Stock of this Gujarat government-owned company has zoomed 91% in 7 weeks

Shares of GMDC hit a record high of Rs 323.70 as they rallied 14%, surpassing its previous high of Rs 316.18 touched on November 12, 2007

Shares of Gujarat Mineral Development Corporation (GMDC) moved higher by 14 per cent to Rs 323.70, hitting a new high on the BSE in Friday's intraday trade, on the back of heavy volumes amid healthy business outlook.

The stock of the industrial minerals company surpassed its previous high of Rs 316.18, touched on November 12, 2007. In the past seven weeks, the market price of GMDC has zoomed 91 per cent from a level of Rs 169.75 seen on August 10, 2023. Since April, it has skyrocketed 156 per cent.

The average trading volumes on the counter more than doubled today with a combined 20.16 million equity shares, representing 6.3 per cent of total equity of GMDC, having changed hands on the NSE and BSE till 02:33 PM.

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. They are also engaged in the generation of power. 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.

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

GMDC operating 5 lignite mines, located in Kutch, South Gujarat, and Bhavnagar, with estimated reserves of 95 million tonnes. During the FY23, GMDC had worked on newly allotted 6 new lignite blocks with combined lignite reserves of 360 Million Tonnes.

The company caters to nearly 25 per cent of the total demand of minerals in Gujarat, with a diversified customer base comprising small and medium-sized companies spread across textiles, steel, cement, power generation and various other sectors.

India's total lignite requirement remained around 45-50 MT during FY19-FY23. Demand for Lignite is expected to remain stable in the medium term driven by demand from thermal power, textile, steel, cement, and other industries. Moreover, India is heavily dependent on imported coal which is a substitute for lignite. In order to reduce the dependency on import of coal, the government is focussing on development of lignite and coal mines domestically.

The management said the company will continue to benefit from higher production, supported by steady demand from manufacturing industries located in Gujarat. The increased production from these new mines will facilitate GMDC in catering to at least 30-35 per cent of total demand by FY25.

Also, during FY23, GMDC received permission for land acquisition in Tadkeshwar, which was closed due to landslide. Restoration of Tadkeshwar mine and increase in production at Bhavnagar site will lead to increased sales volume.

In FY24, GMDC has set an ambitious capex target of Rs 3,000 crore. A significant portion of this will be utilised towards lignite projects. The company does not have any outstanding term debt or fund-based working capital limits. With no major fund-based limits in the near to medium term horizon, the management is confident the overall gearing ratio will remain very comfortable till March 31, 2024.

The company’s capex, planned over the next two years (i.e., FY24 & FY25), is likely to be funded majorly through internal accruals with minimal reliance on term debt thereby maintaining a very comfortable debt profile.

In another key development, GMDC kick-started refurbishing of 250 MW Akrimota thermal power plant at Nani Chher, with a reported plant load factor of 38 per cent. This move is aimed at maximising power generation by increasing utilisation of installed capacity, and taking plant load factor to beyond 75 per cent by the next fiscal year, GMDC said in FY23 annual report.