Apart from stock split, There was talk of 1:1 bonus shares as well, right?
Bonus will be issued after equity split i guess
The Board of Godawari Power & Ispat at its meeting held on 16 October 2021 approved the resignation of Biswajit Choudhuri, Chairman of the Board and Independent Director of the company. The Board has appointed Shashi Kumar, Independent Director of the company as Chairman of the Board with immediate effect.
Pellet prices continue to be at 14,000.
Posting the PE chart of GPIL
The PE of GPIL touched 1.5-2 on 3 occasions-
- Nov 2008 at peak of financial crisis
- July 2013- at peak of loss of interest in small caps when most small caps were trading at 5-6 PE
- March 2020- peak of covid crisis.
At above times, GPIL also had substantial debt, compared to debt free status now.
At current pellet prices, GPIL is in similar PE range- what it was at peak of mkt crisis, and future returns were always huge whenever it touched this PE.
This is the reason, why it is at 40% allocation in my portfolio. (link- Manas Portfolio)
Competitive advantage as the company would like to put in their annual report FY21
India appears to be at the cusp of multi-decade growth on account of
the coming together of growing millennial spending, sustained income
rise, aspirations growth and infrastructure investments.
The companies that are likely to capitalise most extensively across the
decades will need a number of competitive advantages.
They will need their own ore. Their own power. Their own downstream
value chain. Competitive cost structure. And no debt.
One company possesses all these.
Screener still shows 32 % pledge by promoters. As per disclosures to exchange on 05.08.21 , a certain percentage of pledge was released. “the total no. of shares pledged by Promoter and Promoter Group with lenders has been decreased from 77,31,846 Equity Shares (21.94%) to 52,30,000 Equity Shares
(14.84 %) of paid up capital of 3,52,36,247 Equity Shares of Rs.10- each) after the release of
pledged shares on 04.08.2021”. There has not been any subsequent disclosure of having released all the
pledged shares. Iam not saying that’s its a negative, now that the company is long term debt free. company has repeatedly told that its not market to market and no shares were sold by consortium even when prices hit a low of 80 during initial days of covid crisis
Pursuant to the decision of the Board of Directors of Godawari Power And Ispat Limited (GPIL) in its meeting held on 27.07.2021, the GPIL has subscribed to the Preferential Offer made by Hira Ferro Alloys Limited (HFAL) for the second tranche of 9,00,000 equity shares at a price of Rs. 195/-per share.
Subsequent to allotment of these 9,00,000 equity shares of HFAL, the GPIL’s holding in HFAL has been increased from 50.72% to 52.79% in the enhanced capital of HFAL wef 22nd October, 2021.
HFAL was incorporated on 31.12.1984 and is engaged in the business of manufacturing Ferro Alloys for more than three decades. The turnover of the company in 2018-19, 2019-20 and 2020-21 has been Rs.266.66 Crores, Rs.301.77 Crores and Rs.314.46 Crores respectively. The Company has earned sales turnover of Rs.l16.53 Crores and EBlTDA of Rs.29.10 Crores in Q1FY22. There is no long-term debt in the Company and is having working capital facilities from banks. The Company is having its operations in Raipur, Chhattisgarh only.
17.55 Cr for 2.07% values it at approx 850 Cr.
Which is approx of 2.88 x avg last 3 years sales!
Seems descent enough buy.
BTW dividend given by HFAL is the only way that earning of HFAL would translate into cash flow for GPIL, otherwise its just asset sitting in the books of GPIL, right?
Rating Update on 26.10.2021
CRISIL A+/Stable (Upgraded from ‘CRISIL A/Stable’)
Disc.-Invested. Not an Reg. Advisor. Do your own diligence.
Appending the investor Presentation. Awaiting the Concall from the management.
GPIL - Investor Presentation.pdf (2.2 MB)
pretty poor quarter by GPIL. Look at volumes sold in Investor PPT.
Very low volumes due to Monsoons and maintenance shutdowns.
Also, it took 35 cr exceptional one time expense on consolidated basis further hitting the profits.
The mining and billet capacity is yet to ramp up.
After such a poor quarter, it is at 3.5 PE vs sectoral avg of 6-7 PE
Few imp points from the presentation
1: Pledging: Pledged with lenders as an additional collateral for working capital & long term loans taken by the company and is not on a mark to market basis. Thus there are no margin calls on account of fluctuations in stock price.
The pledge has been with the banks for more than 10 years. Promoters has not availed any loan against the pledge of shares. The proposal for release of pledge in under consideration of banks. Entire pledge shares are expected to be released in current quarter.
CapEx:
- Iron Ore Mining from FY21 2.1mt to FY22 3 mt by using INR125Cr.
- Iron Ore Benefication from 1.0mt to 3.3mt using INR 15Cr.
- Steel billets from 0.4mt to 0.7mt using 60Cr
Big increase in mining capacity and big increase in billet capacity too should keep the net profit at same levels even if Iron ore prices remain at lower range.
Annual EBITDA range likely to be in range 1800-2000 cr for FY 22 and 2200-2400 cr for FY 23, with a cash on balance sheet of 800 crores by FY 22 end
From next year, solar plant will start again adding to profit.
Also, the EV will come down as company’s cash balance will increase in 6 months.
Have the shares and bonuses been credited to accounts? After both split and bonus, no of shares should have quadrupled, but I see only double the no of shares credited in account yet.
- Godawari Power announced Acquisition Of Further 9.00 Lacs Shares Of Hira Ferro Alloys Limited (A Subsidiary Company)
Why is company pouring money in subsidiries
- Hira Ferro Alloys was not a subsidiary, it was associate, so with this money infusion it becomes a subsidiary.
- Hira Ferro alloys needs a captive power plant to become efficient but doesn’t have money, so parent has to take care of it.
Earlier GPIL didn’t have the money to do these efficiency related projects but now it is almost net debt zero and has cash to spend
Any update on new CAPEX for Solar project that the Company was supposed to undertake.
Was there any concal during this quarter??
Yes, you can refer to the PPT here. Concall was also held.
The transcripts of Con call held on 01 Nov 21 are appended.
Transcripts Godawari.pdf (795.1 KB)