Now for this quarter they are saying highest sales when the steel prices were earlier of this high they were making around 8000/8500 evebita per ton now they have there own coal iron ore what kind of profit margin can we expect
https://www.bseindia.com/corporates/anndet_new.aspx?newsid=3b7399dc-6a9c-4d80-8f98-1f45d0094578
Doing analysis for Coal Scam/other cases in which Prakash Industries is/was involved:
CBI Cases: As per my understanding following cases had been lodged:
From below mentioned case study it is very much evident that the Company was involved in diversion of Coal from its Chotia Mines , however the diversion was not for selling it to third party. The Captive Chotia mines was specifically allocated for its Sponge Iron Plant , however the Company had utilised it also for its Captive Power Plant and it has been verified by output data from Coal mines visavis input data in its plant.
We need to understand that one needs high grade of Coal for Sponge Iron and the low grade can be utilised in Power plants. Prakash Industries along with other Companies have made submission that to extract X quantity of required grade of coal they need to extract 1.2x or 1.5x or 2 x quantity of coal. The coal extracted then needs to be beneficiated in Coal benefication plant and required quality is utilised for Sponge Iron and the inferiors quality and middlings are diverted for Power Plant. (Which sound very logical). The argument to divert it to Captive power plant seems logical because you cannot sell it to third party and also you cannot store coal for long as it can catch fire in Summer season(in chhattisgarh summers are very hot).
This link will give an insight to CBI case filed against the Company and FSA (Fuel Supply agreement) cancelled by COAL INDAI LTD and which was subsequently restored :Prakash Industries Limited Champa vs Union Of India & Others on 13 February, 2012
(The link is very informative and I will also summarise it:)
The Company had filed petition against SECL (South Eastern Coal fields Ltd ) for stopping Coal supply to the Company under the Fuel Supply agreement. The Coal supply was stopped by SECL alleging that the Company had diverted the Coal from its Chotia mines as mentioned in point No 1 below.
Court finding at point No 2
Final Judgement : For the reasons mentioned hereinabove, the impugned order dated 09.11.2011 (Annexure P/1), being not in accordance with the provisions of FSAs and also without any authority of law, is quashed, with consequential relief.
Shri Koshy (Advocate of Coal India) would further contend that under the FSAs, the SECL has inherent power to suspend the coal supply in case there is diversion of coal. The purchaser shall not sell/divert and/or transfer the coal for any purpose whatsoever and the same shall be treated as material breach of Agreement. In that event, before termination of the agreement, the SECL can take steps to suspend the coal supply forthwith. It would be further contended that the order of the Central Government or the State Government or any direction of the statutory regulatory authority that restricts performance of the obligation under the FSAs comes within the definition of Force Majueure and that may lead to suspension of coal supply for such time. The petitioner, without waiting for the subsequent steps and final order to be passed under the FSAs, has proceeded and filed this petition. Thus, this petition is premature at this stage and deserves to be dismissed. He would next contend that the observations in para 25, 26 and the directions passed in para 27 in the order dated 14.10.2011 by the Director, Government of India, Ministry of Coal, empowers the SECL to take appropriate action of suspension of coal supply even if the same is not provided under the FSAs as the power of SECL is inherent in the agreement itself.
Heard learned counsel appearing for the parties, perused the pleadings and documents appended thereto.
Indisputably, the two coal supply agreements (also called as Fuel Supply Agreement) (FSAs) dated 31.07.2008 (Annexure P/4 colly.) were executed between the SECL and PIL for supply of 293796 tonnes per year from the mines in the Korba/Raigarh and/or from international sources for use at PIL (CPP 50 MW (19X2 MW + 6X2) Hathneora, Champa, as listed in Schedule I, and 81720 tonnes per year from the sellers mines in the Korba coal field and/or from international sources for the use at PIL (CPP 15 MW) Hathneora, Champa, as listed in Schedule I, respectively. Clause 4.2 of the FSAs provides for end use of the coal wherein it was stated that the purchaser shall not sell/divert and/or transfer the Coal for any purpose whatsoever and the same shall be treated as material breach of Agreement. In the event, the purchase engages or plans to engage into such resale or trade, the seller shall terminate this Agreement forthwith without any liabilities or damages, whatsoever payable to the purchase. Clause 14 of FSA deals with suspension of coal supplies.
Clause 14 of the FSAs, as quoted below provides for suspension of coal supply.
Clause 14.1(c) provides for suspension of supplies of coal to the purchaser. Clause 14.2 further provides that the SECL would be relieved of his obligation to supply coal. It is further provided that the suspension shall continue as long as the interest from the security deposit or the financial coverage as the case may be, has not been fully replenished. This is not relevant in the instant case.
"16. TERMINATION OF CONTRACT/ AGREEMENT "
16.1 Notwithstanding the provisions of Clause 2, this Agreement may be terminated in the following events and in the manner specified hereunder: 16.1.1 In the event that either Party is rendered wholly or partially unable to perform its obligations under this Agreement (âAffected Partyâ) because of a Force Majeure Act, as described in Clause 17 below, and such inability to perform lasts for not less than a total of ninety (90) days in any continuous period of one hundred eighty (180) days, and in the considered assessment of the other Party (âNon Affected Partyâ) there is no reasonable likelihood of the Force Majeure Act coming to an end in the near future, such Party shall have the right to terminate this Agreement, by giving at least ninety (90) days prior written notice to the Affected Party of the intention to so terminate this Agreement. In such event, the termination shall take effect on expiry of the notice period or ninety (90) days whichever is later, and the parties shall be absolved of all rights/obligations under this Agreement, save those that had already accrued as on the effective date of termination. 16.1.2 In the event that the Purchaser is prevented/disabled under law from using Coal, for reasons beyond their control, owing to changes in applicable environmental and/or statutory norms, howsoever brought into force; the Purchase shall have the right to terminate this Agreement, subject to prior written Notice to the Seller of not less than thirty (30) days.
16.1.3 In the event of any material change in Coal distribution system of Seller due to a Government directive/notification, at any time after the execution of this Agreement, the Seller may terminate this Agreement without any obligation/liability after providing the Purchaser with prior written notice to the Purchaser of not less than thirty (30) days.
16.1.4 In the event that the Level of Delivery (LD) falls below thirty percent (30%) or the Level of Lifting (LL) falls below thirty percent (30%), the Purchaser or the Seller as the case may be, shall have the right to terminate this Agreement, within sixty (60) days of the end of the relevant Year after providing the other Party with prior written notice of not less than thirty (30) days.
16.1.5 In the event that the Purchaser resells or diverts the Coal purchased pursuant to this Agreement, the Seller shall have the right to terminate this Agreement forthwith.
16.1.6 In the event of encashment of Security Deposit or the Financial Coverage or suspension of Coal Supplies pursuant to Clause 14.1, the Seller shall have the right to terminate this Agreement by providing prior written notice of thirty (30) days provided the Purchaser has not replenished the Security Deposit/Financial Coverage within the aforesaid said notice period of thirty (30) days.
16.1.7 In the event that either Party suffers insolvency, appointment of liquidator (provisional or final) appointment of receiver of any of material assets, levy of any order of attachment of the material assets, or any order of injunction restraining the Party from dealing with or disposing of its assets and such order having been passed is not vacated within sixty (60) days, the other Party shall be entitled to terminate this Agreement.
16.1.8 In the event that any Party commits a breach of term or condition of this Agreement (âDefaulting Partyâ) not otherwise specified under this clause 16.1, the other Party (âNon-Defaulting Partyâ) shall have the right to terminate this Agreement after providing the Defaulting Party thirty (30) days prior notice and the breach has not been cured or rectified to the satisfaction of the Non- Defaulting Party within the said period of thirty (30) days. 16.2 Accrued rights to survive termination.
Termination of this Agreement shall be without prejudice to the accrued rights and obligations of either Party as at immediately prior to the termination.
In the event, either party is wholly or partially unable to perform its obligation under this agreement, because of Force Majuere Act as defined hereunder, shall be applicable.
"17. FORCE MAJEURE 17.1 "Force Majueure Act means any act, circumstances or event or a combination of acts, circumstances and events which wholly or partially prevents or delays the performance of obligations arising under this Agreement by any Party (âAffected Partyâ) and if such act, circumstances or event is not reasonably within the control of and not cause by the fault or negligence of the affected party, and provided that such act, circumstances or event is in one or more of the following categories:
(e) Any law, ordinance or order of the Central or State Government, or any direction of a statutory regulatory authority that restricts performance of the obligations hereunder;
xxx xxx xxx"
In the instant case, the SECL, on account of alleged direction of the Central Government, which amounted to an Act of Force Majuere, has passed the impugned order.
It appears that the termination clause can be invoked in case of resale or diversion of coal purchased under the FSAs. However, having regard to the basic principles of natural justice, the purchaser is required to be informed, if there is an allegation of resale or diversion and thereafter, on consideration of the case of the purchaser, in the instant case, the PIL, steps for termination could be taken. This is not a case of termination of FSA under clause 4.2 of the FSA wherein diversion or transfer of coal has been treated as material breach of agreement or there is established diversion of coal or there is a any direction of the statutory regulatory authority or the Central Government or the State government.
The IMC, in its report dated 08.09.2011 observed in para 7.3.1 observed as under:
"It is observed that about 29- 45% of coal from Chotia mine is being used in captive power plant for which there is no clear permission in the letter of allotment to use coal from Chotia mine in the CPP. In fact, PIL should have regulated their production from Chotia mine in line with the requirement of the sponge iron production as per the condition laid down in the letter of allotment which specifies that there should be complete synchronization between the captive coal mining operation and the development of end use plant (DRI) so that no situation arises where the company is left with surplus coal extracted from captive block when the end use plant is yet to be operational. This clearly brings out that PIL has been diverting coal for the purposes other than sponge iron from the Chotia coal block. This also gets confirmed from the table 14 below which indicates that procurement of coal from linkage got drastically reduced from 2007-08 onwards as the production from the captive coal block ramped up.
o Though, the details of entire spectrum of raw material properties are not available, however, from the raw material chemical analysis, it appears that the quality of raw materials being used by PIL on an average match with the specified quality of Lurgi within the permissible variations to attain the rated capacity of production.
v The installed capacity of the rotary kilns presently operating, after on-going expansion (under construction) and after future expansion shall be as under:
o Existing capacity (with 3 kilns operating) : 3 X 150,000 = 450,000 tpa o Existing capacity + on-going expansion (kiln no. 4 & 5) : 5 X 150,000 = 750,000 tpa o Ultimate capacity (Alt-I) i.e. existing capacity + on-going expansion + proposed future expansion (kiln no. 6 to 10) : 10 X 150,000 = 1,500,000 tpa o Ultimate capacity (Alt-II) i.e. existing capacity + on-going expansion + proposed future expansion (kiln no. 6 to 9) : 9 X 150,000 = 1350,000 tpa.
v The PIL claim of higher installed capacity of each kiln i.e. 200,000 tpa is not found justifiable by IMC as the design basis and the modification/ improvement stated to be carried out by them for increase in capacity has not been substantiated by facts or by actual performance of kilns over the years. v However, in case of use of very high quality raw materials, particularly non-coking coal (say, 14% ash) as in the case of Mittal South Africa (Formerly ISCOR, South Africa) the productive capacity can increase as high as 20% over the installed or rated capacity. However, in all such cases, such increase is invariably associated with consequent decrease in carbon requirement / t of DRI which in fact, lowers down the sp. Coal requirement/t of DRI.
v Keeping in view the iron ore quality and proximate analysis of Chotia coal mine being used in PIL kilns, various losses as well as a margin of 10% on account of fluctuations in raw material quality, operational inconsistencies due to various uncontrolled factors, the gross total (ROM) requirement per ton of DRI shall be approx. 1.36 t.
o Existing capacity (with 3 kilns operating) : 612,000 tpa o Existing capacity + on-going expansion (kiln no. 4 & 5) : 1,020,000 tpa o Ultimate capacity (Alt-I) i.e. existing capacity + on-going expansion + proposed future expansion (kiln no. 6 to 10) : 2,040,000 tpa o Ultimate capacity (Alt-II) i.e. existing capacity + on-going expansion + proposed future expansion (kiln no. 6 to 9) : 1,836,000 tpa v IMC observed that though Chotia coal block was allotted exclusively for meeting DR plant requirement, a significant part of Chotia coal production is being utilized in captive power plant within the same complex at Champa.
v Based on the analysis of allotted coal reserves from different coal blocks (comprising of Chotia coal block, Madanpur North & Vijay Central non-coking coal blocks) and the end use DR capacities, the ultimate requirement of non-coking coal as per IMC for the projected DR capacities works out to be 48.96 Mt with capping of the end-use capacity being 1.2 Mtpa at 61.20/55.08 Mt without capping depending on the availability of Urtan coking coal block against the allotted reserves of 57.60 Mt. This indicates that the already allotted reserves to PIL is adequate in two cases and marginally falls short in the 3rd case. "
- It appears that the Government of India, Ministry of Coal issued a show cause notice dated 09.11.2011 (Annexure P/10) in respect of Chotia mines allocated to PIL seeking explanation of PIL asto why Chotia Coal Block should not be deallocated. Since the said show cause notice is neither under challenge nor any order has been passed in respect of the said show cause notice, it is not necessary to deal with the same and express any opinion on the merits of the case.
On the basis of the aforesaid order, as is evident from the impugned order dated 09.11.2011 (Annexure P/1) supply of coal from Chotia Coal Block for the use in CPP of 50 MW & 15 MW under the FSAs dated 13.07.2008 was kept in abeyance with immediate effect. The observation in para 25 with regard to registration of the FIR is not the subject matter of this petition as the case of petitioner is that the CBI may continue with the enquiry on the allegation made by the rival party. Even otherwise, I do not propose to express any opinion or make any observation in respect of the enquiry/investigation initiated by the CBI by lodging F.I.R. on 07.04.2010. The CBI may proceed with the same uninfluenced by any observations, if any made by this Court.
Thus, it appears that the SECL has no authority to pass the impugned order on the basis of recommendation dated 08.09.2011 and the observations made in 14.10.2011 (Annexure P/11) as the provisions of FSA did not provide for suspension on the aforestated reasons pleaded by the SECL. The reason, even if accepted for the sake of argument, may be available only to invoke clause 16 of the FSA dealing with termination of the agreement, and not for suspension of the coal supplies.
A communication was sent to the Coal Controller dated 23.03.2009 (Annexure P/6) on the basis of a complaint received in the Ministry, alleging that Chotia coal block allocated to PIL was much more than the requirement and the company was openly selling 150 to 200 trucks coal daily to various parties paying high cost to them. The Coal Controller was directed to monitor and submit a progress report. The Coal Controller responded by letter dated 08.10.2009, as under "OSD, CCO, SECL Field Office has personally checked the weighment data and dispatch data from record of Chotia mine and SIP, Champa.
There is minor discrepancy of quantity of coal of day today dispatch due to transport loss.
From the above, it is found that coal produced in Chotia mine, dispatched from the mine as per concerned records, receipt at Champa EUPs are more or less tallying. As regards utilization of coal, it is comparable with standard norm of SIP and CPP. No irregularity noticed."
On 02.06.2011, in Contempt Case (C) No. 420/2011, the High Court of Delhi, ordered as under:
It appears that before the High Court of Delhi, the issue was not with regard to diversion of coal from Chotia Block under FSA but for allocation of coal from Vijay Central Coal Block having regard to the installed or expansion capacity. Thus, contention of Shri Koshy that the impugned order was passed pursuant to the orders, as aforestated, of the High Court of Delhi, is baseless and unsubstantiated.
Other Corporates have also been charged with similar allegation with regard to allocated Coal blocks by CBI:
I am not giving any clean chit to the Company but my views are biased as I am invested in it and it forms 15% of my PORTFOLIO.
It strengthens statement that this is a structural change in steel sector.
| CAPACITY IN MTPA | ||
|---|---|---|
| PRAKASH | SHYAM METALLICS | |
| IRON ORE MINES | 0.6# | 0 |
| IRON PELLET | 0 | 2.4 |
| SPONGE IRON | 1.2 | 1.39 |
| BILLETS | 1.25 | 0.89 |
| TMT | 1.1 | 0.82 |
| FERRO ALLOYS | 0.13 | 0.21 |
| CAPTIVE POWER | 245 | 227 |
| Debtor days | 16 | 31 |
| Debt/Equity | 0.19 | 0.22 |
| Inventory turnover | 11.34 | 3.05 |
| ROCE | 5% | 26% |
| MARKET CAP | 1376 Cr | 11019 Cr |
| # Kabirdham Mine operation yet to commence after which Mining capacity can reach to more then 1 MTPA |
Perhaps this is the reason for market cap difference:
| Prakash | Shyam Metallics | |
|---|---|---|
| OPM | 6.56% | 22.1% |
| ROE | 3.28% | 26.1% |
Prakash right after the end of Q3 & Q4 FY21 pre-announced record sales before earnings report, and havenât done that for Q122. Prakash is also frustratingly announcing only insider transactions, pledge and promoter converting warrants to shares.
The share price hasnât gone up proportionate to the other steel companies - perhaps management has decided to sit out the current cycle.
I am not justifying the low valuation of Prakash Industries but just trying to analyse what valuation Mr Market is assigning for similar company. Management incompetency has lead to value erosion and inefficiency in this company.
Prakash is presently not having pellet plant and as per my understanding a Greenfield Project with 4.2 MTPA Iron Ore Beneficiation Plant and
2.4 MTPA Pellet Plant will entail CAPEX of around Rs 800 Cr.
With assumed pellet capacity , the overall capacity with Prakash would have been better then SEML.
Hypothetically IF Prakash has 2.4 MTPA of pellet and the management is replaced with that of Godawari Power: 
then it would have been a great value creation for its investors⌠but the big question is IF
Thank you for pointing out Shyam Metallics, till your comparison Iâve been comparing Prakash with Godawari & Sarda, that Prakash is at the lower end in product as well as MQ is so glaring in this cycle.
I donât think 800 Cr is a big amount for this company. As I started documenting all their capacity increase announcements since 2014 or so, most are never done immediately or take several years, even the same capacity increase is repeated for years.
Though Prakash Pipes is doing as well as itâs peers, even itâs valuation suffers vs its peers with MQ, though it has given better returns than Prakash Inds.
Yeah, that will decide Prakash for me in the next cycle.
Q1 results will help decide one way or the other. Discl : Invested from lower levels.
@sgkfinance or anybody who is planning to attending the forthcoming AGM of the Company on 29th July,
Any body who wants to ask question can send there query to the company for its AGM .
As per Annual report the company will respond all the queries either in AGM or separately.
I will be sending query tomorrow for AGM⌠Please suggest points
when will Iron ore mines (started last year) benefits, show up in margins. can we have similar margins to Godavari power , would be my two questions. thank you, please do share, incase get a response. Thank you
In there investor presentation, They have mentioned wind mill in Tamil nadu but nowhere it is mentioned separately about the revenue it is generating, does anyone know about it ?
Dear VALUE2017
I know you have been a long time holder of pil even I have been holding it for long do you think there corporate governance is ok with all this kind of equity dilution happening repeatedly and pledging and interse transfer is it worth holding any more or should I come out this because I bought it around 169 in 2017 during the high cycle. Your views will be highly helpful
Thanking you in advance
Corporate governance is poor by any standard in Prakash Industries.
Did you attend the AGM? If yes, could you list down the summaries of commentaries and Q&A.
Thanks in advance!
Company received Vesting Order for Bhaskarpara Coal Mine
Press Release - Secures Long - Term Coal Linkages
As per reports, prakash industries are shutting down their Raipur plant.
Reason for closure and Source of the news,
I understand this company has concerning record about corporate governance.
Having said that few things are important to put in perspective
Disc - Not a buy or sell advice; Not invested; Considering to take tactical position given the special situation.
