Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Godawari Power and Ispat’s (GPIL) steel billet output in Q4 rose by 7pc to 97,070mt from the prior-year quarter. For the year FY2020, billet production increased by 15pc to 344,610mt from a year ago as the company’s output improved due to captive power plant, according to a company release. The company’s sponge iron production dipped by 6pc to 115,840mt in Q4 from the prior year quarter and improved 8pc to 494,955mt in the full year. 


Godawari Ispat Iron and Steel production
Production (mt)Q4FY2020Q4FY2019YoY changeFY2020FY2019YoY change
Iron ore Pellets – GPIL441,000540,000-18%1,999,1501,933,2503%
Iron Ore Pellets – ASL170,446165,3453%687,360572,67320%
Sponge Iron115,840123,858-6%494,955460,0088%
Steel Billets97,07090,3907%344,610298,41815%


The company has commissioned a rolling mill in February to increase production of value-added products including billets. The company is also in the process of merging the 25 MW Jagdamba captive power plant into GPIL, which has enhanced the plant’s capacity to achieve highest ever production in FY2020. Godawari commissioned a 100,000mt iron ore beneficiation plant in February



Godawari Ispat expect Q1FY2021 production to be around 60-90pc across its value chain in line with the demand scenario. The company expect normal operation from Q2FY2021 onwards. Godawari Ispat’s management acknowledges the market uncertainty induced by the pandemic and that it could impact the company’s profitability in the future. 


The company plans to export high-grade iron ore pellets from October 2020 onwards. The export margins are expected to be Rs1,000/mt higher than the domestic market at Rs7,000-8,000/mt, provided the Brazil supplies remain tight.


Impact of COVID-19

The company’s profitability in Q4 FY2020 was affected by a fall in production and sales due to the lockdown and it expects a similar impact in Q1FY2021. Godawari’s manufacturing operations were temporarily shut from March 24 to April 9 following the imposition of a nationwide lockdown in India. The operations were running at near normal capacity by the third week of May.


Direct export of pellet is supporting the company tide over the impact of COVID-19 pandemic, according to the company’s earning calls. Godawari’s strategies for FY2021 includes a focus on increasing high grade (67pc+ Fe) pellet production for exports and for captive consumption to make high-quality steel billets for the domestic market.


Godawari Ispat has sufficient liquidity to meet its financial and operational obligation. The company has opted for moratorium on repayment of principal and interest payment on term loan and cash credit on standalone basis for the period of March to May 2020 to maintain liquidity. However, the company does not seek further deferments from its lenders. 


Financial results

In FY2020, higher utilization across value chain helped the mitigate the sharp decline in commodity prices. During the year, the company started the direct export of pellet. Godawari exported 40pc or 546,086mt of its pellet sales volume in FY2020. Despite improvements in operational efficiencies, the company’s profitability was impacted by lower realisations and temporary shutdown of operations due to the pandemic.


Godawari Ispat’s net sales dropped by 12pc in Q4 to Rs7,901m ($104.54mn) from a year ago while net profit fell by 42pc to Rs342mn. For the full year, net sales dropped by 1pc to Rs32,885mn and net profit declined by 32pc to Rs1,744mn from the prior year.




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