"Weve always said we were building a counter-cyclical steel company. Ourperformance in 2012-13 proves that we have."
Taffecting the fortunes and prospects of a number of steelhe global economy continuedto be turbulent in 2012-13, manufacturers across the world. The extended slowdown inEurope impacted exports; a policy paralysis and high capital costs slowed investments inIndian infrastructure.
As an extension of these realities, the Indian steel industry was impacted, reportingone of the slowest growth in years. however, the challenging year under reviewnotwithstanding, Godawari Power & Ispat demonstrated what it has always professed:that it is a relatively non-cyclical steel company in a fairly cyclical sector. so even asIndias GdP grew 5% and its steel sector grew 5.86%, Godawari Power & Ispat grewconsolidated revenues by 14.38% and profit after tax 76.59%.
Coming as this did at a time when many steel manufacturers in the country reportedlosses or sharp declines in profitability,
Godawaris performance represented a source of quiet pride and satisfaction.
your Companys counter-cyclical performance was the result of a deliberatelycontrarian business model, which is detailed elsewhere in this report.
> Even as most players in Indias steel industry focused singularly on businessscale as a means of sustainability, your Company focused on business quality instead. Theresult is evident in our numbers: we grew revenues in four of the last five years and cashprofit (depreciation plus PAT) in five of the last five years leading to 2012-13
> Even as most players in Indias steel industry focused on downstream productmanufacture, Godawari focused on integrated upstream capacity building, making it possibleto procure a fair quantity of raw materials from within, reducing the Companysdependence on a volatile marketplace.
> Even as most industry investments were made during sectoral rebounds, Godawariinvested a large part of its 31st march, 2013 gross block following the 2008 meltdown whenmost steel players in the country slowed their sectoral capexes. e ven as many industrialentities suffered extensive time overruns (which, in turn, translated into project costoverruns), your Companys solar thermal power project was commissioned within thetargeted schedule, the only project out of seven to be commissioned on time. besides, theCompanys 1.2 mTPA pelletisation plant also started trial production and is expectedto commence commercial operations shortly, a good nine months ahead of schedule.
> Our contrarian ability was established in the mid-eighties, when we commissionedferro alloy capacities through small eAfs (electric arc furnaces), which was a relativelyuntried strategy in those days. Thereafter, we selected to invest in pelletisation,generating a superior use of iron ore fines, creating a cost advantage compared to usingiron ore lumps and leading to a quicker payback. even as a majority of steel manufacturersfocused on core business investments, we extended to the generation of power throughrenewable means, which will ensure the provision of annuity revenues on the one hand andnegligible variable costs on the other.
In 2013-14, growth of the Indian economy is expected to stay at the same of level as inthe previous year and is expected to improve only from 2014-15 onwards. Correspondingly,steel demand in India is expected to grow from a sluggish 5.5% in 2012-13 to 7% in2013-14.
At GPIl, we are attractively placed to capitalise on the sectoral rebound. Thefinancial year of 2013-14 will be a landmark year for the Company as 100% of the projectedgross block has already been commissioned. following the completion of the capex in2013-14, the Company expects to focus on business consolidation, profit generation anddebt repayment, leading to an enhanced corporate value.
The balanced interplay of volume and value represents the core of the Companysstrategy. we expect to increase volumes and margins through the expansion of pelletcapacity from 12 lac TPA in 2012-13 to 24 lac TPA in 2013-14
Interestingly, a growing throughput of pellets will not only increase revenues but alsowiden margins. Prevailing economics indicate an attractive value-addition related topellet manufacture; besides, the Companys margins are expected to ride the 50 mwsolar plant in Rajasthan, marked by high ebIdTA margins coupled with cost reductionstrategies, which, once implemented, are expected to result in a further improvement inmargins.
It is this interplay of volume and value that we expect will translate into enhancedvalue for our stakeholders.
Growing stronger together
we believe in sustained growth and growing stronger together, taking care of all ourstakeholders. we, at GPIl have a philosophy of serving society through industry and livingin harmony with nature. our investments in clean energy businesses are a reflection ofthis philosophy. In addition, initiatives in the realms of education, healthcare, drinkingwater projects and sports, among others, have been undertaken for the betterment ofsociety and minimising the impact of our activities on the environment.
We are optimistic, confident and committed about contributing to Indias long-termgrowth story. we are also confident that our business strategies will help generatesuperior returns for our stakeholders.
Finally, I wish to thank all our stakeholders and business associates for theircontinuous support. we cherish the trust you have reposed in the Company and our endeavourwill always be in making our growth profitable and sustainable.