Godawari Power And Ispat limited (NSE: GPIL) Q2 2025 Earnings Call dated Oct. 28, 2024
Corporate Participants:
Dinesh Gandhi — Executive Director
Abhishek Agrawal — Executive Director
Analysts:
Akhilesh Kumar — Analyst
Sahil Sanghvi — Analyst
Manav Gogia — Analyst
Aditya Welekar — Analyst
Jatin Damania — Analyst
Rakesh Roy — Analyst
Vikas Singh — Analyst
Aman Madrecha — Analyst
Tushar Chaudhari — Analyst
Pradeep Rawat — Analyst
Unidentified Participant
Vaibhav Dubey — Analyst
Sanjay Bothra — Chief Financial Officer
Jinesh Shah — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Q2 FY ’25 Results Conference Call of Godawari Power & Ispat Limited, hosted by Emkay Global Financial Services. [Operator Instructions]
I would now like to hand the conference over to Mr. Akhilesh Kumar, Emkay Global Financial Services. Thank you, and over to you.
Akhilesh Kumar — Analyst
Thanks, Joe. Good afternoon, everyone. Thank you for joining in the Q2 FY ’25 earnings call of Godawari Power & Ispat. We have with us today Mr. Abhishek Agrawal, Mr. Dinesh Gandhi; and Mr. Sanjay Bothra.
I now hand over the call to the management for opening remarks. Over to you, Mr. Gandhi.
Dinesh Gandhi — Executive Director
Thank you, Akhilesh. Good morning, everyone. Thank you for attending the conference call of Godawari Power & Ispat Limited to discuss Q2 and H1 FY ’25 earnings of the — results of the company. Our financial results press release and earnings presentation is available on the website of the stock exchanges and the company. I believe you have had a chance to review the same. I will take you through the results post which we can have a question-and-answer session.
At the outset, I’m extremely sorry for the delay at the start of the call. GPIL has demonstrated consistent performance in H1 FY ’25, even during challenging times of lower realization of sponge iron finished steel prices, although the quarterly performance was impacted by annual maintenance shutdown of pellet plant and following realization of sponge iron and steel billets [Phonetic] products. In this backdrop, company has achieved consolidated revenue, EBITDA and adjusted PAT excluding exceptional item for the quarter and on Y-o-Y basis to INR1,268 crores, EBITDA of INR247 crores and PAT of INR158 crores.
The impact of revenue, EBITDA and PAT was to the extent of INR65 crores on account of loss of pellet production due to shutdown. The loss of production was to the extent of 150,000 tonnes, INR50 crores on account of lower realization of finished product in the sponge iron, INR25 crore on account of additional cost incurred on maintenance of the pellet plant during shutdown period. On a half-yearly basis, the consolidated revenue from operations remained flat at INR2,600 crore appro. compared to H1 FY ’24. Revenue from a higher-volume of value-added product was offset with lower realization in the newly aided products like sponge iron, etc., and lower volume from the pellet plant.
Consolidated EBITDA, PAT excluding exceptional item dropped by 2% and 5% respectively to INR654 crores and INR445 crores due to decrease in realization of the finished product. Despite the challenge, EBITDA margin and PAT margin stood strong at 25% and 17% respectively. Company has a healthy balance sheet with net cash of INR998 crores and a strong cash flow from operations of INR564 crores during H1. The operational numbers for Q2 and H1 are already circulated in the investor presentation. The brief highlights are the loss of pellet volume by about 1,50,000 tonnes due to shutdown of 0.9 million tonne pellet plant, operating volume of value-added products like DRI and finished steel and ferro alloys has increased substantially. Production of iron ore decreased on account of heavy rains during the quarter.
On a half-yearly basis, iron ore, mining and pellet production demonstrate, however, production of sponge iron, steel billets, HB wire, power generation increased considerably. The sales volume for sponge iron, steel billets, wire, et etc., increased 56%, 20% and 39% respectively. Pellet realization increased by 5% to 10,569, realization of other products dropped.
The update on our capex plan. As you are aware, we have an [Indecipherable] capex plan by nearly doubling our iron ore mining and pellet capacities by setting up an integrated steel plant within forex capacities of the present capacity. In this backdrop, in this regard, I would like to update that the approval for increase in iron ore mining and beneficiation capacity from 2.35 million tonne to 6 million tonne is delayed for the reasons beyond the control of the company. We now expect the approval for increase in iron ore winding capacity by Q4 FY ’25. Once our environmental approval is received, the crushing and beneficiation plant is expected to be commissioned within a period of six months as we have already done some part of the work on the mines.
In view of delaying approval of the mining and beneficiation capacity, the company has revised the guidance for iron ore production from 3 million tonne to 2.3 million tonne for FY ’25. The project for increasing pellet capacity from 2.7 million tonne to 4.7 million tonne is running as per schedule and same is expected to be commissioned by June, July 2005 [Phonetic]. In this regard, I would like to further inform you all, that the orders for all equipment have already been placed, construction activities to the extent of more than 50% has already been completed and the shipment of equipments are going to start within a month from various vendors.
As regards greenfield integrated steel plant of 2 million tonne, public hearing has been completed earlier. During the quarter, the presentation to the MOA has been completed and the approval is expected to be received by December ’24. The construction activity of the project shall start only after regulatory approvals are in-place for mining and for integrated steel plant.
Coming on update on the solar project, a total of 165 megawatt solar power plants have been commissioned till date and now operational and are contributing to the cost savings. GPIL has planned an additional 70-megawatt solar power plant for which lending position is in process. This project is to meet the requirement for upcoming 70 — upcoming 2 million tonne pellet plant for which 70 megawatts solar power plant is proposed to be set up. This plan is focused on reducing carbon emission and has established a clear objective achieve Net Zero by 2050. Apart from setting solar power plants, the company initiated various energy-efficient and decarbonization projects.
The capital expenditure for the initiative first stage is INR75 crores, which will generate an additional [Indecipherable] megawatt of power without any extra fuel. The project period for the same is about three years. Walking the talk on the same, GPIL is developing a waste recovery based power plant harnessing heat from the company’s existing furnaces and pellet plant, cooler exhaust to generate additional power of 7 gigawatt of clean energy, which will reduce carbon emission by 50,000 tonnes annually. This has been done with collaboration with Siemens at a cost of INR73 crores to be funded from internal accruals. This project is expected to be completed within a period of 18 months.
The GPIL has further simplified the group structure, called upon and buyback of shares conducted by Alok Ferro Alloys. Alok has become 100% subsidiary and the stake in HFL has increased to 96%. The setting captive coal mining has also completed partial buyback of shares and therefore the stake in the company is reduced.
Coming on to the market outlook. On international front, global iron ore prices dropped below $90 from high of $144 in January ’24 on concerns of China slowdown. The recent excitement around China Siemens post prices back to $115, but it was short-lived. Prices are now back to below $100. The development of a large mine in Guniea will add to supply from 2027 and might push prices down. However, in the interim, housing demand in China is expected to recover and has potential to push the iron ore prices back to $110, $115.
On domestic front, iron ore prices in MDC has largely followed global trade. However, auction prices of mines and the gradual reduction in supply for merchant has put the floor on domestic iron ore prices. India remains one of the bright exports globally for steel demand, World Steel Association has forecasted the steel demand to grow by 8% in FY ’24 and 5% in calendar ’25 to 143 million and 156 million tonnes respectively.
To conclude, I would like to mention that as we transition into second half of FY ’25, we are optimistic about getting our iron ore mining and pellet production and sales back on the trade. Our solid cash flow position coupled with the strategic capex plan aimed is significantly expanding our capacities in iron ore mining, pellet, and integrated steel sets a strong foundation for growth. Enhanced operational efficiencies and cost savings from our solar power plant will further enhance the profitability of the company. Additionally, the advantage of our captive iron ore mine and production of hybrid pellet, along with unwavering support from stakeholder position us for an exceptional performance in the years to come.
With this, I would now like to open the floor for question and answers.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] The first question is from the line of Sahil Rohit Sanghvi from Monarch Networth Capital. Please go ahead.
Sahil Sanghvi
Good afternoon, sir. Best wishes for [Technical Issues] —
Operator
Please increase your voice, please.
Sahil Sanghvi
Is this audible?
Operator
Yes, sir. Please go ahead.
Sahil Sanghvi
Yeah, thank you for the opportunity and best wishes for Diwali season. Also, good to see Godawari maintaining its numbers despite the challenging situation. Firstly, wanted to understand, sir, there were fall in pellet prices also during Q2. I believe that we have a one, two months contract. So just wanted to understand how the prices have not corrected much and what will be the trajectory for pellet prices? Do we have — will the corrected prices come with a lag in 3Q?
Abhishek Agrawal
Hi morning, for Q3, the prices resumed on a positive territory and the numbers are currently at about INR10,000 [Phonetic] plant.
Sahil Sanghvi
That’s correct. I understand. But so are we looking at a lower number directionally for Q3 or just wanted to understand how the contracts are working out?
Abhishek Agrawal
No, for Q3, the number will be really on the higher side.
Sahil Sanghvi
Okay, okay, that’s very good to understand. Were there any kind of iron ore purchases done in Q2 or were we largely able to manage from our own mines?
Abhishek Agrawal
No. So usually we are buying about 25% of our INF on the market and that will continue till our mine expansion. So we continue to buy 25% of INF in the market and till we get the new EC for the mines and that will continue for in the next months.
Sahil Sanghvi
Got it, got it, got it. And thirdly, just wanted to understand with this new 7-megawatt waste-heat recovery power plant, I mean, would that be excess power for us whenever it gets commissioned or would that be still a required thing for the self-sufficiency when it comes to power?
Abhishek Agrawal
No, as the generation increases, we will reduce our coal fossil fuel burner and we’ll reduce the carbon emission. That’s the whole idea.
Sahil Sanghvi
Okay. And this will be — I mean this will be more of — it will be all self-consumed, right? I mean, there’ll be no required. I mean, there’ll be no external sensitivity.
Abhishek Agrawal
No, so we still don’t buy anything from the grid and we don’t import grid power. And if we further strengthen our generation in terms of carbon emission.
Sahil Sanghvi
Got it, got it. And just one last question, if you can comment on the overall demand. I mean, we’ve seen prices rebound post-monsoon also, but the economic activity was also a little subdued in Q2. So how are you seeing demand on ground in Q3?
Abhishek Agrawal
See, Q2 is always a lean season for steel, Q3 post, we hope the demand to come back and the price to probably I would say demand should come back and the price should further go up. That’s the whole idea.
Sahil Sanghvi
Okay, okay. Thank you so much and all the best.
Abhishek Agrawal
Thank you.
Operator
The next question is from the line of Manav Gogia from YES Securities India Ltd. Please go ahead.
Manav Gogia
Hello.
Abhishek Agrawal
Yes, Manav, go ahead.
Manav Gogia
Yes, good afternoon and thank you for the opportunity. Sir, one question on the cost front. Could you let me know what was the blended landed coal cost for the quarter?
Abhishek Agrawal
See, we only put input in coal for DRI and the pellet cost for the coal was about INR12,000.
Manav Gogia
And last quarter it was about INR11,500 right if I’m not —
Abhishek Agrawal
Yeah, yeah, exactly.
Manav Gogia
Okay. And are we sourcing any raw coal domestically for our power plant requirements? Could you be able to give me a split between the coal source domestically versus the imports?
Abhishek Agrawal
We do source — we have increased from Coal India for a bar plant and as well as [Indecipherable]. So Q2 was about INR4,000 and Q3 remaining the same, because domestic coal been much due to good supply of Coal India and the linkages we have is for five years. So the price for the incoming coal for a power plant [Indecipherable] INR84,000.
Manav Gogia
Okay, okay. So just following up on the question asked by the previous participant, you’re saying that pellet prices for Q3 are expected to be a little up as compared to Q2. Could you like be able to quantify the same?
Abhishek Agrawal
Q2, the average price is about INR800 and the prices did come down at the end of Q2, but then with the sudden rise in the iron ore price auctions, so Q3 should be at the same level as compared to Q2, which about INR800 average?
Manav Gogia
Okay, okay. Sure, sure. Sir, just if I could squeeze one more question. In terms of the ECs getting delayed for the iron ore mining expansion, wanted to know since now the ECs are expected to be received in the last quarter, by when are the mines expected to be operational? I think in your opening remarks, you could say six months from Q4. Is that right?
Abhishek Agrawal
No, no, six months is for beneficiation plant commissioning.
Manav Gogia
Okay. So mines will be starting from Q4 itself by the end of Q4. Is that realistic target?
Abhishek Agrawal
We will resume this Q1 FY ’26.
Manav Gogia
Okay, okay. So right when the pellet plant comes into the picture?
Abhishek Agrawal
Yeah.
Manav Gogia
Right. And how much of a benefit do we see on the landed cost per tonne or should we expect it to remain in the same trajectory of INR2,800 to INR2,900 a tonne?
Abhishek Agrawal
See, mine cost would be more or less the same, probably INR100, INR200 here and there. But if you compare to the current market, we are buying about 20% on the market, which is about INR3500. So if you change that with I know mining, which is a substantial increase.
Manav Gogia
Okay, okay. Thank you so much for the answer, sir. All the very best.
Abhishek Agrawal
Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Aditya Welekar from Axis Securities. Please go ahead.
Aditya Welekar
Yeah, good afternoon. Thanks for the opportunity, sir. Sir, just a clarification from Manav’s question previously. So what I understand is that this pellet plant crushing and beneficiation and iron ore mining all will start in tandem from Q1 FY ’26, right?
Abhishek Agrawal
Yes.
Aditya Welekar
Okay. And is there any ramp-up time for that means how much incremental volumes can we expect from FY ’26?
Abhishek Agrawal
See, once we get the approval, we will start running on the mining production and hopefully by I think end of Q1 or Q2, we should be able to mine the [Indecipherable]. That’s the whole idea.
Aditya Welekar
Okay, full 6 million.
Abhishek Agrawal
Yeah, yeah.
Aditya Welekar
Okay. Sir, next question is on iron ore means on one of the slides, there is a one of the mines in Africa is coming online in Guinea and because of that iron ore prices may fall in future. So what will be its impact on our pellet prices or our pellet prices will remain largely stable given the domestic situation. I want to understand what are the factors which decide pellet price volatility.
Abhishek Agrawal
To be honest with the current increase in production in India for steel, the iron ore prices have been strong and irrespective of how the cash flow prices play, the pay price should be on the same levels. So we don’t expect any change in the domestic prices when it comes to iron ore.
Aditya Welekar
Okay, sir. Thanks. That’s all from my side.
Abhishek Agrawal
Thank you.
Operator
Thank you. The next question is from the line of Akhilesh Kumar from Emkay Global Financial Services. Please go ahead.
Akhilesh Kumar
Good afternoon, everyone. Thanks for the opportunity. I have couple of questions. So first coming on the capex intensity. So sir, for a solar plant generally, it takes INR50 million to INR55 million per megawatt to set up 1 megawatt of solar capacity. However, GPIL is targeting to achieve 70 megawatt of solar capacity with an investment of around 35 million to 36 million per megawatt. So could you please walk me through the difference, why is it lower for GPIL?
Abhishek Agrawal
See, the model prices have drastically reduced compared to previous years. Earlier the model prices were about INR2 crores, INR2.5 crores per megawatt, but to be the prior year about 1.5 megawatt. So this is that we have already finalized the EPG conductor. So for 70 megawatt, we are confident about INR200 crores, INR225 crores should be enough for setting up 70 megawatts.
Akhilesh Kumar
Okay. Thank you for that, sir. And second question is on the guidance. So you have trend iron ore guidance for FY ’25. So is there a possibility that there could be a scale back in the targeted capacity to reach 6 MTPA in FY ’26?
Abhishek Agrawal
No, hopefully, we should be able to get the approvals and once we get the approvals, there should not be any issue in reaching the rate classically.
Akhilesh Kumar
Okay, okay. And if I can pitch in one more question. So you have about INR1 crore — INR1,000 crores capex of balance capex to be incurred apart from steel. So could you please guide us how much of it will be done in the FY ’25 and in FY ’26?
Abhishek Agrawal
See, all of it will be done in FY ’25 and ’26 because the condition is headed for the new pellet plant. And once we see the mining approval, we will start the conduction of a beneficiation plant. So all of it will be consumed and to be incurred in ’25 and ’26.
Akhilesh Kumar
So can we assume that 50-50 split between the two years?
Abhishek Agrawal
See pellet plant — pellet will be — is already consuming and once you get the mining approval, so remaining will be done in FY ’26.
Akhilesh Kumar
Okay. Makes sense, sir. Thank you so much. Thank you for taking my questions.
Abhishek Agrawal
Thank you.
Operator
Thank you. The next question is from the line of Jatin Damania from Swan Investments. Please go ahead.
Jatin Damania
Good afternoon, sir and thank you for the opportunity. Sir, just want to understand because last time when we indicated that there was a decline in the pellet prices compared to the first quarter. But now when we look at our realization, we have seen a sequential improvement. So can you help us understand the total grade or the product grade mix in the pellet that we have sold during the quarter?
Abhishek Agrawal
See we have been maintaining — so it’s 50% of high grade, which is 56% and 50% of normal commercial 53% and that will continue to happen.
Jatin Damania
So that will continue to remain at 50-50 only, right?
Abhishek Agrawal
Yes, yes, yes. Until a new panel commissioned.
Jatin Damania
Yeah. And the new pellet plant will probably come in the first quarter of FY ’26, if I’m not wrong.
Abhishek Agrawal
Correct. Very correct.
Dinesh Gandhi
Production will come in Q2 it is expected to be commissioned in Q1, yeah.
Jatin Damania
Yeah, the production will come in Q2, right?
Abhishek Agrawal
Q2. Yeah.
Jatin Damania
In the opening remarks that you indicated that there is a delay in getting an approval from the mining and the state government for the expansion in the mining activities. So suppose if we don’t get an approval in months since till December the Q4 of FY ’25, so is it safe to assume that the — currently what we are buying, 20%, 25% annual from the market, that proportion will go to almost 30%, 35% since our pilot will come into operation?
Abhishek Agrawal
Yeah, if we don’t get the approval, that will surely happen, but we are confident that we will get the approval, because which are the pellet plant.
Jatin Damania
And no, I mean, is there anything which is issue, why we are — why there is a delay in terms of getting an approval or sort of things?
Abhishek Agrawal
It’s not an issue, but as such, it used to take times, but with the state government taking little more time and we are confident we should get the approval before the new fund charts.
Jatin Damania
Okay, okay. And in terms of our beneficiation, now since we have already started the activity on the ground, so what is the capex that we have already spent for the beneficiation?
Abhishek Agrawal
We gave in the presentation, Jatin. The numbers are there.
Jatin Damania
Okay. And in terms of the numbers that definitely we have seen the downward revision in the overall iron ore mining guidance. So now for the month of October, is our pellet plant fully operational?
Abhishek Agrawal
Yes, pellet plant is fully operational. There was a shutdown — I know shutdown for the smaller one, but since September, both pellet plants are fully operational and we are confident we’ll achieve the guidance given by start of the year.
Operator
Okay. Yeah. Thank you, Abhishek, and best wishes for the festive season.
Abhishek Agrawal
Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Rakesh Roy from Boring AMC Omkara Capital. Please go ahead.
Rakesh Roy
Yes, sir. My first question is regarding the margin. The margin has declined from compared to last year, same quarter for 20%. Any reason except from the rain or pellet?
Abhishek Agrawal
No the major example, pellet plant, it was going to shutdown and for almost 50 days because of which we lost the major volume, no other reason.
Rakesh Roy
Okay. So, sir, yes, this plant shut down 50 days. So every year or just for this, this year is —
Abhishek Agrawal
N, no, no last-time we do shut down was almost 10 years back. So that is how the plant works. So going forward, it will happen every year.
Rakesh Roy
Okay. So this is impact on the margin front. So we hopefully from Q3 margin will normalize.
Abhishek Agrawal
From Q3 onwards, the production guidance will be normalized and depending on the market, the margins will remain intact.
Rakesh Roy
Okay. Sir, my next question, sir, if you look at your sponge iron realization, just recently one company in declared results, their expense — response is realization is higher or is lower. Any reason behind that?
Abhishek Agrawal
No, I see in Q2, what has happened is, we have to use the sponge iron capacity and there were supplies to be sold in the market. But going forward, we will only say sponge iron because our internal requirement. We only sell surplus a command to our steel production.
Rakesh Roy
Okay. So for funds in our [Technical Issues] will increase compared to Q2, if —
Abhishek Agrawal
In Q3, the sponge iron sales would be less compared to Q2.
Rakesh Roy
Okay, okay. Sir, and last question, sir, you some [Technical Issues] 12,000 per tonne.
Abhishek Agrawal
Yes, the DRI, yes, correct.
Rakesh Roy
The DRI. So sir, for DRI, we import coal.
Abhishek Agrawal
We import coal for DRI.
Rakesh Roy
Okay, right, thank you, sir.
Abhishek Agrawal
Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Vikas Singh from PhillipCapital. Please go ahead.
Vikas Singh
Good afternoon, sir and thank you for the opportunity. Sir, I just wanted to understand one thing, since the iron ore prices have again started to inch up, have we given any thought about the restarting of the Boria Tibu mine because that low grade was previously not feasible at a low price.
Abhishek Agrawal
See for Boria Tibu, we are filing the papers for beneficiation. So Boria Tibu mine will only start once we saw the beneficiation plant because the grid is — the grid is on the lower side and it’s only feasible in the long-term one we start benefiting and then mid the high grid in the market — to the plant. So Boria Tibu will come online only after, say, two to three years or before that.
Vikas Singh
So just follow-up, what is the average rate what you think the Boria Tibu will give you right now? And whose beneficiation, what is the rate we are looking at?
Abhishek Agrawal
See the average is about 50-52 and post beneification is about 50-55. So we have started working on the filing the EC for Boria Tibu. And once we get the EC desired approvals, we’ll install the plant and we’ll only start the mines when the plant — the plant — beneficiation plan is started.
Vikas Singh
Understood. Sir, my second question pertains to our private exports market. Usually, we have seen in the past that the closer to October end or November, since China centering starts gradually depleting, there is a lot of booking happens from India. So have you seen some inquiries and at current prices, is it visible for us to export? Just wanted your views on that.
Abhishek Agrawal
So see we have been exporting for almost last 10 months and we don’t think any exports will happen at least for Godawari, because the domestic demand is quite strong and the prices in the domestic are much better than the export prices. Though pellet plants in India, which are port-based in Orissa or say in Vizag, they are exporting the volumes but apart from that, not much export is happening from India. So domestic — the domestic demand is quite strong.
Vikas Singh
Understood. But even then that helps us, right? Some domestic materials will go out in the export one eventually —
Abhishek Agrawal
Of course, of course, because in India, the pellet production is on the higher side compared to the demand. So any volumes outside India helps to balance the demand and supply.
Vikas Singh
Understood. And sir, just one last question. I’m sorry if this would have been asked previously because my called off. I think the average utilization for the pellet has improved even on sequential basis, while the iron ore prices have been lower. So just wanted to understand the — whether the larger part of this dip now we will experience in 3Q or on a blended basis, our 3Q would still be higher than the 2Q, which is there.
Abhishek Agrawal
Should be better correct. Yeah.
Vikas Singh
I’m sorry, sir, I missed your comment.
Abhishek Agrawal
Q3 should be better than Q2, in terms of premiumization.
Vikas Singh
Okay. So somehow this fall has been managed in 2Q. Basically that we were expecting some fall in the 2Q realization as well.
Abhishek Agrawal
See the volumes were lower, so we were able to maintain the pricing in Q2, but Q3, given the demand and supply should be better than Q2 — Q3 should be better than Q2.
Vikas Singh
Sir, if I may ask, how is the spot prices in Q3 as of now?
Abhishek Agrawal
See, for the physical grade, it’s about INR10,000 and for the — for the hygiene it’s about INR11,900 at the moment.
Vikas Singh
Understood, sir. Thank you. That’s all from my side and all the best for future. And Happy Diwali to you, sir.
Abhishek Agrawal
Happy Diwali. Thank you.
Operator
Thank you. The next question is from the line of Aman [Phonetic] from Augmenta Asset Managers LLP. Please go ahead.
Aman Madrecha
Yeah. Hi, Abhishek. Thanks for the opportunity. Abhishek, I just had a basic question. So correct me if I’m wrong. So for time being for FY ’25 as a whole, we would be buying close to 60,000 tonnes of iron ore from outside, right, for our internal operations?
Abhishek Agrawal
Yeah, we buy about 50,000 tonnes of iron ore from the market at the moment.
Aman Madrecha
Okay. And also, can you highlight some bit on the iron ore because for example, over the last 20 days, NMDC has increased prices by 2 times by approximately INR1,000 per tonne and when we listen to the management commentary on the same, so the company is expecting a robust iron ore market and the [Indecipherable] section is also going to be good. So what your — what’s your sense on the domestic iron ore market as a whole if you could highlight?
Abhishek Agrawal
See, domestic iron ore market is quite strong. Recently committed OMC auction, the prices are about almost INR1,000 with basis which NMDC increase the prices. So going forward, with the robust steel demand and with the monsoon over, you expect the iron ore prices to be at that elevated levels?
Aman Madrecha
Okay, okay. And also if you could throw some sense on the ferro alloys market, what is happening currently?
Abhishek Agrawal
See ferro alloys is quite stagnant. The good thing is the raw material prices have come down in the national market. Whatever increase happened in Q2 because of certain production being out in the national market and China’s big demand, the manganese prices come down and the current silico manganese prices in the domestic market is more or less stable.
Aman Madrecha
Okay, that’s all. Thank you. Thank you so much.
Abhishek Agrawal
Thank you.
Operator
Thank you. The next question is from the line of Tushar Chaudhari from Prabhudas Lilladher Private Limited. Please go ahead.
Tushar Chaudhari
Thanks a lot, sir for the opportunity. Sir, I just wanted to understand regarding the current demand situation for galvanized fabricated products. Over the last two quarters, the run rate is falling, is it — I mean, but we — I think we plan to increase the capacity also over here over the period. So can you throw some light? Also, the margin is under pressure because of higher zinc prices or how is it going as of now?
Abhishek Agrawal
In Q2, the volumes were lower because our zinc was under maintenance. There was a major repair happened in the [Indecipherable]. That is where the volume is lower. But in terms of demand, the demand is quite strong and we have also commissioned a new rolling mill. So that will support the profitability. So in Q3 and Q4, we hope the demand will remain intact and you can see the better volumes in Q3 and Q4 going forward.
Tushar Chaudhari
Because 1Q also that volumes were lower actually.
Abhishek Agrawal
Q1 is still okay, but Q2 there was a major repair in [Indecipherable], but Q3 and Q4 onwards, you can see a major uptick in the volumes.
Tushar Chaudhari
And margins.
Abhishek Agrawal
My margins will remain intact because more of a PSU work with transition towers, railways and all that. So demand is quite robust and we are — we are very confident once we achieve volumes, the margins will remain intact.
Tushar Chaudhari
Okay, thanks a lot, sir. And Happy Diwali.
Abhishek Agrawal
Thank you. Happy Diwali.
Operator
Thank you. The next question is from the line of Pradeep Rawat from Yogya Capital. Please go ahead.
Pradeep Rawat
Yeah, good afternoon and thank you for the opportunity. Sir, my first question is regarding our — regarding the buyback of Alok Ferro Alloys. What was the consideration at which we bought back the share from our promoters?
Dinesh Gandhi
See, buyback was done at about INR10 per share.
Pradeep Rawat
Okay. Yeah. And both of our ferro alloy subsidiary are doing quite badly. So can you throw some light on that? Why are they doing so badly in operations?
Dinesh Gandhi
So you see the numbers for Q2 and they are doing much better than the same quarter last year.
Pradeep Rawat
Yes. So I was much more asking about yearly performance.
Dinesh Gandhi
No, last year performance was slightly subdued because there was an modification in one of the plant there was a shutdown in the power plant in Alok Ferro Alloys. But these are — these plants are operating fully and volumes have considerably increased during the current financial year. Several operating metrics have increased and this is expected to sustain over the period of time.
Pradeep Rawat
Yeah. So what kind of EBITDA margins are we expecting from Ferro Alloys division?
Dinesh Gandhi
See, it is about INR8,000 to INR10,000 a tonne on an average. EBITDA, I think for ferro alloys business is closer to about INR40 crore, INR45 crore.
Pradeep Rawat
Okay. And my last question is regarding the cost per tonne for converting mild iron ore into iron ore pellets.
Dinesh Gandhi
This is about INR1,800 a tonne.
Pradeep Rawat
Sorry, what was the number?
Dinesh Gandhi
INR1,800 per tonne.
Pradeep Rawat
INR1,800. So cost of mining iron ore is close to INR3,000 per tonne and from mining to pellet, it’s 1,800.
Dinesh Gandhi
Yes.
Pradeep Rawat
Okay. Thank you. That’s all from my side and Happy Diwali.
Dinesh Gandhi
Thank you.
Abhishek Agrawal
Happy Diwali.
Dinesh Gandhi
Happy Diwali to you.
Operator
Thank you. [Operator Instructions] The next question is from the line of [Indecipherable] from Badrinath Holdings. Please go ahead.
Unidentified Participant
Hi, am I audible?
Abhishek Agrawal
Yes, please.
Unidentified Participant
Yes, hi. Thanks for taking my question. So I recently saw Abhishek your interview with Mighil [Phonetic] on CNBC. So I didn’t want to get these numbers confirmed. So of the 2 million tonnes the new pellet capacity in FY ’26, am I right in understanding that in the first year, that is FY ’26, we’ll be doing like a 50%, so 1 million tonnes will be added to our current production in FY ’26?
Abhishek Agrawal
Correct.
Unidentified Participant
Yeah. And then the other 1 million tonne we can expect like the whole 2 million tonnes we can expect in FY ’27.
Abhishek Agrawal
Right.
Unidentified Participant
Okay. And our captive consumption of our pellets will remain at 0.9. So in FY ’27, then our sales volumes will go up directly by the whole 2 million tonnes, right?
Abhishek Agrawal
So again, FY ’26, the volume should go up by 1 million and by ’27, whole volume of 2 million should go up, yes.
Unidentified Participant
Yes. But our captive consumption of the pellets will remain the same throughout —
Abhishek Agrawal
Exactly. So right now it is also for 9 million tonne. And going forward, as we start increasing production, the sales volume will go up.
Unidentified Participant
Okay, great. And last — and the iron ore, we don’t plan on selling it. Even once the mining because of the additional royalties that we have to pay, even once the mining ramps up, there will be no situation where in there we’ll be selling our iron ore to the market, right?
Abhishek Agrawal
No, we have no intention of selling the iron ore in the market. So whatever is buying will be consumed in the pellet plant.
Unidentified Participant
Okay, thanks. And last question is, where do you see the high-grade mix for our pellets between the 63 and 66 in FY ’27, will it be one-third of low-grade and two-thirds of hybrid?
Abhishek Agrawal
See currently it’s 50-50 and once we start the new plant, there also be producing high-grade. So yeah, you are very correct, once we start the new pellet production, high-grade will be two-third and the normal will be one-third.
Unidentified Participant
Okay. Okay. Yeah. Thank you so much. All the best.
Abhishek Agrawal
Thank you.
Operator
Thank you. The next question is from the line of Vaibhav Dubey from BigMint Technologies Private Limited. Please go ahead.
Vaibhav Dubey
Good afternoon, everyone.
Dinesh Gandhi
Good afternoon.
Vaibhav Dubey
I wanted to ask, how has been the share of domestic versus exports in last quarter and what is your outlook for quarter three?
Abhishek Agrawal
See, we haven’t been exporting any pellet from last 10 months. We have been selling everything domestically. And looking at the current domestic demand and the prices, we will continue to sell everything domestic. Export will be zero. Even for Q3 and with current prices, hopefully Q4 should all be also be zero. So we will keep saying everything domestically.
Vaibhav Dubey
Okay, noted, sir. Sir, my second question is on the CCU unit, which you have mentioned in your press release, investor presentation, what are your plans on achieving this net zero emissions? If you can share more details.
Abhishek Agrawal
See, like we have given a target of 2050. We are working with IIT Bombay on the CCU, they developed a pilot in the lab and a bigger version will be installed in Godawari. And once everything is successful in terms of operational and in terms of capturing carbon, we’ll go to the bigger model. So it’s at a very R&D stage and hopefully everything works out, we can start investing on a bigger model. That’s the whole idea.
Vaibhav Dubey
Okay. Okay, sir. Thank you so much, sir. And Happy Diwali in advance.
Abhishek Agrawal
Happy Diwali. Thank you.
Operator
Thank you. The next question is from the line of Sahil Rohit Sanghvi from Monarch Network Capital. Please go ahead.
Sahil Sanghvi
Yeah. Thank you for the opportunity again. Am I audible?
Abhishek Agrawal
Yes, please. Yes.
Sahil Sanghvi
So I just wanted to understand sir, there is this gap between the net cash number that you calculated and what is directly available on the base of the balance sheet. I think you account for the loans in the net cash number. So just wanted to understand these loans are to whom and at what interest rate?
Dinesh Gandhi
So Sahil, can you come again please?
Sahil Sanghvi
Yeah, sir, sir. I mean you have a net cash number of roughly INR970 crores — INR990 crores in your presentation. So there is roughly, I think, INR170 crore, INR80 crores of loans that you’re probably accounting as cash and cash equivalent. So just if you can explain what — who are these loans given to and what interest rate and if you can give some details on that.
Dinesh Gandhi
Bothraji, you will take this question?
Sanjay Bothra
Yes, the interest is largely between 12% to 16% and the loans are three table on demand. That’s why it is taken as cash and cash equivalents.
Sahil Sanghvi
But whom are this given to?
Sanjay Bothra
GMR is one party and there are some other corporates also.
Sahil Sanghvi
GMR?
Sanjay Bothra
Yes. GMR enterprises.
Sahil Sanghvi
Okay, fine. That’s all. Thank you.
Operator
Thank you. The next question is from the line of Manav Gogia from YES Securities India Limited. Please go ahead.
Manav Gogia
Yes. Thank you, sir again for the opportunity. Sir, in the last call, we had guided that the capex for this particular year would be in the range of about INR800 crores and next year should be about INR1,000 crores. Are the numbers still intact?
Abhishek Agrawal
Yes, it is intact.
Manav Gogia
Yes. And could you give me the total capex spend up till the first half of this financial year?
Dinesh Gandhi
The numbers are there in the presentation.
Manav Gogia
Okay, okay. I might have missed it. Sir, second question coming up on the other expenses, which have jumped roughly 14% on the quarter-on-quarter basis. Could you just underline the factors that contributed to the same?
Dinesh Gandhi
No, as I said in my opening remarks, INR25 crore is an one-time cost especially for the shutdown of the pellet plant and the cost incurred sold that. So that INR25 crore is, additional cost incurred in this quarter.
Manav Gogia
Okay, okay.
Dinesh Gandhi
It will not be repeating.
Manav Gogia
Sure, sure, sure. Thank you so much for the clarification, sir. That’s all from my side. Wish you all a very Happy Diwali. Thank you.
Abhishek Agrawal
Happy Diwali.
Operator
Thank you. [Operator Instructions] The next question is from the line of Jinesh Shah from H&I Investments [Phonetic]. Please go ahead.
Jinesh Shah
Thank you for the opportunity. My question is in last Q1 PPT, we have mentioned that the iron ore beneficiation plant will take 15 months from the date of environment year and for environment approval. In this Q2 presentation, we are mentioning six months from the environment. So what has happened in last three months that the timeline has been changed?
Abhishek Agrawal
See approval for 0.6 million done, so majority of work has been completed and once we get the mining approval for [Indecipherable] done we will spend and create an initial volume and start beneficiation. So that of the three months, we have come up to six months because major work has already happened. Once we get the mining approval for 6 million tonne, we will spend additional amount on the beneficiation and we start the beneficiation as a whole idea.
Jinesh Shah
Okay. And the — our mining application with environment clearance is continuously getting delayed. I mean — but I mean while we have initiated this project in terms of iron ore expansion, mining expansion as well as the pellet production, the idea was the mining capacity will be available well in advance. But now since we are talking in this call that if environment clearance is getting delayed, then we may have to procure the iron ore from outside to maintain our pellet plant capacity, which we are commissioning in Q1 next year. So why the management and our environment team is not putting adequate efforts to ensure that these environment should not get delay further?
Abhishek Agrawal
No. So I would say the environment team is putting the required effort. It would be wrong to say that they’re not doing any effort. Taking much more time than we expected, but we are confidently by end of the financial year, we should be able to get the mining permissions.
Jinesh Shah
Okay. And you also mentioned that some state government approval is pending other than this environment clearance for these new ideas for the expansion of iron ore plant. So which are those state government approval is still pending other than the environment clearance for this?
Abhishek Agrawal
No, see for the current mining expansion as per the law and the MMDR Act, we are supposed to get approval from state government. So whatever rules are required, it’s with the state government not with the central government. So it’s taking time, we do understand, but then things are in place and hopefully by end of financial year, we should get the approval.
Jinesh Shah
So what I understood from the PPT, we have mentioned the revised TOR, right? So when we are going to submit the response against this TOR?
Abhishek Agrawal
We have already submitted the response in the TOR, and obligation has to happen and further so, yeah. So things are in process that is taking a little time, but we are confident by end of this year, we should have the approval.
Jinesh Shah
So the public hearing is applicable for our iron ore expansion project.
Abhishek Agrawal
Yes, it is applicable. But it should happen in the state government level, not in the central government level.
Jinesh Shah
And by when this public hearing is going to happen, because if the public hearing is still pending, then I am really — I’m not sure how we’ll be getting all the approval in next six months’ time.
Abhishek Agrawal
No, no, see we are at the last stage of getting the approval — the permission approved. So once that change is achieved publicly will happen. So fully by November end, we should get the approval and then in December we are confident the public hearing will happen.
Jinesh Shah
Thank you, Abhishekji. Thank you.
Abhishek Agrawal
Thank you.
Operator
As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Dinesh Gandhi
We once again sincerely thank you all for your participation in our support. We are confident that we have adequately addressed all your queries. Wishing you all season’s greeting and Happy Diwali to you and all your families. Should you have any further questions or need any additional information, please feel free to get in touch with our Investor Relations team at Go India Advisors. Thank you very much. Thank you all.
Abhishek Agrawal
Thank you.
Dinesh Gandhi
Thank you.
Operator
[Operator Closing Remarks]