Godawari Power

Godawari Power reported a steady start to FY26 with an EBITDA margin of 24% and PAT margin of 16%. While consolidated revenue, EBITDA, and PAT remained largely stable quarter-on-quarter, the year-on-year performance was lower primarily due to a decline in sales realization. Ferro alloys production and sales volumes demonstrated robust growth, increasing by approximately 15% and 13% respectively, both year-on-year and quarter-on-quarter. The company's zinc recycling unit, Jammu Pigments Limited (JPL), contributed INR 230 crores in revenue and INR 20 crores in EBITDA during the quarter.

The Board has approved a total capex of INR 1,600 crores for two new strategic projects. This includes a INR 900 crore investment in a 0.7 million ton Cold Rolling Mill (CRM) complex, which will enable the conversion of HRC into CRC and other value-added steel products. Additionally, INR 700 crores will be invested in a 10-gigawatt Battery Energy Storage System (BESS) project. Both projects are targeted for commissioning by March 2027, with funding for the CRM project through INR 600 crores debt and INR 300 crores equity, and the BESS project through 40% GPIL equity and balance debt in an SPV.

The company anticipates receiving necessary approvals for the Ari Dongri mining capacity expansion, increasing from 2.35 million tons to 6 million tons, by Q3 FY26, with operations expected to commence in Q4 FY26. Furthermore, a 2 million ton pellet expansion is progressing on schedule and is expected to be commissioned in October. Management also indicated plans to expand Boria Tibu mining capacity from 0.7 million tons to 3 million tons, with beneficiation facilities at the mine site, aligning with the new steel plant commissioning in approximately three years.

GPIL has received approval from PGCIL to supply steel billets for galvanized steel structures, a significant milestone reflecting product quality. This is expected to drive volumes of galvanized fabrication products to cross 30,000 tons quarter-on-quarter. The company plans to proceed with a 1 million ton integrated steel plant, but this investment is contingent upon receiving the mining EC, which is expected post-Diwali (early November). The steel capex deployment is projected as 20% in FY27, 60% in FY28, and 20% in FY29.

The BESS project is a strategic diversification into new energy, driven by the necessity for grid stability in solar-rich states and government tenders. Management expects a handsome ROI of 40-50% within 18-24 months, based on a minimum 5% EBITDA margin, translating to INR 350-400 crores EBITDA at 10 gigawatt capacity. The strategy involves importing cells (5% duty) and manufacturing battery packs and containers domestically, leveraging high import dependence (over 99%) and potential future government policies to protect domestic manufacturing.

The CRM complex aims to produce value-added steel products, including color-coated steel, zinc-aluminum-magnesium (ZAM) steel, and galvalume products, targeting a margin of INR 4-5 per ton for its 0.7 million ton capacity. The company plans to cater to diverse segments with thicknesses ranging from 0.15mm to 3.5mm. The CRM complex will also indirectly support the BESS project by producing steel for container manufacturing. Sourcing of HR coils will be from major domestic players like JSW, Tata, and JSPL, as well as imports.

For the current capex, the company expects to maintain a very low leverage, with a debt-to-equity ratio below 0.5, taking on a small debt of INR 700-800 crores. Looking ahead to FY27 and FY28, with mining approvals and pellet plant commissioning, GPIL anticipates generating a minimum free cash flow of INR 3,000 crores. Management expressed confidence in pellet prices remaining in a range of INR 8,500-10,000 per ton in the longer term, supported by own iron ore mines and market shortages.