NMDC Ltd Q3 FY2024 Concall Summary

Key Takeaways

• Volume engine intact, one mine stalled: Nine-month turnover rose ~25% entirely on volume, but the Kumaraswamy mine closure is costing 20,000-30,000 tons per day while enhancement approval sits with the government.
• A large, one-off penalty was absorbed: A ₹252 Crores charge for a pre-1980 Forest Act facility at Donimalai hit Q3, yet underlying numbers were strong enough to absorb it without derailing the quarter.
• NMDC Steel ramp-up is the near-term margin story: January HR coil production jumped 50%-60% month-on-month to ~1 lakh ton, but the plant carries a ₹2,000/ton logistics disadvantage and won't break even until it hits 1.5-1.6 lakh tons per month.
• Export is a strategic option, not a current lever: A 30% export duty plus royalties and freight make domestic net realization superior even at \$200/ton; management is exploring tie-ups for the future but sees no economic case today.
• What to watch next quarter: Whether Kumaraswamy enhancement approval arrives, the pace of NMDC Steel's march toward 55% utilization by Q1 FY25, and any update on the slurry pipeline and pellet plant partnership.

Volume & Production

• Volume-driven top line: The ~25% turnover growth over nine months came entirely from higher volumes, with average realization almost flat.
• Kumaraswamy bottleneck: The mine closed after reaching 0.7 crore tons; enhancement approval from the Cabinet Committee and High-Level Clearance Committee is pending, and every day of delay loses 20,000-30,000 tons of production.
• FY24 volume call: Management expects to land very close to 47 crore tons; if Kumaraswamy enhancement comes in 3-4 days, 47 is comfortable, but if delayed, it becomes a tough call.
• FY25 volume target: Guidance of 50-51 crore tons, with upside to ~53 crore tons if one more project comes on; Kumaraswamy will add 2 crore tons, the Kirandul RWLS will add 1-2 crore tons, and a full year of the fifth line at Bacheli will add 2 crore tons.
• Beyond FY25, the big jumps wait: Major quantum leaps of 0.5-1 crore ton each from projects like deposit 11C and deposit 14 will arrive around FY2028-29; these are being tendered now and take roughly three years to execute.
• EC enhancement pathway: A 10% increase is possible without a public hearing for five-star mines and takes about six months; larger increases for deposits like 14 and 11C require a public hearing and roughly one year.
• Kirandul and Bacheli long-term scale: Both complexes are expected to reach 30-35 crore tons over 4-5 years, with the SP3 screening plant at Kirandul slightly delayed and Bacheli's production enhancement projects still being designed.

Mukherjee: "the main and it will be a onetime sudden big jump around 28-29 if we are able to award all the projects in the next financial year there is another three years to execute that is the timeline that I see."

NMDC Steel Ramp-Up

• Production inflection: January HR coil production of ~1 lakh ton was 50%-60% higher than the previous month; the blast furnace can run at 10,000 tons per day, so the binding constraint is coil rolling capacity, not hot metal availability.
• Cost disadvantage: NMDC Steel carries a logistics cost penalty of roughly ₹2,000 per ton versus peers, which weighs on competitiveness.
• Realization snapshot: HRC realization is around ₹51,200-₹51,150 per ton, while pig iron fetches ₹36,500; roughly 30,000 tons of experimental product was sold at a discount because it was not readily marketable.
• Breakeven path: The company turns profitable once production reaches 1.5-1.6 lakh tons per month, or 66%-70% utilization; management targets 55% utilization, or 5,000 tons of coils per day, by Q1 of FY2025.
• Divestment visibility is zero: The government divestment process is being driven by GCOM, not NMDC, and management has no visibility on timing or structure.

One-Off Charges & Below-the-Line Drags

• Donimalai penalty: A ₹252 Crores charge stems from facilities built in 1977 before the Forest Act of 1980; the actual amount paid was only ₹30-31 Crores and capitalized, while ~₹60 Crores was penalty and ~₹180 Crores was interest on that penalty. The hit was large but absorbed within the quarter.
• Pellet plant losses: The same penalty covered the tailing dam at Donimalai, from which tailings could not be extracted to feed the pellet plant; once paid, tailings can feed the plant and production should rise. Pellet-only losses for nine months were ₹65 Crores, not the ₹104 Crores an analyst had asserted.
• Panna Diamond drag: One year of waste mining is required with no diamonds expected during that period; the mine has never been very profitable but is the oldest in the portfolio. EC approval is expected in 3-4 days, after which mining can start.

Mukherjee: "It is a very unfortunate thing that happened... the actual amount paid is only 30-31 Crores which has been capitalized next is basically penalty of around 60 Crores and 180 Crores is interest on penalty."

Projects & Diversification

• Slurry pipeline and pellet plant: Most right-of-way issues are resolved except for two villages out of 131 km; approvals are in place and work is progressing. The pellet plant redesign will make it extendable from 0.2 crore tons to 0.6 crore tons, with a common sizing exercise nearly complete. Management hopes to commission both fully by the end of FY2025.
• Pellet plant partnership: NMDC is contemplating a partnership with private players on an O&M, revenue-sharing basis, expected to be finalized in 3 to 6 months.
• Coal blocks: Tokisud has requested land acquisition under the Coal Bearing Act route, with some apprehensions but management hopeful; Rohne has no CBA approval issue and will be expedited once CFR is made. If CBA approval comes, Tokisud could be operational by early FY2026, with 16-18 months to start mining.
• Australia operations: Mining has started through the Legacy Gold Mine, with waste mining underway and ore expected in another month or two. Management plans to invest more for faster exploration and hopes to mine other deposits within 18-24 months.
• Lithium exploration: NMDC is looking at lithium beyond India, including Australia, negotiating with working mines for an equity stake or off-take agreement, with port arrangements in a lithium-rich area and a PFS underway with partners.
• Rare earth and National Mineral Index: Management has consciously decided not to pursue rare earth and has not been asked to participate in or provide input to the National Mineral Index.

Export & Pricing

• Export economics don't work: Domestic net realization is generally higher than export realization even at \$200 per ton, because of a 30% export duty, royalty and DMF of roughly 20-21%, and freight of ₹1,400-₹1,550. Export is not economically justified at the mines-head netback level.
• Strategic, not immediate: Management is exploring the market for strategic tie-ups, but sees no economic case currently and would have to take a margin hit to export. The debate is about when to start, not whether, and it is tied to the long-term expansion plan to reach 10 crore tons and access international markets.
• Pricing outlook: Minor adjustments of a couple of hundred rupees up or down for some products are possible, but prices look fairly stable and management is optimistic.

Mukherjee: "very few times there is an economic justification of export. Yes, there is a strategic of export because when you go to 10 crore ton you would require to have access to international markets as well for which of course to be present on a long-term basis you cannot be a Fly by Night operator there, but that is an aspect that we are looking at in terms of our expansion plan, not in terms of an immediate sort of thing."

Capital Allocation & Balance Sheet

• Capex trajectory: FY25 capex is pegged around the ₹2,000 crore mark, with major jumps expected in subsequent years as large projects move from design to execution.
• Self-funded growth: Management has more than adequate cash to fund capex for the next 2-3 years and has no plans to raise capital from the market. Even with capex of ₹6,000-₹8,000 Crores and dividends at current levels of 40%-45%, cash would not be an issue.
• NMDC Steel divestment: No visibility; the process is government-driven and management has nothing to discuss at this stage.

Guidance & Commitments

Key Metrics