GMDC soars 15% on heavy volumes; stock more-than-doubled in 2 months

Shares of Gujarat Mineral Development Corporation (GMDC) hit a new high of Rs 367.70, as they rallied 15 per cent on the BSE in Tuesday’s intra-day trade on the back of heavy volumes. In past two months, the stock price of GMDC has more-than-doubled or zoomed 117 per cent.

The average trading volumes on the counter more-than-doubled today with a combined 25.86 million equity shares, representing 8.1 per cent of total equity of GMDC, changing hands on the NSE and BSE till 12:59 PM. In comparison, the S&P BSE Sensex was up 0.79 per cent at 66,028.

As on June 30, 2023, Government of Gujarat owned 74 per cent stake in GMDC, shareholding pattern data shows.

GMDC is a mining and mineral processing company, and is the largest merchant seller of Lignite in India. The company produces lignite bauxite calcined bauxite fluorspar and manganese ore. The company offers lignite for various industrial units including textiles chemicals ceramics bricks and captive power. Lignite mining is the main operation of the company.

GMDC has also allotted two new coal blocks at Odisha. The company plans to commission these mines in the next three years. These two projects are projected to become the company’s backbone, GMDC said.

The operating performance of the company moderated in June quarter (Q1FY24) due to a decline in lignite prices owing to the correction in international coal prices. During Q1FY24, the TOI of GMDC remained lower by 34 per cent on a y-o-y basis largely attributed to lower average sales realisation followed by decline in lignite prices. However, the company achieved EBITDA margin of 32.23 per cent during Q1FY24 which remained better than envisaged.

CARE Ratings believes that GMDC will continue to maintain its dominant market position in the lignite mining business with a healthy operating performance backed by sales volume growth.

GMDC is currently operating five lignite mines with estimated reserves of around 95 million tons (MT) and average life of mine is 12-14 years as on March 31, 2023. The company has been allotted six new lignite blocks having combined lignite reserves of around 360 MT. With allocation of new lignite mines, CARE Ratings believes that GMDC will continue to benefit from higher production and sales volume supported by steady demand from manufacturing industries located in Gujarat.

During FY24, the sales volume of lignite is expected to grow by around 15-20 per cent supported by restoration of Tadkeshwar mine by Q2FY24 and increase in production at Bhavnagar site by acquiring further land and engaging additional mining contractor at site. The company is likely to report total income from operation of around Rs 3,500-3,700 crore during FY24 supported by sales volume growth despite moderation in average sales realisation.