Gujarat Mineral Development gains ~3% on expectations of short-term impact of Covid-19

The company has entered into power purchase agreements with Gujarat Urja Vikas Nigam Ltd. for sale of electricity generated by it.

Aug 12, 2020 10:08 IST India Infoline News Service

Gujarat Mineral Development Corporation
Gujarat Mineral Development Corporation Limited (GMDC) informed the exchanges on Tuesday that the company believes the impact on its business in general and financial risks on account of Covid-19 is likely to be short-term in nature.

GMDC stock is currently trading at Rs43.10, up by Rs1.15 or 2.74% from its previous closing of Rs41.95 on the BSE.

The company is in the business of mining of Lignite, Bauxite and other minerals as well as generation of electricity by wind, solar and also lignite based thermal power projects, which are essential services as emphasized by the Government.

In the case of generation of electricity, the availability of power plant to generate electricity as per the demand of the customers is important. Therefore, GMDC has ensured not only the availability of its power plant to generate power but has also continued to supply power during the period of lockdown, considering essential service as declared by the Government.

The company has entered into power purchase agreements with Gujarat Urja Vikas Nigam Ltd. for sale of electricity generated by it. Therefore, reduction in the demand of power in the short term will have no effect on the sale of Power by the company.

In respect of Mining, lignite mining continues to be the main operation of the company which has the maximum share in its total turnover. GMDC currently operates in five operational lignite mines located in Kutch, South Gujarat and Bhavnagar region.

“The company is a critical supplier of lignite in the industrial units operating in Gujarat. Lignite is supplied not only to its own power plants for captive consumption but also to other power plants and other industries. Company is supplying lignite to its customers only against advance receipt for sale of lignite except in the case of state government PSUs. Therefore, company does not have any credit risk for the same,” GMDC said. 

GMDC expects that considering the steps taken by the Central and the State Government for the revival of economy, the impact on the demand of lignite due to lock-down may be for short duration only.

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