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GMDC Ltd: Value for money
STOCK ANALYSIS
By Devdas Mogili
Gujarat Mineral Development Corporation Ltd (GMDC), is a 48-year Govt. of Gujarat undertaking. Established in 1963. It is a mining and mineral processing company and is the largest merchant seller of Lignite in India. M. S. Sahu is the chairman of the company and V. S. Gadhavi IAS is the managing director.
GMDC produces lignite, bauxite, calcined bauxite, fluorspar and manganese ore. The company is also engaged in the generation of power and offers lignite for various industrial units engaged in textiles, chemicals, ceramics, bricks or for captive power.
The company commenced operations with a small sand crushing plant at Surendranagar which supplied graded sand to consumers all over Gujarat. The sand was used by various manufacturers of sodium silicate and glass industries. In 1968, the company commenced the next project, which was beneficiation of fluorspar, a rare mineral essential for basic industries like refining of steel, manufacturing of aluminium, hydrochloric acid, foundry flux and welding electrodes among others.
In the early 70's, the company commenced mining of lignite in Kutch district. In 1984, it started mining operations at Rajpardi near Ankleshwar.
In October 1997, the Government of Gujarat came out with an offer for sale of 82,68,000 equity shares of Rs.10 each at Rs.140 thereby diluting their stake to 74%.
During 2004-05, the company commenced operations in the mine at village Tadkeshwar in Surat District. The company commissioned the Sea Water Intake System, Desalination Plant, Fuel Oil Handling System, Cooling Water System and Air Compressor System & Other Auxiliary Systems.
During 2004-05, GMDC signed a MoU with RBG Minerals Industries, Udaipur, for developing the Ambaji Group Mining and a concentration project. In the same year, it completed the refractory dry out procedure of Boiler Unit I, which lead to lighting up the boiler by oil. After the light up, steam blowing activities were undertaken and the first unit was successfully synchronized with the GEB Grid during 2005.
In 2005-06, after commissioning the Material Handling System, the first unit was taken on Lignite Trials and successfully reached its rated capacity of 125 MW. The second unit was successfully synchronized with the Grid on 12 December 2005. Lignite dispatch from Tadkeshwar started from March 2006 on a commercial basis.
During 2006-07, the company executed a MoU with Gokul Refoils & Solvents Ltd for setting up a 125 MW captive power plant based on lignite from the Tadkeshwar mine. Also, the company executed a MoU with Jaypee Associates Ltd, New Delhi, for setting up a 2.4 million metric tones per annum (MMTPA) cement plant based on limestone.
During the year, the company entered into a joint venture with Gujarat Power Corporation and formed a company called, Bhavnagar Energy Company Ltd for 500 MW lignite based power plant at Bhavnagar. The unit 2 of power projects at Nani-Chher started commercial operation from 1 May 2005 whereas unit 1 was commercialized from March 2007.
During 2007-08, the company signed a MoU with Aluchem Inc, USA, for setting up of 1 MMTPA capacity Alumina based chemicals and speciality products based on Bauxite deposits. Also, the company was granted work permit by the Government of Gujarat for lifting of 1,00,000 MT of Manganese Waste Dump from Shivrajpur in Baroda.
In September 2007, the company started mining production in Amod Lignite Mine near Rajpardi and mining operations at the Bhavnagar mine commenced in April 2008 and the lignite production from September-October 2008.
Power Project - Nani Chher: During the year under review, the total generation of Akrimota Thermal power Station was 1,394 MUs.
Wind Farm: The 19.5 MW wind farm was commissioned in October 2009 and earned a revenue of Rs.3.37 crore. GMDC has further installed 81 MW of wind farm in two phases. The first phase of 40.5 MW was commissioned in 2010 and the next phase by end FY11.
New Projects: It plans to commence five lignite mines across Gujarat with total reserves of 91 million MT. It has also applied for mining lease in Ghala near Surat.
Cement Plant: In joint venture with the Jai Prakash Group, GMDC has set up 2.6 MMTPA Cement Plant for which it will supply the limestone.
Coal Block Development: It has been allocated two Coal blocks viz. at Morga-II in Chhatisgarh and at Naini in Orissa and has participated in a 50.50 joint venture with the Pondicherry Industrial Promotion Development and Investment Corporation (PIPDIC).
Alumina Plant: The State of Gujarat is bestowed with bauxite reserves of 137 MMT. In order to exploit this vast bauxite mineral wealth, it has executed MoU for setting up two Alumina Plants 1 MMTPA capacity at Kutch and the other is Saurashtra.
Fluorspar Beneficiation: It has entered in to several MoUs for mineral development and value addition with various business entities and proposes to set up 50:50 joint ventures with M/s Gujarat Fluoro Chemicals Ltd. and M/s Navin Fluorine International Ltd.
Silica Sand Beneficiation: It proposes to set up a 2 lakh MTPA Silica Sand beneficiation plant in joint venture with Asahi India Glass Co. and can sell its share of 1 lakh MTPA. The operation and maintenance of the plant will be carried out by M/s Asahi India Glass Co.
Speciality Alumina Chemicals: It has plans to set up Speciality Alumina Chemicals Plant in Gujarat based on its Bauxite at an investment of Rs.30 crore.
Brown Fuse Alumina - Tabular Alumina: It has entered in to two MoUs to set up Brown Fuse Alumina - Tabular Alumina plant based on Bauxite.
Integrated Coke Oven Plant: A 51:49 joint venture has been set up with Sunflag Iron & Steel Co. Ltd. to set up Gujarat State Min. & Resources Corporation Ltd.
Multi Metal Project, Ambaji: It has entered into an MoU with Binani Zinc Ltd. and Rajasthan State Mines & Mineral Development Corporation for setting up beneficiation plant with a capacity of 2000 tonnes per day (TPD) based on the deposits of Ambaji Deri and Basant Gadh, at an approximate project cost of Rs.239.11 crore. The proposed equity investment is GMDC - 25%, Binani-65% and RSMMDC-10%.
Performance: The company posted net sales revenues of Rs.1065.22 crore with a net profit of Rs.279.87 crore netting an EPS of Rs.8.80 (FV: Rs.2) for 2009-10.
Financial Highlights: (Rs. in lakh)
Latest Results: For Q3FY11, sales rose 33.63% to Rs.360.40 crore as against Rs.269.70 crore in Q3FY10 while net profit shot up by 42.53% to Rs.101.48 crore from Rs.71.20 crore in Q3FY10 recording an EPS of Rs.3.19 for the quarter and Rs.8.24 for the 9 months ended 31 December 2010.
Financials: GMDC has an equity base of Rs.63.60 crore with a book value of Rs.44.20 (FV: Rs.2).and a low debt:equity ratio of 0.26 with RoCE of 26.27% and RoNW of 21.33%.
Share Profile: The GMDC share with a face value of Rs.2 is listed and traded on the BSE/NSE under the B group. Its share price recorded a 52 week high/low of Rs.172.70/Rs.101.70. At its current market price of Rs.138, it has a market capitalization of Rs.4430 crore.
Dividends: The company has been paying dividends as shown here: FY10 - 125%, FY09 - 100%, FY08 - 100%, FY07 - 100%, FY06 - 60%, FY05 - 50%, FY04 - 45%, FY03 - 45%, FY02 - 40%.
Shareholding Pattern: The Government of Gujarat holds the majority stake of 74% and the balance of 26% is with the non corporate promoters, mutual funds and the investing public. Mutual Funds, like Franklin India, DSP BR, Sundaram, Tata, SBI, Religare, Mirae, have added the company’s shares to their various schemes.
Prospects: In 2009, the Government of Gujarat has announced a new mineral policy for development of mineral resources and emphasizes mineral based industrial growth.
Lignite: The lignite resources have been reserved for power generation and wherever possible, for underground coal gasification by State PSUs or by Joint Ventures with State PSUs. GMDC would continue to supply surplus quantity of lignite from its mines to the industries in Gujarat, in particular to small and medium industries on a long-term basis.
Bauxite: All new Bauxite bearing areas in Gujarat have been reserved for GMDC and it has been made the facilitating and channelizing agency for bauxite sale and exports. It would become the sole supplier to bauxite users in Gujarat for higher value addition.
Manganese: In addition to the existing 1153 hectares reserved for GMDC, the remaining areas of manganese reserves would be granted to captive users for forming a JV with GMDC to produce value added products like MnSo4, MnO, Ferro Alloys or EMD etc. The new mineral policy has made GMDC as a catalyst and a propeller in manganese based industries.
Conclusion: GMDC a Government of Gujarat undertaking with an excellent track record of paying dividends and performance is aggressively expanding and diversifying and is likely to post an impressive topline and bottomline in days to come.
At its current market price of Rs.138, the share price is discounted less than 15 times its 2009-10 earnings of Rs.8.8. Considering its leadership status, excellent performance and payouts and aggressive expansion plans, the share offers value for money for long-term investors.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
GMDC Ltd: Value for money
STOCK ANALYSIS
By Devdas Mogili
Gujarat Mineral Development Corporation Ltd (GMDC), is a 48-year Govt. of Gujarat undertaking. Established in 1963. It is a mining and mineral processing company and is the largest merchant seller of Lignite in India. M. S. Sahu is the chairman of the company and V. S. Gadhavi IAS is the managing director.
GMDC produces lignite, bauxite, calcined bauxite, fluorspar and manganese ore. The company is also engaged in the generation of power and offers lignite for various industrial units engaged in textiles, chemicals, ceramics, bricks or for captive power.
The company commenced operations with a small sand crushing plant at Surendranagar which supplied graded sand to consumers all over Gujarat. The sand was used by various manufacturers of sodium silicate and glass industries. In 1968, the company commenced the next project, which was beneficiation of fluorspar, a rare mineral essential for basic industries like refining of steel, manufacturing of aluminium, hydrochloric acid, foundry flux and welding electrodes among others.
In the early 70's, the company commenced mining of lignite in Kutch district. In 1984, it started mining operations at Rajpardi near Ankleshwar.
In October 1997, the Government of Gujarat came out with an offer for sale of 82,68,000 equity shares of Rs.10 each at Rs.140 thereby diluting their stake to 74%.
During 2004-05, the company commenced operations in the mine at village Tadkeshwar in Surat District. The company commissioned the Sea Water Intake System, Desalination Plant, Fuel Oil Handling System, Cooling Water System and Air Compressor System & Other Auxiliary Systems.
During 2004-05, GMDC signed a MoU with RBG Minerals Industries, Udaipur, for developing the Ambaji Group Mining and a concentration project. In the same year, it completed the refractory dry out procedure of Boiler Unit I, which lead to lighting up the boiler by oil. After the light up, steam blowing activities were undertaken and the first unit was successfully synchronized with the GEB Grid during 2005.
In 2005-06, after commissioning the Material Handling System, the first unit was taken on Lignite Trials and successfully reached its rated capacity of 125 MW. The second unit was successfully synchronized with the Grid on 12 December 2005. Lignite dispatch from Tadkeshwar started from March 2006 on a commercial basis.
During 2006-07, the company executed a MoU with Gokul Refoils & Solvents Ltd for setting up a 125 MW captive power plant based on lignite from the Tadkeshwar mine. Also, the company executed a MoU with Jaypee Associates Ltd, New Delhi, for setting up a 2.4 million metric tones per annum (MMTPA) cement plant based on limestone.
During the year, the company entered into a joint venture with Gujarat Power Corporation and formed a company called, Bhavnagar Energy Company Ltd for 500 MW lignite based power plant at Bhavnagar. The unit 2 of power projects at Nani-Chher started commercial operation from 1 May 2005 whereas unit 1 was commercialized from March 2007.
During 2007-08, the company signed a MoU with Aluchem Inc, USA, for setting up of 1 MMTPA capacity Alumina based chemicals and speciality products based on Bauxite deposits. Also, the company was granted work permit by the Government of Gujarat for lifting of 1,00,000 MT of Manganese Waste Dump from Shivrajpur in Baroda.
In September 2007, the company started mining production in Amod Lignite Mine near Rajpardi and mining operations at the Bhavnagar mine commenced in April 2008 and the lignite production from September-October 2008.
Power Project - Nani Chher: During the year under review, the total generation of Akrimota Thermal power Station was 1,394 MUs.
Wind Farm: The 19.5 MW wind farm was commissioned in October 2009 and earned a revenue of Rs.3.37 crore. GMDC has further installed 81 MW of wind farm in two phases. The first phase of 40.5 MW was commissioned in 2010 and the next phase by end FY11.
New Projects: It plans to commence five lignite mines across Gujarat with total reserves of 91 million MT. It has also applied for mining lease in Ghala near Surat.
Cement Plant: In joint venture with the Jai Prakash Group, GMDC has set up 2.6 MMTPA Cement Plant for which it will supply the limestone.
Coal Block Development: It has been allocated two Coal blocks viz. at Morga-II in Chhatisgarh and at Naini in Orissa and has participated in a 50.50 joint venture with the Pondicherry Industrial Promotion Development and Investment Corporation (PIPDIC).
Alumina Plant: The State of Gujarat is bestowed with bauxite reserves of 137 MMT. In order to exploit this vast bauxite mineral wealth, it has executed MoU for setting up two Alumina Plants 1 MMTPA capacity at Kutch and the other is Saurashtra.
Fluorspar Beneficiation: It has entered in to several MoUs for mineral development and value addition with various business entities and proposes to set up 50:50 joint ventures with M/s Gujarat Fluoro Chemicals Ltd. and M/s Navin Fluorine International Ltd.
Silica Sand Beneficiation: It proposes to set up a 2 lakh MTPA Silica Sand beneficiation plant in joint venture with Asahi India Glass Co. and can sell its share of 1 lakh MTPA. The operation and maintenance of the plant will be carried out by M/s Asahi India Glass Co.
Speciality Alumina Chemicals: It has plans to set up Speciality Alumina Chemicals Plant in Gujarat based on its Bauxite at an investment of Rs.30 crore.
Brown Fuse Alumina - Tabular Alumina: It has entered in to two MoUs to set up Brown Fuse Alumina - Tabular Alumina plant based on Bauxite.
Integrated Coke Oven Plant: A 51:49 joint venture has been set up with Sunflag Iron & Steel Co. Ltd. to set up Gujarat State Min. & Resources Corporation Ltd.
Multi Metal Project, Ambaji: It has entered into an MoU with Binani Zinc Ltd. and Rajasthan State Mines & Mineral Development Corporation for setting up beneficiation plant with a capacity of 2000 tonnes per day (TPD) based on the deposits of Ambaji Deri and Basant Gadh, at an approximate project cost of Rs.239.11 crore. The proposed equity investment is GMDC - 25%, Binani-65% and RSMMDC-10%.
Performance: The company posted net sales revenues of Rs.1065.22 crore with a net profit of Rs.279.87 crore netting an EPS of Rs.8.80 (FV: Rs.2) for 2009-10.
Financial Highlights: (Rs. in lakh)
Latest Results: For Q3FY11, sales rose 33.63% to Rs.360.40 crore as against Rs.269.70 crore in Q3FY10 while net profit shot up by 42.53% to Rs.101.48 crore from Rs.71.20 crore in Q3FY10 recording an EPS of Rs.3.19 for the quarter and Rs.8.24 for the 9 months ended 31 December 2010.
Financials: GMDC has an equity base of Rs.63.60 crore with a book value of Rs.44.20 (FV: Rs.2).and a low debt:equity ratio of 0.26 with RoCE of 26.27% and RoNW of 21.33%.
Share Profile: The GMDC share with a face value of Rs.2 is listed and traded on the BSE/NSE under the B group. Its share price recorded a 52 week high/low of Rs.172.70/Rs.101.70. At its current market price of Rs.138, it has a market capitalization of Rs.4430 crore.
Dividends: The company has been paying dividends as shown here: FY10 - 125%, FY09 - 100%, FY08 - 100%, FY07 - 100%, FY06 - 60%, FY05 - 50%, FY04 - 45%, FY03 - 45%, FY02 - 40%.
Shareholding Pattern: The Government of Gujarat holds the majority stake of 74% and the balance of 26% is with the non corporate promoters, mutual funds and the investing public. Mutual Funds, like Franklin India, DSP BR, Sundaram, Tata, SBI, Religare, Mirae, have added the company’s shares to their various schemes.
Prospects: In 2009, the Government of Gujarat has announced a new mineral policy for development of mineral resources and emphasizes mineral based industrial growth.
Lignite: The lignite resources have been reserved for power generation and wherever possible, for underground coal gasification by State PSUs or by Joint Ventures with State PSUs. GMDC would continue to supply surplus quantity of lignite from its mines to the industries in Gujarat, in particular to small and medium industries on a long-term basis.
Bauxite: All new Bauxite bearing areas in Gujarat have been reserved for GMDC and it has been made the facilitating and channelizing agency for bauxite sale and exports. It would become the sole supplier to bauxite users in Gujarat for higher value addition.
Manganese: In addition to the existing 1153 hectares reserved for GMDC, the remaining areas of manganese reserves would be granted to captive users for forming a JV with GMDC to produce value added products like MnSo4, MnO, Ferro Alloys or EMD etc. The new mineral policy has made GMDC as a catalyst and a propeller in manganese based industries.
Conclusion: GMDC a Government of Gujarat undertaking with an excellent track record of paying dividends and performance is aggressively expanding and diversifying and is likely to post an impressive topline and bottomline in days to come.
At its current market price of Rs.138, the share price is discounted less than 15 times its 2009-10 earnings of Rs.8.8. Considering its leadership status, excellent performance and payouts and aggressive expansion plans, the share offers value for money for long-term investors.
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