TV interview on CNBC today- they will also give dividend in addition to buyback.
Guess, I will have to buy more shares with dividend money as I can’t use so much of cash.
Pretty shareholder friendly move to distribute cash, and reduce number of shares- leading to increase of EPS as well
6 Likes
Ha ha. why are you asking me? I am not a promoter.
Though answer is pretty simple. they also need some cash, and instead of siphoning the cash through illegal ways, they are taking a legal and fair/ethical way out.
8 Likes
Buyback and huge dividends indicate that management bandwidth and also that it is not having fire in its belly…
Buybacks will also help promoters to encash and they will be the biggest beneficiaries… nothing wrong…
but it gives an indication that management does not has any better avenues to invest the surplus and generate better returns for its investors.
3 Likes
Have you looked at their capex plans for next few yrs?
They are doubling capacity in 3 yrs, and 4x capacity in 6 yrs?
You want to them to make capacity 10x in 6 yrs? not happy with 4x?
9 Likes
Overdump collapse in worst case will affect iron ore mining for 2 months (Q1 FY24) by 50% and company may resort to procure the other 50% of needs from market (₹1,500/ton input cost increase). Enough stocks now to run at full capacity for 2-3 weeks. Q1 earnings might get affected - any stock drop will be a good opportunity to buy more.
I don’ think much impact-
1)- 50% of only one mine is impacted. other mine is fine.
2) they mentioned they have inventory of few weeks of iron ore- so production of pellets will not be impacted.
stock value is function of future earnings.
Can we estimate fy 26, and fy 30 earnings based on expansion, inr depreciation and inflation - 8% per yr in India??
can anyone do this exercise?
3 Likes
@Kumar_manas Could you direct me to the thread on the calculations done when they double or triple the capacity?
Why should the company expose itself to such risk by lending to a corporate with poor financials. The notice states that the inter-corporate deposit is to Prakash Industries but the shares have been pledged by the promoters. Can such an arrangement lead to disputes in case of default?
2 Likes
I would call it a smart move.
It has loaned 35cr (1% of GPIL mcap) to Prakash Industries with pledge of 9.8% stake (currently worth 90cr).
There is comfort that Prakash Ind is generating annual EBITDA of 300-400cr, CF conversion of 70-80%, new steel plant coming up (336cr CWIP as per 2Q BS).
If things go off, GPIL gets a decent stake at a reasonable valuation (~3x EBITDA)
6 Likes
From a different perspective, Prakash industries already has 74.4 % of their shareholding pledged. What kind of interest would GPIL receive for giving intercorporate loan to a B rated company? GPIL can comfortably get 6 to 7 % for a bank deposit. Is it worth the risk? Secondly, if things go south, market cap could go down pretty fast. The company has a borrowing of 600 odd crores as well. So, banks will be most probably be having first charge on most of the assets. As the amount involved is small it doesn’t matter much. But I would say its not the best use of cash unless strategic in nature somehow.
5 Likes
I strongly suspect this as a strategic deal and a better capital allocation than doing a buyback. industry is going through consolidation and GPILs balance sheet supports this move. They have been doing deals in the last few years. Prakash Industries looks like an attractive candidate given its access to mines as well as 3.2 MTPA intermediary +FG capacities.
Note: As per Jan 2023 credit report debt is 226cr only.
3 Likes
Deal is important because this gives GPIL access to coal mines of Prakash Ind have. Moreover, they have been allotted new coal mine recently.
2 Likes
Guys there is no deal in making here. It’s just that GPIL is trying to make 400-500bps higher return on it’s cash. Ideally they should avoid it, but since they know the sector and the company very well, they probably understand the risks better and decided to go ahead.
9 Likes
I do not see any risk at all in this transaction, In worst case you will get 10% equity of Prakash Industries at Rs 35 Cr which is a very good deal. Rather they should lend Rs 180 Cr to Prakash and take pledge of entire shareholding of Promoters and in the event of default they can take the entire management control with them…(hypothetically …)
Prakash Industries at Rs 200 Cr would be a good bargain…
5 Likes
Anyone noticed the valuations of Indian steel players like JSW Steel, Jindal steel etc- they are rising.
JSW steel is stable at 3 Price to Book.
Steel sector getting re-rated silently?
3 Likes
Have a question to senior forum member regarding the GPIL’s intention of setting up a 1 million tone per annum steel plant. How much resource GPIL needs to throw at it .At current rate its almost 8000 cr investment required to set up the same capacity. On that context maximum FCF generated in a year is around 900 cr in FY21.Iron pellet is the heavy lifter for GPIL and product is somewhat losing shine by own admission from management in Q3FY23 concall
So are we going to see a NMDC redux here when they started to increase capex after 2015 and stock has gone sideways or am I missing something here.
There’s only 1 aspect that has pushed me to buy steel and related stock. the PM has said we have go from 110MT to 300MT before the end of the decade to match our growth and widen the speciality grade of steels that we produce instead of importing them.
Currently, there is no capacity addition that is even close to 30MT new addition in FY24.
So will there be a problem for demand? No.
Will there be a problem of margins for firms? Yes, if they are at the first stage of the iron value addition.
2 Likes
Iron ore story may become like coal story.
Despite having one of biggest coal reserves, there is coal shortage in India. Pvt companies have to import coal from Australia and Indonesia at much higher rates.
This may play out in Iron ore in a decade- other companies mines including tata steel have their lease end date in 2030. Sandur manganese iron ore mine lease is also ending in 2033.
GPIL mines lease license will last till 2055.
While iron ore price is pretty cheap in India due to very high export duties, but if we have to import iron ore, we will have to import at Rs. 8500 a ton plus logistic costs.
Govt can’t reduce price of imported iron ore.
GPIL will increase capacity by 4x in 6 yrs.
Imagine the profits in 10 yrs from now!
6 Likes