NMDC vs GMDC – Financials, Future Plans and More

NMDC vs GMDC: In a world where resources are limited but human needs are infinite, the demand for minerals is continuously increasing. Mining activities continue to be important in extracting the minerals needed to meet demand. In this article, we will look at NMDC and GMDC as two companies dealing with the complex and highly regulated mining and minerals sector.

NMDC vs GMDC – Stock Analysis

NMDC

Company Overview

National Mineral Development Corporation (NMDC) was established in 1958 and is a Navaratna company under the Ministry of Steel. The President of India owns 60.79% stake in the company. The company’s main business is iron ore extraction.

segment analysis

The majority of NMDC’s revenue comes from iron ore sales. Madhya Pradesh, Chhattisgarh, Karnataka, Telangana and Jharkhand are among the Indian states where the company has a physical presence. The company owns a 26% stake in ICVL in Mozambique and a 92.32% stake in Legacy Iron Ore in Australia.

GMDC

Company Overview

The company was founded in 1963. Gujarat Mineral Development Corporation (GMDC) is one of India’s largest lignite producers, with the Governor of Gujarat owning 74% of the company. The mineral is commonly used to generate electricity or for other industrial purposes and is sold to a variety of industries including textiles, chemicals, ceramics, bricks and captive power.

segment analysis

In FY23, revenue was earned from the sale of products including lignite (88.30%), bauxite (1.56%), thermal power (6.13%), renewable energy (3.90%) and other projects (0.11%). They generate all their revenue within India.

industry analysis

India’s mining and minerals industry is one of the world’s largest producers. The industry is affected by global supply and demand fluctuations. An infrastructure boom could help the industry increase production capacity, and excess demand over supply could help push prices up.

After years of restrictions, the Indian government is considering granting licenses to the private sector. The mining industry is undergoing a transformation as the government allows 100% FDI. This will benefit investment and technology to mine mines efficiently while avoiding environmental leaks.

NMDC vs GMDC – Finance

Let’s compare and fundamentally analyze the two companies.

Sales and Net Profit

In FY23, the revenue of NMDC and GMDC was Rs. 17,666.68 crore and Rs. 3,501.44 crore with a CAGR of 9.8% and 16.82% respectively. Over the past five years, GMDC has outperformed NMDC in terms of revenue growth. It is worth noting that GMDC’s increase in sales was driven by price increases in the lignite segment.

In FY23, the net profit of NMDC and GMDC was Rs. 5,537.72 crore and Rs. The CAGR was 4.54% and 53.33%, respectively, reaching $1,215.73 million. Profits for both companies have fluctuated over five years, with GMDC recording a negative in FY21 but rebounding to positive the following year. Here GMDC is growing faster than NMDC.

profit

In FY23, NMDC’s OPM was 34.25% and GMDC’s was 38.49%. The average for 5 years was 49.66% and 20.53%. Both companies’ returns are excellent, but NMDC’s OPM is better than GMDC’s. NMDC OPM is decreasing compared to the previous year.

FY23 NPM was 31.35% for NDMC and 34.72% for GMDC. Excluding FY21, NMDC is seeing similar declines as OPM. Following low margins during the COVID period, GMDC NPM is showing an upward trend, with other income growing 151.51% year-on-year to KRW 39.357 billion in FY23 to help margins.

rate of return

As of FY23, GMDC’s RoE was 22.90% and NMDC’s was 27.26%. NMDC and GMDC averaged 24.03% and 8.10% over five years. Compared to GMDC, NMDC has a higher ROE. Unlike NMDC’s downward trend, GMDC’s returns have improved.

In FY23, the RoCE of NMDC and GMDC was 36.04% and 31.31%, respectively. The average for 5 years was 33.36% and 10.86%. Nonetheless, a higher RoCE than RoE means more effective use of debt financing, which is good for the business.

GMDC has lower returns than NMDC, but higher returns were expected due to NMDC’s higher base effect than previous years.

debt analysis

Both NMDC and GMDC have excellent financial stability and little debt. A business with little debt can grow, and having more working capital can help keep debt limited.

The FY23 interest coverage ratios of NMDC and GMDC were 102.64% and 729.07%, respectively. This ratio makes creditors and investors more comfortable because it equals the number of times the interest can be covered by profits.

NMDC and GMDC – key indicators

Let’s take a look at some of the key indicators of NMDC and GMDC.

Future Plans

NMDC

• NMDC plans to increase its production capacity from 67 million tonnes per annum (MTPA) in FY26 to 100 MTPA in FY30 through brownfield expansion.
• With the development of greenfield projects such as Deposits 13 and 14, the company expects to benefit from its joint venture with Chhattisgarh Mineral Development Corporation.
• NMDC Steel Plant (NISP)’s greenfield steel plant located in Chhattisgarh is almost complete and starts operations with a capacity of 3.0 MTPA.
• Besides constructing the beneficiation plant at Bacheli, the company is currently constructing a 1.5 million pipeline connecting Bacheli with Nagaragar. This expansion will allow iron ore to be transported more cheaply to any location.

GMDC

• The company is working to bring six additional lignite mines into operation, which will help it improve its market share, production and positioning. Leveraging the cost of lignite can help in cost reduction and target around 50% share of the Gujarat market.
• By strengthening its beneficiation capacity, the bauxite portfolio can further diversify its revenue streams with an estimated investment of $1.5-4.5 billion.
• The company is diversifying its business into solar energy and upgrading its thermal systems to contribute to a greener future. They expect cost savings and financial success from this plan.
• Drone technology is used to explore minerals such as lithium, copper, gold and other minerals in harsh environmental conditions. It can be used to find minerals faster and more effectively, which leads to better mineral discoveries.

conclusion

We are nearing the conclusion of NMDC and GMDC. Although these two companies have potential, they also have limitations in their fields and are prone to making changes to a greener future.

But a greener future requires more minerals, which could be either an opportunity or a challenge for the industry. What do you think about these companies? Does it have potential? Let us know your thoughts in the comments section below.

Written by Santosh

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