gujarat mineral development corporation ltd Management discussions

2022-23

ECONOMIC OVERVIEW

The global economy continues to be bu eted by challenges, shaped by the Russia-Ukraine con ict, a cost-of-living crisis, and the slowdown in China. Forecasts project global growth to slow to 2.7% in 2023. More than a third of the global economy will contract, while the three largest economies - the United States, the European Union, and China will continue to stall. For many, 2023 looms like a recession.

Indian economy appears to have moved on after its encounter with the pandemic, staging a full recovery in FY22 ahead of many nations and positioning itself to ascend to the pre-pandemic growth path in FY23. Despite strong global headwinds and tighter domestic monetary policy, if India is still being expected to grow signi cantly - and that too without the advantage of a base e ect its a re ection of Indias underlying economic resilience; of its ability to recoup, renew and re-energise the growth drivers of the economy. There have been quite a few positives like the rebound of private consumption that has given a boost to production activity, higher Capital Expenditure (Capex), near-universal vaccination coverage enabling people to spend on contact-based services, such as restaurants, hotels, shopping malls, and cinemas. Balance sheets of the Corporates have strengthened, well-capitalised public sector banks are ready to increase the credit supply and the credit growth to the Micro, Small, and Medium Enterprises (MSME) sector.

The Ukraine-Russia con ict has pushed up food prices on world markets, despite the recent easing after the Black Sea grain deal, causing serious hardship for low-income households worldwide, and especially so in low-income countries. The frequent lockdowns in China under its zero COVID policy have taken a toll on the economy. Furthermore, the property sector, representing about one- fth of economic activity in China, is rapidly weakening.

Increasing price pressures pose a grave threat to current and future prosperity through squeezing real incomes and undermining macroeconomic stability. Central Banks around the world are now focused on restoring price stability, and the pace of tightening has accelerated sharply.

The geopolitical re-alignment of energy supplies stemming from the war is broad and permanent. Winter 2022 was challenging for Europe, but winter 2023 is likely to be worse. For many emerging markets, the strength of the US$ is stultifying, leading to tightening nancial conditions, and increasing the cost of imported goods. The Dollar was at its highest level since the early 2000s and continues remaining high. Too many low-income countries are in or close to debt distress. What is the need of the hour to avert a wave of sovereign debt crisis is progressing toward orderly debt restructurings - through G2Os Common Framework for the most a ected. Time will be of the essence.

WORLD ECONOMIC OUTPUT

The outlook remains uncertain as nancial sector turmoil, high in ation, ongoing e ects of Russia-Ukraine imbroglio, and three years of COVID rule the roost.

The baseline forecast is for growth to fall to 2.8% in 2023, before settling at 3.0% in 2024. Advanced economies are expected to see an especially pronounced growth slowdown diving to 1.3% in 2023. Alternatively global growth might decline to about 2.5% in 2023 with advanced economy growth nosediving to below 1%. On the back of lower commodity prices, Global headline in ation in the baseline is set to fall from 8.7% in 2022 to 7.0% in 2023. Underlying (core) in ation is likely to decline more slowly. In ation is unlikely to return to target before 2025 in most cases. The natural rate of interest will stay important for both monetary and scal policy as it is a reference level to gauge the stance of monetary policy and a key determinant of the sustainability of public debt. The evolution of the natural rate of interest across several large advanced and emerging market economies will have to be closely monitored. Public debt as a ratio to GDP has soared across the world during COVID-19 and is expected to remain elevated. The e ectiveness of di erent approaches to reducing debt-to-GDP ratios will need to closely examined. Supply-chain disruptions and rising geopolitical tensions have brought the risks and potential bene ts and costs of geoeconomic fragmentation to the centre of policy debates. Attention needs to be paid to how fragmentation can reshape the geography of foreign direct investment (FDI) and how it might a ect the global economy.

GLOBAL MINING SCENARIO

As the global economy sets course for a carbon-free future, the most important consideration is whether mining and metals companies will be able to supply the growing quantities of materials needed for wind turbines, solar panels and electric vehicles that will play key roles in the transition to a net-zero world.

According to the International Energy Agency (IEA), mineral requirements for clean energy technologies would need to quadruple by 2040 to reach the Paris Agreement goal of a temperature rise of well below 2 degrees centigrade. The IEA further opines that an even faster transition to hit net-zero globally by 2050 - would require six times more mineral inputs in 2040 than today.

While the verdict is yet to be out, Executives representing a range of mining and metal production activities, ranging from steel to coal to Lithium seems con dent of the sector being able to meet these demand projections. A key reason why mining and metals executives are con dent about the future is that they regard decarbonisation plans as a growth opportunity, and not merely a cost of doing business. The speci c opportunity over the next ve years is to transform the carbon footprints of operations through technology investments

For the mining and metals industry, the challenge is unique. It must quickly increase production to supply global business with the materials it needs to shift to a carbon-free future. Yet it must do so without harming the environment, while restructuring its own operations so that they consume less carbon. The responsibility lies in guiding the industry onto a more sustainable path and to convince a sceptical audience it is being done so in a sustainable fashion.

INDIAN ECONOMY

India is forecast to witness a growth of 6.0 - 6.8% in 2023-24, depending on the trajectory of economic and political developments globally. The Economic Survey of 2022-23 has projected a baseline GDP growth of 6.5% in real terms for FY24.

The optimistic growth forecasts stem from a number of positives like the rebound of private consumption given a boost to production activity, higher Capital Expenditure, near-universal vaccination coverage enabling people to spend on contact-based services, such as restaurants, hotels, shopping malls, and cinemas, as well as the return of migrant workers to cities to work in construction sites leading to a signi cant decline in housing market inventory, the strengthening of the balance sheets of the Corporates, a well-capitalised public sector banks ready to increase the credit supply and the credit growth to the Micro, Small, and Medium Enterprises (MSME) sector to name the major ones.

Despite the three shocks of COVID-19, the Russia-Ukraine con ict and the Central Banks across economies led by Federal Reserve responding with synchronised policy rate hikes to curb in ation - leading to appreciation of US Dollar and the widening of the Current Account De cits (CAD) in net importing economies, agencies worldwide had projected India as the fastest-growing major economy at 6.5-7.0% in FY23.

The Economic Survey 2022-23 that was tabled in the Parliament projects a baseline GDP growth of 6.5% in real terms in FY24. The projection is broadly comparable to the estimates provided by multilateral agencies such as the World Bank, the IMF, and the ADB and by RBI, domestically.

Growth is expected to be brisk in FY24 as a vigorous credit disbursal, and capital investment cycle is expected to unfold in India with the strengthening of the balance sheets of the corporate and banking sectors. Further support to economic growth will come from the expansion of public digital platforms and path-breaking measures such as PM Gati Shakti, the National Logistics Policy, and the Production-Linked Incentive schemes to boost manufacturing output.

The upside to Indias growth outlook arises from limited health and economic fallout for the rest of the world from the current surge in Covid-19 infections in China and, therefore, continued normalisation of supply chains. Besides, the in ationary impulses from the reopening of Chinas economy turning out to be neither signi cant nor persistent, recessionary tendencies in major Advanced Economies (AEs) triggering a cessation of monetary tightening and a return of capital ows to India amidst a stable domestic in ation rate below 6%, along with an improvement in animal spirits and providing further impetus to private sector investment have contributed signi cant to the positive outlook.

COAL SECTOR PERSPECTIVE

The Ministry of Coal, Government of India has conceptualised an Action Plan for FY 2023-24 with the goal of achieving Aatmanirbhar Bharat through enhancing the production, e ciency, sustainability, new technologies etc. in the coal sector.

The Action Plan is an ambitious, well-crafted roadmap that covers a variety of areas such as Coal Analytics, Private Investment, Infrastructure Projects, Safety in Mines, Technology push for Coal and Sustainability in the Coal Sector.

Under Coal Analytics, the Ministry has nalised the total coal production target of 1,012 MT for FY 2023-24. It is taking various steps towards increase coal production and e ciency like Mining Developers cum Operators (MDO) for the operationalisation of Coal India Limited (CIL) Mines/Blocks, formulating a coking coal strategy to enhance coking coal availability in the country and thus reducing imports and empanelling third party coal sampling agencies for both power and non-power coal consumers.

Regarding private investment, the CAPEX and Assets Monetisation targets for FY 2023-24 have been projected at 21,030 Crore and

50,118.61 Crore respectively. During FY 2022-23, the Ministry signed agreements for a total of 23 coal mines having cumulative PRC of 33.224 MTPA and these mines are expected to generate an annual revenue of 4,700.80 Crore calculated at PRC (Peak Rated Capacity).

In consultation with Ministry of Railways, Ministry of Coal is closely monitoring the new railway line projects that are critical for coal evacuation and is undertaking mapping of Coal Sector on National Monetisation Pipeline (NMP) and use of Dashboards on NMP. Since logistics is a crucial component of the coal supply chain, the Ministry of Coal has adopted a Coal Logistics Policy/Plan for e ective and environmental-friendly transport of coal.

Towards restoring the ecological balance in the mined-out areas, mine closure activities will begin this year at a signi cant number of CIL and Singareni Collieries Company Limited (SCCL) mines as per the guidelines issued by Ministry of Coal in October 2022 (Scienti c Closure of Closed/Abandoned/Discontinued Mines before Year 2009)

A Monitoring framework will be soon circulated for coal companies towards implementation of Technology Roadmap in digitalisation & integration of sub-systems, use of new technology (Drone, Remote sensing), and blast-free coal mining towards promoting e ciency, safety and environment. Towards incorporating clean coal technology, various initiatives like Coal to Hydrogen, Coal & Lignite gasi cation, CBM/CMM, etc. are being undertaken.

Coal production needs to progress hand-in-hand with environmental protection, resource conservation, caring for society and measures to protect our forests and biodiversity. Greening Initiatives, Development of Eco-parks/Mine Tourism, Gainful Utilization of Mine Water/Overburden (OB) and Energy-E cient Measures are some of the major identi ed sustainable activities identi ed by Ministry of Coal.

INDUSTRY STRUCTURE AND DEVELOPMENT Coal

Coal is the most important and abundant fossil fuel in India. It accounts for 55% of the countrys energy need. The countrys industrial heritage was built upon indigenous coal.

Commercial primary energy consumption in India has grown by about 700% in the last four decades. The current per capita commercial primary energy consumption in India is about 350 kgoe/year. Driven by the rising population, expanding economy and a quest for improved quality of life, energy usage in India is expected to rise. Coal is expected to continue to occupying centre-stage in Indias energy scenario.

As a result of explorations carried out up to the maximum depth of 1200m by the Geological Survey of India (GSI), Central Mine PLanning & Design INstitute LImited (CMPDI), SCCL and Mineral Exploration Corporation Limited (MECL), etc., a cumulative total estimated coal reserve (resource) of the country as per the Coal Inventory published by GSI, as on 01.04.2022, is 361411.46 million tonnes (MT). Hard coal deposits, spread over 27 major coal elds, are mainly con ned to Indias eastern and south-central parts. Through a sustained programme of investment and greater thrust on application of modern technologies, the all-India production of coal was raised to 778.21 million tonnes (MT) in 2021-22. The all-India production of coal during 2022-23 was 893.08 MT, with a growth of 14.76%.

Out of the total coal demand of the country, nearly 20-25% of the demand is met from import. Import of coal mainly comprises coking coal and higher grade (GCV) coal, since their domestic production is limited due to either scarce reserves or non-availability. Power sector imports coal for imported coal-based (ICB) power plants, while domestic coal-based (DCB) power plants import them for blending purposes. Traders and Industries also import coal for commercial and logistic considerations, since Coal is under Open General License (OGL).

Bauxite

India is ranked 8th globally in terms of bauxite reserves and has high quality metallurgical grade bauxite deposits with close to 5 Billion Tonnes reserves. Bauxite is the ore from which Aluminium is produced. Aluminium is a strategic metal, and is quite critical for all the key sectors that will aid in India becoming a mega economy - right from building and infrastructure to aerospace, electrical distribution and more. Aluminium is essentially required for proposed infrastructure development, power transmission, manufacturing, transport and defence. Further, as per the Paris Convention, aluminium is a critical metal, essentially required for achieving low-carbon footprint and renewable energy generation.

The per capita consumption of aluminium in India is quite low at about 2.5 kg, compared to the world average of about 11 kg and Chinas 24 kg, while many developing countries have already reached 8 kg. Despite possessing one of the worlds largest deposits, this possible key to fast-track Indias development is being ignored as bauxite mining is yet to be prioritised. The abundant bauxite deposits are largely untapped, and the country is yet to leverage this natural wealth for economic growth and development.

The ambitious growth plan of India, with the vision of a US$5 trillion economy, Aatmanirbhar Bharat and initiatives taken for mega infrastructure projects, will need a huge commodity consumption of steel, aluminium, cement, power and other mineral products. Our domestic aluminium requirement needs to be boosted from the present levels of 4 million tonnes to 12 million tonnes, which will require an increase in bauxite mining from current levels of 24 million tonnes to at least 72 million tonnes.

India not only needs to pick up pace on auctioning of bauxite mines, but also increase the capacity of its existing mines. Seamless increase of production from existing mining lease areas by at least 50% can be an immediately pro table solution.

Lignite

India has signi cant deposits of lignite and sub-bituminous coal. The total estimated lignite coal deposited is 1,588 MT in the tertiary basin in India. Lignite deposits are mainly distributed in southern and western regions of the peninsular shield, mainly in Tamil Nadu, Puducherry, Kerala, Gujarat, Rajasthan, and Jammu & Kashmir. Substantially matured Lignitic-sub-bituminous coal, is found in northeastern part around Meghalaya, Assam, Nagaland, Sikkim and Arunachal Pradesh. Kerogen and Syngas from lignite are emerging as the near future clean green energy technologies to ful l the increasing energy demands.

India Lignite Production: FY: Year to Date data was reported at 6.720 MT in May 2023. This records an increase from the previous number of 3.200 MT for Apr 2023. India Lignite Production: FY: Year to Date data is updated monthly, averaging 19.975 Mt from Apr 2019 to May 2023, with 50 observations. The data reached an all-time high of 47.370 MT in Mar 2022 and a record low of 2.351 Mt in Apr 2020.

Indias total lignite requirement remained around 45-50 MT during FY19-FY23. Demand for Lignite is expected to remain stable in the medium term, driven by demand from thermal power, textile, steel, cement, and other industries. Moreover, India is heavily dependent on imported coal which is a substitute for lignite. In order to reduce the dependency on import of coal, government is focussing on development of lignite and coal mines domestically.

GOVERNMENT POLICIES

The Ministry of Coal has approved the ‘Exploration of Coal and Lignite Scheme with an estimated expenditure (from 2021-22 to 2025-26) of 2,980 Crore. The scheme will explore and estimate coal resources in the country, facilitating the preparation of detailed project reports for coal mining. The approval will provide an outlay of 1,650 Crore for promotional (Regional) exploration and 1,330 Crore for detailed drilling in Non-Coal India Limited areas.

The Exploration of Coal and Lignite Scheme will play a crucial role in assessing coal reserves, auctioning new coal blocks, and recovering costs from successful bidders. It will consist of two stages: 1. Promotional (Regional) Exploration and 2. Detailed Exploration in Non-Coal India Limited blocks. A new coal-linkage policy, UTTAM (Unlocking Transparency by Third Party Assessment of Mined Coal) Application for coal quality monitoring, has been initiated towards ensuring adequate supply of fuel to power plants through reverse auction. It will also look in Online Coal Clearances System, Coal Allocation Monitoring System (CAMS) and the opening-up of commercial coal mining With the Honble Prime Ministers announcement on new climate targets at COP26, India has taken a big step with ‘Panchamrit Strategy towards cementing its commitment to clean energy. Since coal will continue playing the role of primary fuel for power generation in our country for the time being, Ministry of Coal, in line with the commitment, has already moved forward with a comprehensive Sustainable Development Plan. Action has already started for its speedy implementation. Emphasis is being majorly put on Sustainable Development in coal mining, and taking care of its environmental and social impacts.

First Mile Connectivity (FMC) is other major initiative by coal companies to minimise environmental pollution, where coal is being transported through conveyor belt from Coal Handling Plants to Silo for loading. This process eliminates movement of coal through road. Taking a big step, 39 such projects have been planned to be commissioned by 2023-24 with an investment of over 13,000 Crore Similarly, Surface Coal Gasi cation Projects have been planned for Syn Gas production to be used further either for production of Methanol/Ethanol, Urea or Petrochemicals. This will be a way forward for use of dry fuel as green coal with relatively lesser carbon footprint and environmental pollution. Use of LNG to substitute diesel consumption in mining and coal transport equipment has also been planned on a massive scale. This technology will be replicated shortly in coal transporting dumpers in the rst phase for substantial reduction in carbon footprint.

PERFORMANCE OF GMDC Lignite

GMDC has the distinction of being Indias No.1 Merchant Seller and the 2nd largest Producer of Lignite, playing a signi cant role in fueling the industrial development of Gujarat, particularly the MSME sector. Gujarat is rich in deposits of high-grade lignite. Currently, Lignite is the major contributor to GMDCs revenues, and we are mining it at Bhavnagar, Tadkeshwar and Rajpardi (South Gujarat), Mata no Madh and Umarsar (Kutch). Were a crucial supplier of Lignite to the industrial units operating in the State of Gujarat. Our customers span from major manufacturers of Textiles, Chemicals and Ceramics to small-time brick manufacturers. Organisations, who traditionally used blended fuel in manufacturing, have discovered Lignite to be a good alternative, despite its lower calori c value. With our e orts at timely and cost-e ective supply of Lignite, we enable organisations to save on coal transportation costs and the state to save on critical foreign exchange out ow. Thus, helping reduce dependence on coal imports immensely and steering the nation towards achieving self-reliance in manufacturing. We have been witnessing an ever-increasing demand for Lignite from the MSME sector. To meet the increasing demand, we are seeking to scale up Lignite production capacity, from 08 MTPA to 10 MTPA. GMDC is currently catering extensively to the fuel requirements of industries in Gujarat, nearly 25% of the states total demand for lignite. Having embarked on a journey of deepening the lignite business by augmenting capacity of lignite production, we are looking to escalate the Lignite production from open cast mines to serve 30-35% of the states market. Further, GMDC is working towards operationalising 6 new lignite mines. It will help expand our production, place us in a higher orbit of growth, strengthen and expand the market position and contribute signi cantly towards the achievement of the goal of capturing the mine to market value chain. The upcoming Lignite mines will also help increase Gujarats production capacity, reduce the cost of electricity, leverage the buoyancy in lignite prices, and serve the captive power plants and customers in a better way. With this, we plan to reach to nearly 50% of the Gujarat market. We have also onboarded the globally reputed consultancy rm, Deloitte to help fast-track the new lignite mining projects.

Bauxite

GMDC operates Bauxite mines in Gujarat. India has the 8th largest Bauxite reserves, around 5 Billion Tonnes.

Were exploring new avenues in diversi ed sector in bauxite and other allied industries by value addition of plant and non-plant grades of bauxite. Towards further expanding our product portfolio, were developing capabilities for bene ciation of Bauxite. Two Bauxite bene ciation plants are expected to be set up, with investments between 15 Crore and 45 Crore.

Our operations are located in districts of Kutch as well as Devbhoomi Dwarka. The Bauxite deposits of Gujarat are clustered deposits with numerous pocket deposits present in near-by vicinity. We are currently mining nine Bauxite deposits, of which eight are in Kutch and one is in Devbhoomi Dwarka. Reserves of plant-grade bauxite and non-plant grade bauxite are found in Kutch as well as Devbhoomi Dwarka. In FY 2022-23, we produced 1.91 lakh MT Bauxite from our operating mines (Gadhsisa Group of Bauxite Mines) in Kutch district and have produced 1.38 lakh MT Bauxite from our Mevasa Bauxite mines in Devbhoomi Dwarka district. Bauxite sales were 2.56 lakh MT during FY23. At GMDC, we are fully equipped to ensure the availability of Aluminium, and thus help reduce dependence on the import of Bauxite. Steering the nation towards self-reliance, helping realise the vision of an Aatmanirbhar Bharat.

Power Generation

GMDC has a sizeable presence in the energy sector. Our Power Division has a diversi ed portfolio of thermal power projects and renewable power generation projects comprising wind and solar power. A total of 1,142.02 MUs of power were produced in FY 2022-23. Power generation is a vertical in our portfolio. Lignite from our mines situated nearby at Panandhro, Mata No Madh and Umarsar are transported to it.

Akrimota Thermal Power Station (ATPS)

The Generation as well as PLF of ATPS for 2022-23 is 822 MUs and 38% PLF respectively. The power plant has seen signi cant improvement in its operations. In order to take an informed decision, M/s A T Kearny has been taken on board as strategic advisor to take an informed decision in respect of power plant.

Wind Power

GMDC currently has 200.9 MW Capacity of Wind Power Projects and are situated at di erent locations in Gujarat. The CUF of wind projects has reported 18 % in the FY 2022-23 with total Generation of 313 Million Units.

Solar Power

GMDC has 5 MW Solar Power Project is situated at Panandhro Lignite Project. The solar power has generated 7.02 Million Unit Power with CUF of 16% in the year 2022-23.

Towards adding scale and strength, we have initiated ways of working with an array of globally-reputed strategic advisory consultancies and project management consultants. The strategic rm of M/s. A T Kearney has already been onboarded to help us take strategic decisions in improving capacity utilisation of the lignite-based thermal power project, and give better direction to our forward integration initiatives. A much-needed restructuring exercise was undertaken, and one of the key decisions taken involved upgrading systems at the thermal stations, and the appointment of an advisor. Were striving to cut down on our daily losses from the thermal power plant, turn it around, improve its performance and make it into a pro table asset. Power generation e ciencies have been implemented. By taking green initiative of wind and solar power generation, we reduced 4,214.72 tonnes of CO due to generation of green energy.

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Over the years, we have generated 4303184 MWhr of Green Energy.

Exploration Activities

GMDC has begun using a drone-based Airborne Magnetometer known as Magarrow for Geophysical survey for mineral prospecting and exploration in Ambaji. We believe that mineral prospecting and exploration can greatly bene t from this new technology, especially during conduction of geophysical surveys in hilly and inaccessible areas. Aerial intelligence in mineral exploration, mining & infrastructure takes incorporation of drones into the support system to the next level.

“Magarrow” is a UAV-enabled drone-based technology equipped with non-radioactive laser-pumped caesium vapour with a total eld scalar magnetometer to map shallow and deep-seated virgin mineral deposits ranging up to 600-800m below from the ground level. This drone-based technology will bring about a signi cant shift in the current methods of mineral prospecting and revitalise mineral discoveries in the country, particularly green eld deposits of Lithium, Copper, Gold and other Critical minerals. Mineral deposits can be located faster and more accurately in many inaccessible areas, harsh terrains, forests, deserts, farmlands, etc., without physical human entry into these areas. As it is a drone-based technology, there will be no need to build approach roads or disturb the ecology and environment of the mineral prospect areas. Additionally, mineral prospecting projects which traditionally take up 3 - 4 years can be completed within 5 - 6 months, with greater e ciency and accuracy, using this technology. Further, we are aiming to boost our non-lignite businesses to at least 50% of income generation. Some of the other metals that we are planning to explore and mine are Manganese, Copper, Lead and Zinc, near Ambaji.

New Coal Blocks

Fuel security was an issue for the Gujarat government. There was a demand from the state to secure our resources upstream. In November 2022, six teams formed by GMDC visited seven states to study 38 coal blocks.

We emerged as the highest bidder for two coal mines in Odisha in the recently concluded commercial coal block auction by the Ministry of Coal, Government of India. We won the bids for Odishas Burapahar block in Sundargarh District, having a geological reserve of 548 million tonne, and the Baitarani (West) block in Angul District, a geological reserve of 1,097 million tonne.

The Baitarani (West) block (in Angul district), the bigger of the two blocks, has 13% forest cover, and coal reserves of 1,097 million tonnes, of which 468 million tonnes can be mined through open pit mining. This project will require a capex of 4,125 Crore The estimated coal reserves in the Burapahar block (in Sundargarh district), with 33% forest cover is about 548 million tonnes. This project will need a capex of 950 Crore We plan to commission these mines in the next three years, towards which we would probably need to invest in excess of 5,000 Crore in the next 5-7 years. We are committed to utilising our resources and expertise to develop these blocks to their fullest potential while ensuring the highest standards of safety and environmental sustainability.

These two projects are projected to become our backbone. The net worth of GMDC which currently stands (as on 31st March, 2023) at

5,759 Crore, will increase by four times by 2027-28. Thus, fuelling the nations energy demand and further consolidating our own position as the leading mining player in the sector.

New frontiers

There is an increased emphasis on harnessing the nations power requirements to renewable sources of energy. India receives sunshine plentifully, and it can be e ectively used to generate signi cant amounts of solar power. A key component of the solar panels is silica. This provides GMDC with a vital opportunity to execute an initiative in value addition. We are exploring avenues in the diversi ed sector in silica sand and other allied industries to manufacture solar panels.

Cement is another sector where we are poised to derive great advantages. GMDC has huge quantities of Cement grade Limestone at its Lignite blocks in Panandhro Extension, Bharkhandam and Lakhpat in Kutch district. As of 2020, India is the worlds 2nd largest cement market, both in production and consumption. Indias cement production is expected to increase, and Indian cement companies continue reporting a healthy growth in earnings and demand for the industry increased on the back of resuming construction activities post COVID-19 lockdown imposed by the government.

As a part of forward integration and envisaging enhanced demand of cement in future, we will continue exploring new opportunities for utilisation of cement grade limestone for cement industry and focussing on capacity augmentation, introduction of alternate market structures, possible diversi cation prospects, value addition and other opportunities. We are stridently moving ahead to support the high level of activity going on in real estate and the Governments futuristic push towards creating smart cities and urban infrastructure. Given the huge limestone resources and easy availability of fuel in the form of lignite, we seek to partner with a few large cement manufacturers whom we can provide an assured supply. This will provide them with the locational advantage of dealing with an organisation like GMDC, who has both the resources, fuel and limestone.

Financial Performance

GMDC remains committed to maintaining the momentum by further enhancing shareholder value in the future and will continue to drive innovation, expand its market presence, and create long-term value for all stakeholders. We are scaling new horizons and peaks in growth. Our recent nancial performance has summitted a new high our highest achievement ever. We will continue implementing robust growth strategies and expanding our frontiers as we keep progressing on the journey of transformation. We have also achieved an exceptional nancial performance in the fourth quarter of FY23. This remarkable achievement is a testament to the dedication and unwavering commitment of our team.

The following table depicts GMDCs nancial performance during past three nancial years:

( in Crore)

Particulars	2020-21	2021-22	2022-23
Turnover	1,343	2,732	3,501
Profit Before Tax and before impairment	52	777	1,657
Profit After Tax	(37)	445	1,212
Dividend (%)	10	215	455

For the details of signi cant changes in key nancial ratios, along with detailed explanation refer to Note No. 2.49 of Note to the Standalone Financial Statements forming part of the annual report.

Operational Highlights

As a part of our journey ahead, we have partnered with the globally-reputed Boston Consulting Group (BCG) to undertake an extremely important strategic transformation initiative that will cover all sectors of our operations, christened Project Shikhar. Through implementation of Project Shikhar, we are seeking to achieve a breakout growth and multiply revenues manifold, unlock e ciency gains, enable future-proo ng our growth through portfolio diversi cation, become a pan-national player in the Mining and Minerals sector, generate employment across various regions, be an employer of choice and achieve best-in-class operating e ciencies to drive EBITDA uplift. With Project Shikhar we aim to further raise our performance bar, be the most competent in the categories and sectors we operate in, and enable us be at par with globally-benchmarked organisations. The strategic rm, A T Kearney has been onboarded to help us take strategic decisions in improving capacity utilisation of our lignite-based thermal power project, that was underperforming till recently. We managed to cut down on the daily losses from the thermal power plant, turn it around, improve its performance and made it into a pro table asset. Power generation e ciencies have been implemented. Parallelly, Deloitte is exploring ways to fast-track our new lignite mining projects.

Lignite, one of the key sources for generating thermal energy, comes along with contaminants like Sulphur and Pyrites that impact the environment. Removing these contaminants, technically regarded as washing Lignite, will reduce the pollution load. We are exploring opportunities to build a Pyrite and Sulphur removal plant that will use the advanced dry technology. We believe the needs of the environment are as important as the need for energising progress and development-driven to realise the vision of Honourable Prime Minister of making India a Green Energy nation.

OPPORTUNITIES AND THREATS FOR GMDC Opportunities

GMDC enjoys a large net worth base, healthy pro tability, comfortable debt coverage indicators and strong liquidity. Plus, the majority ownership by the Government of Gujarat (GoG) provides operational ease to our mining operations.

The six new mining leases are expected to boost the Lignite production which will help in increasing our revenue. Besides this, as a result of coal prices touching historic highs in the international market, the demand in domestic industry for domestic fuel of lignite has increased manifold.

We have ventured into exploring Coal, expanding our operational geographical boundaries to the Eastern regions of the country. We recently emerged as the highest bidder for two coal mines in Odisha in the recently concluded commercial coal block auction by the Ministry of Coal, Government of India. We won the bids for Odishas Burapahar block in Sundargarh District, having a geological reserve of 548 million tonne and the Baitarani (West) block in Angul District, a geological reserve of 1,152 million tonne. Through greater geographical and product diversi cation, we can look up to Volume-backed increase in our scale of operations.

There are huge reserves of Limestone at our upcoming Lakhpat Punrajpur Mining, Panandhro Extension & Bharkandam. We are approaching various cement companies across India for setting up of Cement Plant where we will be a long-term Limestone supplier. As the market of overburden minerals like Silica Sand, Ball Clay & Bentonite is increasing, we feel that our plan of becoming a long-term supplier of the respective minerals through bene ciation, will have a larger scope in terms of our revenue, customer base and market share.

Threats

GMDC will need to factor in risks related to the coal mining operations where we do not have any prior experience. Besides this, we are facing very strong headwinds by way of regulatory risk associated with mining operations, subdued performance of thermal power plants that is restricting the overall pro tability and return indicators, and competition from imported coal.

With India accelerating towards a green future, there is a great shift from Coal and Lignite towards power being generated by alternate natural sources of energy. We are planning to incur considerable capital expenditure including expenditure on land acquisition, over the next two years (i.e., FY24 & FY25) which is expected to be funded majorly from our internal accruals with very minimal reliance on term debt. Plus, there will be rehabilitation costs around the two blocks that we have successfully bidden for in Odisha. Such large-size investment plans are expected to restrict free cash ow in medium term.

OUTLOOK

GMDC derives strength from its long track record of operations with dominant position in lignite mining business, diversi ed clientele across industries and favourable demand prospects. Our nancial performance is characterised by healthy pro tability, large cash accruals and cash ow from operations, lean operating cycle and negligible reliance on fund-based working capital limits.

Our measured drive is outlined by expansion of mining activities on various facades, namely, increasing the geographical reach within Gujarat, and diversifying operations in sectors such as renewable energy segment and value addition to the base minerals. Going forward, we have strategic plans to further deepen our presence by ramping up our capacity of lignite production by FY25. We are seeking to further expand our lignite production to 15 million tones and are looking at fresh mining leases to boost our lignite production. We do not have any outstanding term debt or fund-based working capital limits. With no major fund-based limits in the near to medium term horizon, we are con dent the overall gearing ratio will remain very comfortable till 31st March, 2024. Our CAPEX, planned over the next two years (i.e., FY24 & FY25), is likely to be funded majorly through internal accruals with minimal reliance on term debt thereby maintaining a very comfortable debt pro le.

We will seek to quickly operationalise our six new Lignite blocks, along with setting up of a lignite bene ciation plant and venturing into bene ciation of silica sand, bauxite and uorspar. Towards gainfully utilising the mined out reclaimed land, we will explore renewable power generation options in its mined-out areas. We will endeavour to actualise the possibilities of becoming a long-term limestone supplier by putting its 1,700 million tonnes of limestone reserves to commercial use. Besides these, we will also begin exploring new business opportunities for Manganese in Dist. Panchmahal and Vadodara, jointly with M/s MOIL Ltd.

RISKS AND CONCERNS

Risk is an inherent element of any business activity. GMDC is also not immune from various business and economic risks. It has to be recognised that risks are not merely the hazards to be avoided, but in many cases, they o er opportunities which create value ultimately leading to enhancement of shareholders wealth, and ensuring sustainability of operations.

Our existing mines have reserves of around 95 Million Tonnes. Out of the existing ve mines, Rajpardi mine is expected to exhaust its reserves in FY24 and the Umarsar mine in the next 4-5 years. It is essential for us to develop new mines as exhaustion of the Rajpardi mine is expected to have signi cant impact on our overall operations.

During March 2023, we were allocated two coal blocks at Odisha which we plan to develop over a period of four years in a phased manner. We expect to achieve full mining capacity by the year 2027-28. However, coal output could be constrained due to delays in obtaining environmental and forest approvals and lack of adequate logistic infrastructure.

Mining companies are required to ensure restoration of mined areas, and that some of the revenue/costs of the mining go towards strengthening of environmental resources and ecosystem resilience in adjoining areas. We are actively undertaking activities to ensure sustainable development. Increasing environmental concerns may lead to higher costs. Land acquisition is also a challenge for us as the new legal framework for land acquisition would result in higher land costs. There are few areas of concerns, including the heavy investment required in exploration and the upgradation of technology, adoption of environment-friendly technology, tackling of social issues like displacement of the population, marginalisation of local communities and economic disparities in mining areas and rehabilitation of closed mine sites.

INTERNAL CONTROL AND ITS ADEQUACY

GMDC has undertaken a much-needed restructuring exercise. Along with incorporation of e ective and prudent accounting practices, a cost-centric approach was implemented towards steady improvement on various parameters. We faced up to the challenges, and guided by the team at the helm, regained glory in a remarkably short time.

To deliver on the promises made to its stakeholders, it was imperative for GMDC to usher in transformational changes. Towards ensuring a successful and continued transformation, were continuously assessing our operations in ways that will not only address the short-term needs, but will also ensure long-term stability and viability.

We have put in place all the necessary internal controls adequately. There are in-house Internal Audit Department and internal check procedures on the purchase of items such as stores, chemicals, machinery. Similar checks and procedures are also devised for sale of goods. We follow a risk assessment process which includes identifying and assessing the risks related to various functional aspects of companys overall operations. Moreover, we have appointed independent Internal Auditors for various Projects and Head O ce, who are required to submit periodical reports to the top management and they also hold periodic discussion with the Audit Committee on important ndings and observations. We also avail the services of professional agencies and Chartered Accountants for periodical physical veri cation of assets. Our internal nancial control inter alia spans across the following aspects:

Fixed Assets Process

Intangible Assets Process

Cash and Treasury Process

Payroll Process

Revenue and Receivables Process

Purchase and Payables Process

Entity Level Controls

Financial Statements Closing Process

Departmental pre audit and internal audit

e-Governance

GMDC has adopted e-Governance for its major business processes like Sales, Despatch, Finance & Accounts, Material Management and by facilitating stakeholders by Online Order Booking, Payment and Receipt by digital mode. All the project sites are interconnected with centralised system, resultant to high level of transparency which maintain the trust and faith of our various stakeholders.

HUMAN RESOURCE AND INDUSTRIAL RELATIONS

During the year under review, there was no material development in Human resource and Industrial relations. GMDC had maintained harmonious relations between management and the employees. We remain committed towards holistic development of workplaces. GMDC organised a fun- lled and relaxing activity on International Womens Day that enabled to highlight our endeavours at inclusivity and providing equal opportunities for all. The event helped put the focus on the signi cant contributions made by our women employees and their increasing presence in the workforce. Shubharambh was another event organised by us towards enabling employees across departments to bond, and creating holistic workplaces. It was organised across various company locations to celebrate GMDCs recent stellar nancial performances. It was an evening of joy and togetherness, celebrated on the inspiring occasion of our Foundation Day, along with family members. As on 31st March, 2023, we had 1,023 employees, including Contractual employees.

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis, describing the Companys objectives, projections and estimates, contain words or phrases such as will, aim, believe, expect, intend, estimate, plan, objective, contemplate, project and similar expressions or variations of such expressions, are forward-looking and progressive within the meaning of applicable laws and regulations. Actual results may vary materially from those expressed or implied by the forward-looking statements due to risks or uncertainties associated therewith depending upon economic conditions, Government policies and other incidental factors. Readers are cautioned not to place undue reliance on these forward looking statements.