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NMDC Ltd.

BSE: 526371 Sector: Metals & Mining
NSE: NMDC ISIN Code: INE584A01023
BSE 00:00 | 27 Jan 122.90 -0.95
(-0.77%)
OPEN

123.80

HIGH

125.05

LOW

120.75

NSE 00:00 | 27 Jan 122.95 -0.90
(-0.73%)
OPEN

124.25

HIGH

125.00

LOW

120.80

OPEN 123.80
PREVIOUS CLOSE 123.85
VOLUME 656553
52-Week high
52-Week low
P/E 5.78
Mkt Cap.(Rs cr) 36,017
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 123.80
CLOSE 123.85
VOLUME 656553
52-Week high
52-Week low
P/E 5.78
Mkt Cap.(Rs cr) 36,017
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

NMDC Ltd. (NMDC) - Chairman Speech

Company chairman speech

Dear Shareholder

Against the wishes of everyone COVID-19 infections continued to hauntthe world. While FY22 was a mixed bag of worries and relaxations the initial months ofFY23 have again become a period of concern with new variants of COVID-19 and otherinfections like monkeypox. I hope you and your families are safe and healthy.

Economic scenario

From February 2022 unexpectedly the Russia-Ukraine conflict hasreplaced COVID-19 as the headline in global electronic and print media. Already sufferingfrom the devastating infection the world had to face another disaster that has beenchallenging the availability of crude oil edible oil and food grains. Supply chaindisruptions have hindered the flow of those goods from country to country and continent tocontinent. The dwindling supply of essential items has a far-reaching and spirallingimpact on inflation. Concerned by the unstopping inflation rise the central banks acrossthe globe have been increasing the interest rates to suck the liquidity from bankingsystems. In these conditions IMF World Bank and all major financial institutions havebeen downgrading the growth projections of the world economy for 2022.

In India also inflation has been ruling above 7% at 7.04% in May 2022and 7.01% in June 2022. It is well above the RBI's target rate of 6% forcing the regulatorto raise interest rates by 40 bps in April and 50 bps in June 2022.

However India's situation is not grim. The South-west monsoon onwhich a major part of our economy is dependent is expected to be normal as by 11thJuly it has covered the entire country and has been 7% higher than the normal level.Despite the ongoing geopolitical conflict we have been able to import crude oil fromRussia which has been helping us keep the average imported crude oil price lower. Thegovernment's policy measures like Production Linked Incentives (PLI) push for thecreation of infrastructure and expansion of capital expenditure have been attractinglarge amounts of investments from the private sector. These factors provide the comfortthat India can sail through the challenges with minimal impact and global financialinstitutions have assigned higher growth rates for India than the world's average.

Global output and reserves of iron ore

The global output of iron ore in the calendar year 2021 as estimatedby the U.S. Geological Survey (USGS) was 2600 million tonnes which was 5.3% higher than2470 million tonnes in 2020. It is noteworthy that 2022 production was 4% higher than2500 million tonnes in the pre-pandemic year 2019.

In terms of country-wise output in 2021 with 900 million tonnesAustralia continued to be the largest producer of iron ore. India's production was 240million tonnes and emerged as the fourth largest country after Brazil (380 mt) and China(360 mt).

In terms of iron ore reserves Australia tops with 51000 milliontonnes followed by Brazil with 34000 mt Russia with 25000 mt China with 20000 mtUkraine with 6500 mt Canada with 6000 mt and India with 5500 mt.

Demand drivers for Iron ore

Demand for iron ore moves in tandem with steel demand. Global crudesteel production in 2021 was 1951 million tonnes an increase of 3.7% compared to 2020.The Russia- Ukraine conflict and the continued impact of COVID-19 in China have beendampening the demand for steel in 2022. Consequently demand for iron ore has beendeclining and prices have been volatile with a downward bias in June and July 2022. Thusthe outlook for the iron ore market is not encouraging in short term.

However long-term demand for iron is expected to be positive. As per a2018 report of the United Nations an additional 2.5 billion people are expected to livein urban areas. It is projected that India will have added 416 million urban dwellersChina 255 million and Nigeria 189 million. This macro factor will require enormousconstruction activity.

Being the most widely used as the primary material for building housesfabricating machinery and producing vehicles steel is expected to be in demand for along time to come which will have a pulling effect on iron ore.

Financial performance

Despite the continued impact of COVID-19 in FY22 we recorded the bestever financial performance. Our production of iron ore reached 421.88 lakh tons recordinga 24% jump over FY21. During the year our Operating revenue on a consolidated basis wasRs 25861.73 cr an increase of 68.3% over Rs 15370.06 cr for FY21. Resultantly Netprofit increased by 50.3% to Rs 9391.99 cr from Rs 6247.07 cr. The increase in the netprofit is significant given that we have absorbed an additional royalty of Rs 5084 crfollowing the Mines and Mineral Regulation (Development) Act.

The company paid the highest ever dividend of Rs 14.74 per share whichworks out to a 46% payout against an EPS of Rs 32.07.

Major developments in the company

Demerger of steel plant: Our strategic business reorganisation in theform of demerging our 3 million tonnes NMDC Iron & Steel Plant (NISP) NagarnarChhattisgarh into NMDC Steel Limited is progressing well. We have obtained the NoObjection Certificate from the stock exchanges. Our application for demerger has beenaccepted by the Ministry of Corporate Affairs and as directed by them we have held themeetings of Unsecured creditors and Shareholders of our company in June 2022. We expect tocomplete the demerger within FY23.

Expansion at Bacheli mine: We have envisaged the fifth line ofscreening and the downhill conveyor augmentation at Bacheli mine but the project has beendelayed with a problem with the consultant. Now we have appointed a new consultant andthe project work has been resumed. We expect these facilities to be ready in FY23 and addabout 25 lakh tonnes of production. (This info is from the concall transcript.25 lakh tonsis a per annum number or for FY23?)

Renewal of Kumaraswamy mine: Our lease at Kumaraswamy mine from theKarnataka government has been renewed in June 2022. This mine has a production capacity of70 lakh tonnes of iron ore per annum.

Dismantling of e-auctions: So far our sales in Karnataka are routedthrough e-auctions conducted by the Monitoring Committee appointed by the Supreme Courtand the Monitoring Committee has been retaining 10% of the sales proceeds towards thereclamation and rehabilitation plan. Further Monitoring Committee receives the salesproceeds and then transfers them to us. In the process our monies are stuck with theMonitoring Committee for a considerable time. Through a recent judgment Supreme Court hasdone away with that requirement to allow a level playing field with other states. Thiswill help simplification of our sales in the state and cut down the working capital cycle.

Going forward

On the back of the developments mentioned above at the Bacheli mineKumaraswamy mine and other mines we target production of 460 lakh tonnes of iron ore inFY23. This volume is about 10% higher than in FY22 and would provide a cushion againstpossible pressure on pricing and we hope to maintain and surpass the top line again inFY23. Dismantling the e-auctions through Monitoring Committee in Karnataka would be anadditive to both the top line and bottom line.

I am grateful to all the shareholders Board members employeescustomers suppliers banks regulatory bodies governments and all stakeholders forsupporting the company in its progress.

Yours Sincerely

Sumit Deb
Chairman and Managing Director

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