Gujarat Mineral Development Corporation (GMDC) posted a strong set of earnings in Q4 as both the lignite and power businesses did well.
In an interview with CNBC-TV18, L Kulshrestha, CFO of Gujarat Mineral Development Corporation (GMDC) spoke about the quarter's earnings and his outlook for the company.
Talking about the goods and services tax (GST), he said it would be beneficial for the company. The company is currently paying 30 percent as blended tax rate, which is expected to go down to 12-18 percent going forward, said Kulshrestha.
On the volumes front, he said lignite sales volumes at 76.5 lakh tonne in FY17 and 26.4 lakh tonnes in Q4FY17. Meanwhile, the plant load factor (PLF) for the power business stood at 64 percent in FY17, he added.
He further said the company currently has a cash balance of approximately Rs 1,100 crore, and this excess cash will be utilised for technology upgradation, land acquisition, development of new mines, capex for the thermal power station and also invest in renewable energy business.
Below is the verbatim transcript of the interview.
Latha: The VAT for mining in Gujarat is 22.5 percent whereas in states like Tamil Nadu he says it is only 5-5.5 percent. So now if there is a national tax, GST, you will be paying lower taxes?
A: Yes. We are expecting that tax range will be between 12-18 percent which will include excise duty; we are paying 22.5 percent VAT, thereafter 6 percent excise.
Sonia: Currently how much are you incurring on lignite totally?
Latha: What is tax outgo and what will it be in FY18?
A: Tax outgo is more than Rs 200 crore in case of lignite.
Sonia: I am asking you in percentage terms? You said that the blended tax rate will fall to about 12-18 percent but currently including VAT and excise duty how much are you paying in terms of tax on lignite?
A: It is more than 30 percent.
Latha: So the blended tax falls to 12-18 percent from current 30 percent?
A: Yes.
Sonia: When this tax rate falls, how much will the profit per tonne be that GMDC could see, the incremental gains?
A: We will get additional profit of 10 percent.
Latha: Now you were telling us about your lignite volumes, can you give us an idea of how the realisations were in Q4 and what is your sense in FY18?
A: Production of lignite was 76.52 lakh metric tonne in the year and in quarter it was 26.41 lakh metric tonne. As far as value wise is concerned, value for the year was Rs 1,104 crore and for the quarter it was Rs 306 crore.
Latha: What would be a sustainable rate per tonne for FY18 you think?
A: We think that we will sustain and our profit margin will be around 20-25 percent.
Sonia: I just wanted to come back to the tax issue. You said that the profits would go up by about 10 percent odd, but just to understand what the actual reduction in levies would be, some analysts are estimating that it could even be reduced by about Rs 250 per tonne once GST comes through. Is that a reasonable assessment?
A: At present we have not done assessment. Assessment will be done.
Sonia: Can you also tell us a little bit about the current capacity utilisation levels are in the power business and will that business continue to deliver a positive EBIT number?
A: In power business our plant load factor (PLF) was 64 percent and revenue from power business was Rs 456 crore in FY16-17. In the quarter it was Rs 117 crore.
Latha: What are you doing with your cash, what is the cash balance?
A: Cash balance is around Rs 1,100 crore and we will utilise this cash surplus for technology upgradation, land acquisition, development of new mines, capex for thermal power station and we may also invest in renewable energy projects.
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