NMDC Ltd Q4 FY2024 Concall Summary

Key Takeaways

• Record production, profits and capex: FY24 delivered the highest-ever production and sales, PBT up ~30% YoY, and capex hit a record ~INR2,100 crores, 114% above target.
• Steel plant ramp-up is the margin story: HRC output doubled to 120,000 tons/month by May; breakeven is targeted by Q2, and the plant promises a 25% EBITDA margin at 90% utilization.
• One-off expense masks underlying strength: Q4 other expenses spiked on a INR282 crore forest land regularization payment for Donimalai, a legacy issue now resolved.
• Demand is not the constraint: Management says customers are willing to take all it can produce, with JSW receiving less than 50% of its ask; two price hikes were taken in the last two months.
• What to watch next quarter: Whether the steel plant hits its Q2 breakeven, the pace of the 800-person recruitment drive to unlock three-shift production in Chhattisgarh, and the restart of pellet plant construction after a six-month redesign halt.

Steel Plant Ramp-Up & Economics

• Production trajectory: HRC output reached 120,000 tons/month in May, doubling from the 66,000-ton breakeven level in December. The full-year FY25 target is 0.18 to 0.2 crore tons.
• Breakeven commitment: Management expects the plant to hit breakeven by Q2 FY25; the threshold is above 150,000 tons/month.
• Margin structure at scale: At 0.2 crore tons capacity, EBITDA margin is seen around 10%. At 2.5 to 2.6 crore tons (third-stage ramp-up, ~90% utilization), EBITDA margin is projected around 25% at current price levels.
• Cost advantages: The blast furnace is described as one of the biggest and therefore more efficient and cheaper; the continuous process avoids reheat energy loss. Lean manpower is planned.
• Current pricing disadvantage: Ramp-up means less made-to-order production, so the plant has been producing only vanilla grades (2062 and 10748). Average price realization is above INR49,000, with a target of INR51,000 as the made-to-order share increases.
• Distribution gap: The plant has no stockyards or stockists; all sales are ex-works, a disadvantage no other steel plant carries. A plan to deploy stock is being pursued, with a delta of INR2,000–INR3,000 per ton from land cost savings in Hyderabad and Vizag to be shared with NMDC Steel.
• Recent commissioning wins: Pulverized coal injection started May 24, promising a substantial cost reduction. A top recovery turbine commissioned days before the call will generate 15–16 MW, saving about INR100 crores a month on electricity.
• Recovery of advances: From Q2 FY25, the steel plant will start repaying advances, including a INR2,500 crore non-interest-bearing outstanding and an iron supply outstanding.

Amitava Mukherjee: "Our cost of total production of 0.1 crore tons, which we turned to service of April, is the fastest ever in any PSU. Sale, for example, did it in 260 days and RIL did it in about more than 290 days."

Volume Growth & Production Roadmap

• FY25 target: 5 crore tons production, up from the record FY24 base.
• Medium-term trajectory: 5.3–5.4 crore tons in FY26; FY27 not yet decided. The long-term ambition is to become a ~10 crore ton company by FY30–31, with all capex ready by calendar year 2030.
• Production sources: Karnataka sector contributes 1.7–2 crore tons; Kirandul ~35; Bacheli ~30–35; Deposit 4 & 13 ~10 (50% share); the rest from buying up mines, totaling ~75.
• Chhattisgarh bottleneck: April production was slightly lower YoY. Three-shift working is ready with equipment but requires ~800 new recruits; the recruitment process is on and should take another six months. The third shift at 11C has started but cannot yet operate seven days a week.
• Kumaraswamy expansion: All sanctions have come for about 150 crore tons extra. An application to take Kumaraswamy to 1 crore tons will restart next year, with an enhanced EC of 54 targeted.
• Industry context: India's iron ore production is seen reaching ~295 in FY25 (from 279), with NMDC adding 5–6, OMC adding 6–7, and Lloyds adding 5–7.

Amitava Mukherjee: "I would love to produce 1 crore ton extra and people would consume it immediately."

Capex Program & Infrastructure

• FY25 capex: Around INR2,000 crores planned. Most big projects are at the tendering stage, so first-year expenditure is expected lower at 5–10% (design, drawing, equipment ordering), picking up from next year.
• Peak capex trajectory: INR7,000–INR8,000 crores the year after next, rising to INR8,000–INR9,000 crores in 2–3 years. Management targets taking all approvals from the competent authority this financial year.
• INR50,000 crore pipeline includes: Sp-II tender (~INR1,000 cr, awarded), Tailing Dam (INR200–300 cr), Down Hill conveyor & crushing plant at Deposit-14 (INR1,500 cr), Deposit-5 crusher & conveyors (INR2,000 cr), Slurry pipeline Phase 2 Nagarnar-Vizag (INR10,000 cr), Phase 3 Kirandul-Bacheli (INR3,000 cr), new pellet plant at Vizag (INR2,000 cr), distribution network including slurry pipeline to Raipur (INR7,000–8,000 cr), stockyards (INR8,000–10,000 cr), and 10 RWLS in Chhattisgarh (INR500 cr).
• Slurry pipeline economics: Described as the cheapest transport mode, 40–45% cheaper than alternatives including driving cost. Phase 1 is under execution with pipeline laying progressing well.
• Railway doubling: Two more sections expected by July and September 2025, with the final section around December 2025. The entire doubling up to Kirandul is being done by the Railways.

Pellet Plant Restart & Redesign

• Why work stopped: Construction halted for six months because common facilities were redesigned for common sizing. The original design used only LTO as fuel; the new design adds multiple fueling including coal tar, requiring coal gasification.
• Current status: A change order has been given at the Bacheli grinding plant and the contractor has restarted. The pellet plant change order is to be given within the week, with work restarting in 15 days to a month after negotiating changes and financial implications.
• Commissioning timeline: The entire system is expected to be commissioned by December 2025.
• Tailing pond access: The INR282 crore forest land payment included the tailing dam area. The pond was designed for 85% tailings but had no access until now. A few more permissions are still needed to start using tailings.
• Economics: Cash breakeven was achieved this year but is not satisfactory. The slurry pipeline's 40–45% transport cost saving and the dual-fuel arrangement are expected to lower manufacturing cost and make pellets cheaper.

Market Demand & Pricing

• Demand outstrips supply: JSPL is asking for material NMDC cannot provide; JSW is getting less than 50% of its demand; RINL is getting 70–80%. Management states demand is never a problem.
• Pricing power: Two price hikes were taken in the last two months. The market is expected to remain buoyant, with demand "cutting."
• Export is uneconomic: Net realization from exported lumps is less than INR1,400 and fines less than INR1,200. Management says it does not make strategic or economic sense to export currently, though a call may be taken when production reaches a particular level.
• Royalty normalization: Royalty was ~47% this quarter due to previous years' outstanding being settled with integrated pricing; the normal run-rate is 42–43%.

Balance Sheet, Dividend & Other Items

• Dividend policy: Payout at 38% given the capex pipeline; management argues saving cash is advisable. In absolute numbers, the dividend will increase because profits are expected to increase substantially. The Board will take the final call on any payout ratio change.
• RINL accounting change: An ICAI advisory required bill discounting arrangements previously shown as contingent liability to be restated as a liability and corresponding debtors. Both last year and this year were restated.
• Karnataka land: INR640 crores paid and possession taken of a parcel described as worth ~INR3,000 crores, flat, with road and railway access and water available. Management has a deliberate policy of not building more steel plants after Nagarnar; consultants are engaged to find the best alternative use, but none has been found yet.
• Employee cost: Provisions have been made and the increase is expected to be about INR100 crores more. When pressed on whether wage negotiations are concluded, management said "it's almost under penalty, it's the penalty percentage," leaving the status unclear.

Amitava Mukherjee: "It's a beautiful piece of land, almost as big as parcel of almost INR3,000 crores as big a parcel as it is in Nagarnar. ... unfortunately, very deliberately we have had a policy of not making more steel plants after Nagarnar."

Guidance & Commitments

Key Metrics