear friend. Export is not allowed.
Jatin:	Is relationship between the domestic price and global price?
Dinesh Gandhi:	There is no relationship because in India pellets are not getting imported.
Abhishek Agrawal:	What he means is, dollar is moving up, does the domestic prices also start moving up? So, Iwould say not relatively. For some people it might change, that might have an impactdepending on the product cycle. For example, people who do engineering or depending onimports, but relatively, on a larger scale, it doesn't impact so much. And right now, the globalprices of all the commodities or all the steel, I would say production, pellets and all, longproduct, prices are much, much, much less compared to the Indian domestic market. Forexample, billets, right now if you see that, it is about $490, which is INR40,000 and inRaipur, we are selling billet at about INR44,000. So, it's already 10% higher. So, rise onimpact is not very relative to compared the dollar movement.

Jatin:	Historically to domestic prices trade, when exports were allowed was exports price at adiscount to the global price, or was it par to the global price or is it below the global price?
Abhishek Agrawal:	It all dependent demand supply, there'll be times that domestic prices are much lowercompared to global size. So, people start exporting more and then the dimensions are strongerthan the global then people start buying domestic more and use their export volume. So everycompany depending on the market scenario keeps changing the you know, the supply mix inthe domestic and export market. It is a very volatile market right now. So you know there isn'ta lot of reasons behind it. So it's difficult who you know, give us we know one particularanswer.
Jatin:	Okay, what percentage of your cost is coking coal?
Abhishek Agrawal:	We don't use coking coal, because we don't have a blast furnace. We are into DRI route. So wehave pellets, coal based sponge yarn and then making production and so we only importthermal coal we don't import coking coal.
Jatin:	Okay, and thermal coal is what percentage of your cost?
Abhishek Agrawal:	So 50% of total import. So the total coal I consume in entire operation. Import is 50%.
Jatin:	50% is important and the rest is?
Abhishek Agrawal:	Domestic
Dinesh Gandhi:	Total raw material cost is closer to about 10%.
Jatin:	So total cost of coal used is 10% overall cost or 10% of the overall revenue?
Dinesh Gandhi:	Overall costs cost. Not the revenue Okay.
Jatin:	Thank you, in terms of your operating margins, as we can see that you know, because of thefactors that you have been mentioning, we have seen a big drop in realization and hence theEBITDA is dropped. From 35% It came down to almost 17% for the quarter, so 28% to 17%.Do you think it bounces back from here or stays here or goes lower.
Dinesh Gandhi:	That depends on the opening of the market for export and what is the international scenario.Otherwise the long term margins are closer to 20%. But if an extraordinary situation ariseslike you know, last financial year, then the margin can go up to 35%, 40%. Last year we did

	42% in H1 FY '22. So that depends on the demand supply purely and commodity, sofluctuations are very wide.
Jatin:	Okay, so if you were to, like assuming exports not open the next two quarters, this quarter andthe next quarter. Then given all that's happening. You expect it to be around what it is or go upmarginally or go down marginaly.
Dinesh Gandhi:	We expected what it is, 1-2% here and there but mostly in this range. What we did in Q2.
Jatin:	Won't your power benefit actually kick into this?
Dinesh Gandhi:	Not in current year, major benefit will kick in the next financial year when the project getscommissioned. Some of the some benefit will come from the project we did alreadycommission but then to 2% - 3% here and there could always be fluctuation in the margin andto this extend it will get covered within that.
Jatin:	You said that was commissioned in June, became operational in June or it became operationallater.
Dinesh Gandhi:	No, it has already become operational, the impact of which will be felt from Q3, because inQ2 we had been banked entire power. So, it is alluded cost only. So, Q2 there will be someimpact, but then you also see some prices have gone down. In Sponge iron there are someprices are going down in billet. So, that impact will also grow up. So, on an average it will becloser to 19% 20% margin
Jatin:	And the 70 megawatt plant which was, I think there from August is that been commissioned oris it going to commission.
Dinesh Gandhi:	No, no, no, it is commissioned and we started utilizing power from October onwards for twomonths the power was banked with the state grid.
Jatin:	Okay. So, for basically both the plants, Q3 onwards full benefit will come in.
Dinesh Gandhi:	Yes, for 70 megawatts Q3 onwards will come and for the rest of the project which are underconstruction, the benefit of which will come in Q1, FY '24.
Moderator:	We have the next question from the line of Chintan Mehta from Lloyd llp. Please go ahead.

Godawari Power & Ispat Limited November 11, 2022

Chintan Mehta:	It's regarding the cost of iron ore in a presentation your maintenance INR 2900 quarter onquarter. So I want to understand that this is including royalty, the cost should have gone downquarter and quarter considering the fall in the market price of iron ore. And royalty is afunction of to a certain extent, the prices of the iron ore, don't you think that cost would havefallen by INR 200 INR 300.
Abhishek Agrawal:	This is just to just to clarify, you know what happened at we are supposed to pay royalty basisguided which have been published. So right now IBM has printed the price of month of July.So there's usually a backlog of three months. So right now the royalties been paid, which is theIBM price for the month of July, we are seeing in October. So we expect as we move forwardand the prices come down so that there will be saving on account of royaly.
Chintan Mehta:	And what kind of reductions do you foresee in that? Because that will convert -- they'reconverted into our EBITDA in one way or another.
Abhishek Agrawal:	See the system right now which IBM follows is, you know, they calculate the average of thevolume sold in particular state basis, the top five miners, in Chhattisgarh there's only one minerwhich is selling to NMDC. So that is the impact of royalty on account of the mechanisms IBMis adopting right now, the impact won't be very, very significant. If it had been Orissa, becausethere are a lot of commercial mining happening then impact will be much more severe. But inChhattisgarh, the impact will be very minimal, say probably in the range of INR 100-INR 150.
Chintan Mehta:	And that impacts us more confidence that the price has bottomed out because NMDC seemskind of you know, to royalty structure in from the mine of Karnataka as well. It has to paypremium royalty on overall basis. So you think that NMDC passage of some more bottom thanthat will be scope, you know, in Raipur as well, or no scope of reduction. That's your thinking.
Abhishek Agrawal:	So I did read the article, which has been respected the Chairman of NMDC and he said theprice have bottomed out, and we don't see any further correction. So basis this statement I'massuming, and NMDC will not get hike the prices further. So we don't expect much correctionin royalty going forward as well.
Moderator:	Thank you. The next question that's on the line of Yogansh Jeswani from Mittal Analytics.Please go ahead.
Yogansh Jeswani:	Thanks for the opportunity. Just one question on your restructuring that we were doing so wehad bought in the assets from Alok Ferro Alloys and HIRA Ferro alloys. So just going to yourgroup structure. So in Alok Ferro Alloys we own around 79% And then another 8% 9% isowned by HIRA Ferro Alloys.And 12% 13% Ardent Steel.HIRA Ferro Alloys is a subsidiaryand Ardent is an associate. So are we further looking to simplify the structure and bringing theremaining stake from Ardent and HIRA also into GPIL directly.
Dinesh Gandhi:	Hira will remain as it is, we don't intend to buy that in GPIL. And, Ardent yes, we intend tobuy it at some point of time, we'll do the transfer. But we're not in a hurry that is within thegroup only.

Yogansh Jeswani:	Got it. Also Ardent Steel will continue to maintain this 37% 38% Do we intend to sell this.
Dinesh Gandhi:	No we intend to maintain the stake. We will continue with it.
Yogansh Jeswani:	One clarification, a lot of has been discussed over your power investment. Yes, I think a lot hasbeen discussed on your power investments and all the cost savings effort that you're taking. Sojust one clarification, suppose these solar power plants coming on stream we'll be roughly to50 Plus megawatt power capacity. So we'll be self-sufficient or will we have some access toselling the market as well.
Dinesh Gandhi:	We will be self-sufficient for our existing operations. Including whatever is capacity underconditioning, there is a self-sufficient. For new projects, we will have to look for fresh powerprojects. But for requirement we don't need any additional power from here on.
Yogansh Jeswani:	New product in the greenfield right?
Dinesh Gandhi:	Yes. For existing requirements, the power will be self-sufficient.
Yogansh Jeswani:	Got it. So once all these power plants are commissioned, so by next year, we can say on anaverage your per unit power cost will be below INR 2.5 per unit.
Dinesh Gandhi:	On an average yes.
Abhishek Agrawal:	2.5 to 3, depending on the prices of coal.
Yogansh Jeswani:	Yes, so overall, simplistically, in terms of margins. I mean, you guys must have done thisworking. So just to simplify for us. Last year, full year, we had spent something around INR200 crore to INR 220 crore on power, so that should come down to less than INR 100 croreright
Dinesh Gandhi:	No, the number which you are looking in balance sheet, includes the fuel consumed in thepellet plant. So that will not be the correct working because we are already running the powerplant effectively, and the fuel for the power plant is clubbed into the raw material cost. Sowhatever power you're buying from the grid is classified into the powering fuel coal plus thecoal charged into the pellet plant. Coal justification is charged into the power and fuel costs.But yes, our current cost of power is close to about INR 4 per unit which will come down to goINR 2 to INR 2.25 going forward

Yogansh Jeswani:	Okay, and what is our entire power consumption says in terms of units for the entireoperations, the increased operations that that will be doing in FY '23 or '24.
Dinesh Gandhi:	At full capacity on any given day, the consumption will be about 95 Megawatts.
Yogansh Jeswani:	So, one last question on the Ferro Alloy, you said you are taking a maintenance shutdown. So,in Q3, we will see some impacts of it or in Q3, we'll be back to normal?
Dinesh Gandhi:	Q3, we should be back to normal, but normal is now not like last year, because the prices havealready fallen from INR130,000 to about INR80,000. So, production volume will be normal,but the realization and profitability will definitely be as, compared to last year it will be lower.
Abhishek Agrawal:	So, just to add to what Dinesh is saying, of course, prices are taken care of, but on the volumeside, Hira ferro alloy will be absolutely back to normal but Alok Ferro there will be someimpact, because still the modification revamping is going up and that the revamping will takeinto effect the end of November. So there will be a reduced volume from Alok this quarter Q3as well, from Q4 we will be back to normal in terms of volume. Thank you.
Moderator:	We have the next question from the line of Aman Madrecha from Augmenta Research PrivateLimited. Please go ahead.
Aman Madrecha:	Thanks for the opportunity, can you please throw some light on the domestic market, like postimposition of the export duty, the pellets are being sold in the domestic market. And generallyyou're highlighted in your previous calls also that higher grade pellets of 63% to 62% don'thave much takers in the Indian market. So, what has changed and like how are the pelletsbeing consumed by the domestic market or the domestic takers some highlight on this?
Abhishek Agrawal:	On a pellet side what has happened is as you must be aware, as we go ahead, the quality of ironore India is going down, Orissa being one of the major surprises of iron ore which is the basicraw material for pellet, earlier the benchmark was 63. Now, the benchmark is 62. So, now thepellets produced on average basis all over India is about 62.5, which is a high you know,alumina silica content, and which is the mass production. In case of Godawari,. the advantagewe have is one is the high grade pellets, where the x is about 65 and we produce about 65% inthe entire charge mix. So, buyers are totally different, you know, players like Tata, JSPL, whoare running the blast furnaces, the reason behind using our pellet and paying a premium isbecause the high coking coal costs, the cocking coal by the way deliver to India are bove 300which gives them an advantage to use the pellets in the charges. So there is a prime reasonwe're still getting a decent premium over and above the other players in the market because oflower middle and higher FP that is one thing and on the on the strategic side, the secondadvantage we have is you know, our phosphorus is quite low. Because of own iron ore mining,because of which there are few players in the domestic market who specifically wants a palettebecause of the steelmaking because like no, you know, everybody in India is moving towardsmaking quality steel so phosphorus does play an important role. And the average phosphorus,all over India, it's quite high. So that is the reason you know, I keep mentioning again, again,when it comes to pellet for Godawari, we don't have any selling, rather we get a premium inthe market. For example, our Orissa plant in Ardent, which is based in Orissa, the averageselling is about INR6500 whereas Godawari is about INR8000., so straightaway EDITDA inaddition of 1500 per tont, which is huge in the volume game.

Moderator:	Thank you. Next question is from line of Satyan Wadhwa from Profusion InvestmentAdvisors. Please go ahead.
Satyan Wadhw:	Just one question in the breakup of power, how many units of power do you use in the miningoperation for which you pay you know, INR 11.5 and INR 12 just trying to get a sense of whatthe theory on the mining side will be.
Dinesh Gandhi:	About 5MW.
Moderator:	Thank you. The next question is from the line of DB Jana from KLT Securities. Please goahead.
DB Jana:	Yes, looking to the course saving and better realization of our product pellet and all that, canwe safely assume that in quarter three and four the profitability will be better than Q2?
Dinesh Gandhi:	It is very difficult to predict the profitability, but yes, the range would be you know,somewhere closer to this, but there could be some variation here and there.
DB Jana:	If the situation maintained the same that about export and all?
Dinesh Gandhi:	But some or the other input costs keep fluctuating, so, it may not be exactly same, but therange will be closer to here, at this level.
Moderator:	Thank you. Next question is from the line of Wayne Demello as an individual investor. Pleasego ahead.
Wayne Demello:	So, congrats on a good set of results, given the circumstances, and thanks for taking myquestion. So my first question is in the previous quarter, you know, since the imposition of theexport duties, the fall in realizations for pellets was a lot more than that of sponge iron. So,management had guided that we would try to sort of push more volumes on the sponge ironfront rather than pellets but I have seen that we've sold a lot more pellets whereas sponge ironvolumes have slightly come down. So, could you throw some light on that?
Dinesh Gandhi:	No, no, no, no, we have a pellet capacity of 2.7 million ton and sponge iron capacity of 0.5million only. So, we cannot change the mix lightly, you know, you can do some arbitrage, butyou know, whatever responder and we are purchasing we are operating plant at 100%. Sobeyond that we cannot increase or the pellet sales will continue, to the extent of 500,000 tonsper month per quarter that will continue.

Wayne Demello:	Okay, thank you. My second question is, so, you know, on the pellet front, we're doing youknow, 65% of high grade pellets, and we're selling to bigger players like Tata, JSPL like youmentioned. So you guys must be aware that Tata Steel has in in this quarter in Q3, they havepellet plant in Kalinga Nagar, 6 million tons, I think. So, given that scenario. I mean, do youhave any outlook on, you know, the demand for our pallets?
Abhishek Agrawal:	Yes, I'm totally aware about the Tata steel commissioning a new pellet plant. But as Imentioned earlier, the volume which we produce, you know, and volume, which bigger playersrequire, for example, Tata or JSPL. So I don't see any change in that, I think we will continueto do business with all these guys. Because only the reason is coking coal prices are, using ourpalette will always be beneficial for their total cost.
Wayne Demello:	Okay, thank you. And one final question is, is there any update on we're auctioning? We werebidding for some coal.
Abhishek Agrawal:	So we are we are still trying. Now Government has come up with six plants of coal we areevaluating all the options , and as we said earlier, we are still looking to acquire a coal mine.And we will keep continue to work. We'll work on that.
Moderator:	Thank you. The next question is from the line of Ganesh as an individual investor, please goahead.
Ganesh:	Thank you for the opportunity. So I'm looking at the corresponding quarter two years back toQ2 FY '21 We made a similar EBITDA at that time also with the same similar amount ofpallet sales. But the gap between our iron ore costs and the pallet cost then compared to nowwe have 1000 rupees more per tonne. So what I'm trying to understand is the profitabilitythough the gap is 1000 rupees more is the profitability the same or similar because of higherinputs. And what are the input costs just want to understand that?
Dinesh Gandhi:	You have to reframe your question you're trying to ask because our profitability has gonedown in the quarter it is not same as last quarter or the same quarter of last year.
Ganesh:	Same quarter two years back I'm just trying to think if the input cost is -- input costs have rose?
Abhishek Agrawal:	I got your question. I will tell you why. Although we are 1000 per ton, but in addition on theenergy side because of you know higher input prices for a DRI and about the thermal prices forpower plant, the input cost side had gone up so that has utilize the saving which is on the palleton the iron ore side.
Dinesh Gandhi:	So do we see the theme continuing also because I see the thermal coal prices are stillfluctuating in the same way

Abhishek Agrawal:	They have started cooling down. But in the current market scenario, I think it will continue todo so, because still the prices are quite on the higher side. So I think going forward, also thelooking, globally stabilized in terms of energy, I think we will be impacted by the currentmarket scenario on the energy side.
Moderator:	Thank you. Ladies and gentlemen, that would be our last question for today. I now have theconference back to the management for the closing remarks. Thank you and over to you.
Dinesh Gandhi:	Ladies and gentlemen, thank you for joining the conference call of Godawari Power & Ispat todiscuss Q2 results. We have tried to answer all your questions but if anything is remaining orsomebody has anything, you can approach our IR for further clarification if required. Thankyou very much.
Moderator:	Ladies and gentlemen on behalf of GoInda Advisors that concludes this conference. Thank youall for joining us and you may now disconnect your lines. Thank you.