Key Growth Levers For Godawari Power | NDTV Profit
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00:00Hello and welcome to the Smid show here on NDTV Prophet, I am Harsh Saita, with me is
00:18Mahima Vashrajani as well as me Eka Barve.
00:21You know first management on the channel or rather on the Smid show today is Abhishek
00:25Agarwal, ED, Godavari, Power and his part to talk to us about Q1 numbers, very strong
00:31margin increase both on a sequential as well as on a year-on-year basis, let's start off
00:35with that.
00:36Mr. Agarwal, what's led to that margin increase?
00:38Talk about Q1, first of all good morning to everyone, talk about Q1, so there was a sudden
00:45increase in the domestic pricing, due to which of course the credit prices have gone up and
00:50that was the reason you know we could perform like this in Q1.
00:54Okay and Abhishek when you talk about you know uptick in prices during Q1, but what's
00:59your outlook for the pricing for FY25 as a whole especially the next quarter?
01:05See Q2 is definitely weak, definitely Q3 should pick up probably second half once monsoons
01:13are over, but there is a trend in the steel right, Q2 is always weak because of monsoons,
01:17Q3 half is always weak and then in last six months we usually you know the demand is there
01:21and then we start performing, you know I think we still need it.
01:25So Mr. Agarwal then I want to understand that the kind of margin uptick that you've seen
01:29in this quarter, will you be able to sustain that margin overall in FY25 or there will
01:34be some kind of hit or miss there?
01:38To be honest looking at current market of course it's difficult to maintain the same
01:43running, I've always been you know market manager of course, you really need a car to
01:48go out when markets are on a go, so to comment something on it will be very difficult, but
01:52yeah hopefully we can sustain probably what we did last year, that will be a great achievement.
01:57I also wanted to you know kind of get a sense in terms of your product mix you know, I know
02:02mining, pellets, sponge ion, steel pellets, could you maybe give us a break up in terms
02:07of volumes?
02:08Okay so mining is 3 million, I know pellets is 2.7, we're taking it to 4.7 for which we
02:15have already started the work after receiving all the approvals, DRI which is sponge ion
02:20is a 0.94, steel pellets is 0.525 and rerolling is a 0.4 million, that is how my entire product
02:28mix is.
02:30And in terms of your volume guidance for FY25, are you confident that you know the company
02:35will meet the guidance, especially in the iron ore mining now that's the one segment
02:40where percentage achieved is the least and it only saw 3% uptick on a year on your basis,
02:45so what's your outlook over there?
02:47See of course, due to monsoons, it will always be for mining, but we're confident going forward
02:52we should be able to make up the loss volume.
02:55And you know in light with the Supreme Court of India's latest judgment about mining royalties,
03:00what's the kind of impact you're seeing especially on your iron ore mining, what do you expect?
03:05See of course, the biggest thing which is pending from the Supreme Court is you know
03:11or from the current date, everybody is waiting for that decision, but apart from that as
03:16if not, Chhattisgarh government hasn't taken any decision on state tax, so if anything
03:20is there, we have to comply.
03:22Okay, got it, but what would that impact be Mr. Agarwal?
03:26If you were to...
03:27It's up to the state government to decide, I really can't comment on that.
03:31Sure, okay.
03:32And just with regard to volumes, how's the volume number been for Q1 and what's the kind
03:38of overall expectation in terms of growth volume versus value for FY25?
03:44The guidance we're given for FY25, we are confident we'll be achieving it across the
03:48products.
03:49Q1, you know more or less, if you see, you know some is 5% down, some is 2% up, so more
03:55or less, the production has been as per the target and that is how we plan for the rest
04:00of the year as well.
04:01So we're confident we will achieve the desired volumes.
04:03Okay.
04:04Mr. Agarwal, what is the kind of overall capex that you've planned for FY25 and how will
04:09that be funded?
04:10Okay, so FY25, as I mentioned, a new pellet facility has started the work.
04:17So that one and the one in the minor mining along with beneficiation, so that capex will
04:22be the outgo for this year, for which the work has already started in the pellet plant.
04:26For mining, we have received part approvals for which the work has started and we are
04:30waiting for the remaining approvals to start.
04:33Right.
04:34Can you quantify that amount for us?
04:35It should be about 8 million crores for this project.
04:39Okay.
04:40And, you know, in terms of the kind of revenue potential, you know, from your different segments,
04:48in terms of iron ore, mining, pellet, integrated steel plant expansion, what is the kind of
04:53revenue uptick overall in FY25 that you're expecting?
04:58It's very difficult.
04:59I think at least 10% in the last year, we should be able to do that because of greater
05:05volumes in certain products.
05:06For example, my steel billets, the volume is going to go up, especially in the rolling
05:10side as well.
05:11So I think from last year comparison, I think we should be up 10% this year.
05:13Hopefully, if the market sustains.
05:15Yeah, but you've been advantaged by favorable pricing as well.
05:20So would that at all change that double digit growth guidance number is what we're trying
05:26to gather?
05:27In terms of production, we will be producing at par or a little more than the last year.
05:34But especially on the top revenue side, you know, the earnings depend on the pricing.
05:38Today, Q2, the steel prices are, you know, three years low.
05:41So Q2, if you compare compared to, you know, probably last year Q2, there'll be a huge
05:45difference.
05:46So it's very challenging to, you know, really comment, you know, if we should be able to
05:48achieve or not.
05:49Because the scenario is such right now.
05:51Ramesh, I also wanted to get a sense of the integrated steel plant.
05:55And I know environmental approval is pending.
05:57So when do you expect that coming through?
05:59And what's the kind of execution timeline post the approvals and the project costs as
06:04well?
06:05So, yeah, there is a market in progress.
06:08You know, there have been delays due to certain conditions which are out of control.
06:14So hopefully, you know, we should be able to, you know, get the desired EC by end of
06:19Q3.
06:20Earlier, the guidance was, you know, end of Q2, early Q3.
06:22So there's a slight delay there.
06:23And apparently, we have been working, you know, along with the suppliers and an entire
06:28project.
06:29So once we have the desired approvals, we will start the work immediately.
06:33Got it.
06:34And in terms of the investment going on to the integrated steel plant?
06:38Yeah.
06:39Right now, when we started, it was 6,000 crores, you know, plus minus 10%.
06:43But of course, so hopefully, we should be able to achieve, you know, in the desired
06:47number.
06:48But any changes there, we will definitely, you know, inform everybody.
06:51Right.
06:52Abhishek, you're sitting on roughly 870 plus Q1 cash reserves.
06:59So your cash reserves seem to be strong.
07:01Your CAPEX, if I heard correctly, is limited, at least for FY25.
07:06Please correct me if I'm wrong.
07:08So what's the plan with regard to the cash, if at all, there isn't a plan to utilize it
07:13for CAPEX?
07:14Well, see, you know, whatever, you know, free reserve we have, we have been distributing
07:19to our shareholders time and again.
07:21Then the buyback twice, then we'll simply allow the split, as well as a special dividend
07:26on account of 25 years of the company.
07:28So, you know, we have been giving back to the shareholders, you know, as and when, you
07:32know, there's a possibility.
07:34But looking forward, since the CAPEX cycle has begun, if market sustains, so hopefully,
07:39you know, the target is not to borrow long-term debt.
07:42So if we're able to achieve that, we are much happy to, you know, give back to shareholders
07:46again and again.
07:47And we have a dividend policy in place, which clearly states, you know, what will be the
07:51dividend depending on the profit.
07:53So that is very clear as well.
07:55Right.
07:56Mr. Agarwal, you know, one last question before I let you go.
07:58As far as I understand, the finished steel product realization was down around 5 to 6%
08:03this quarter.
08:04What is the outlook overall for FY25 for this number?
08:08See, if the market continues like this, you know, of course, India is the next importer
08:15of steel.
08:16So that is also playing its own role.
08:18And plus, I feel the demand is quite weak right now.
08:21The monsoons have been quite heavy.
08:23Hopefully, you know, the demand should come back going forward.
08:25And I think the pilots should come back at least, you know, what they were probably in
08:29Q1, which is like 10% from here on.
08:31So let's hope how the market plays.
08:33Yes.
08:34And, you know, we also want to ask you about your solar power project.
08:37Now, 20 megawatts is completed, if I'm not wrong.
08:42What's the progress on the balance 70 megawatts?
08:48See, the 70 megawatts which we have planned is for the new pellet plant capacity of 2
08:52million, for which we have already started scouting for the land.
08:56That project will only take 10 months.
08:58So finally, the pellet plant will come up and the power requirement will be coming up
09:03through solar.
09:04And there was a commission plan.
09:06We already have 145 megawatts commissioned at group level.
09:11Okay.
09:12Well, Mr. Agarwal, thank you so much for giving us those insights on Godavari Power.
09:16And thank you so much for taking your time and speaking with us at NDTV Profit.
09:19And I'd also like to thank Meeka Burvey for joining us with this particular conversation.
09:24All right.
09:25Let's focus on quarterly earnings and good set of numbers from Dr. Lal Path Labs.
09:31In fact, it's been a pretty strong quarter and a beat on estimates.
09:35Revenues are up 11% for the quarter.
09:38EBITDA up 16.4%.
09:40Margins have gone up to 28.2% versus 27%.
09:44And net profits are also up 28.6%.
09:47What's worked this quarter?
09:49We're getting into a conversation with Dr. Om Manchanda.
09:51He's the MD of Dr. Lal Path Labs.
09:53Dr. Manchanda, very good morning to you.
09:56And thank you for speaking with us here on NDTV Profit.
09:59Let's begin with your take on what's worked this quarter.
10:04Good morning.
10:05Yes, there are three, four factors that I think that have contributed to our good performance this quarter.
10:11I would put number one as a higher contribution coming out of our Swastik brand,
10:17which is a bundle package for health packages.
10:20And we've seen consistently for the last four quarters, the contribution from this Swastik has been going up.
10:27And this contribution went up to nearly about 25%.
10:30So I think that's number one.
10:32Number two is, I think, efficient management of our cost structure.
10:37We have been implementing a lot of automation and efficiencies in our business,
10:43which is actually contributing to higher margins as well.
10:47Overall, I think in terms of region-wise growth for us, markets like UP, Bihar and Uttarakhand,
10:55these markets are doing fairly well.
10:57So these are the things that have contributed to our success this quarter.
11:01Dr. Manjanda, in your call, you've talked about competition from new players and how that works out.
11:08I want to understand how you see that situation panning out,
11:12considering a lot of hospitals are also moving into the diagnostics place and pushing in the diagnostics space.
11:20Where do you see that competition coming in from and how will you sustain?
11:25This space has always been very competitive.
11:28It's been fragmented and unorganized.
11:30But for the last few years, we've seen a trend of large players who are spending a lot of money on promotions, etc.,
11:37have been coming in the market, which in some way is not a bad news,
11:40because essentially it helps the market to grow faster.
11:44And some of these players have been using price as a variable to really drive the growth,
11:50which to my mind, in healthcare, while most categories are price elastic,
11:55but healthcare is not that really elastic as one thinks, because trust factor is very important.
12:02So to my mind, competition tends to help market grow faster, which is what we have seen.
12:08And obviously the benefits tend to flow more towards a brand, which is a preferred brand, which is a trusted brand.
12:14At the end of the day, quality is what wins in this space.
12:18You've also talked about the aim to beat last year's growth without taking any price increases.
12:25How is that going to work out?
12:27And do you see Swast Fit again being the driver of that growth?
12:33Yeah, we had some apprehension in the month of February, March,
12:36because we were just completing about a year cycle on price increase.
12:40And last year, impact of price increase was to the tune of 3%, or maybe 3.5%.
12:46Then we were not very sure.
12:48And of course, the question being asked, can you sustain these growth levels,
12:51which we have done now without taking the price increase.
12:55We are very confident that we will definitely be able to beat our last year growth.
12:59This quarter is an example of that.
13:02And what gives me confidence is definitely, yes, Swast Fit as a sort of product portfolio,
13:07and also the markets like rest of North, which are doing very well for us.
13:12You've had a good quarter in terms of margins at 28.2%.
13:16Is this what you expect to average at through the year?
13:21So what we are seeing is that with the contribution of this bundle package is going up,
13:26this is leading to higher tests per patient.
13:28So when you are able to do more tests per patient visit,
13:32so your servicing costs really don't go up, that contributes to higher margins.
13:37So if this contribution sustains, I think we will be able to sustain these kind of margins over a period of time.
13:45Where are the growth levers coming for you now, Dr. Manjanda?
13:50Are you looking at inorganic growth in terms of larger footprint?
13:55Are you looking at more capital expenditure through this year?
13:59What is the strategy ahead for the financial year?
14:03So, yeah, I think we really plan to grow on multiple dimensions.
14:07The first dimension is to widen and deepen our footprint.
14:10So it's much easier for us to do in those markets where our brand is fairly strong,
14:15which is North of India, East of India, and some parts of Central India, now West as well,
14:21post the acquisition of Suburban.
14:23It becomes very difficult in those markets where the brand is relatively weak,
14:27which we believe South is one such territory we need to widen our footprint.
14:32That's where inorganic play would come.
14:34The second dimension to this strategy would be to look at our product portfolio.
14:39We've seen on the routine testing some sort of a Swastik format.
14:44Can it be extended to high-end test as well?
14:47We'll have to figure it out as to what sort of value it adds to the medical side of it.
14:54But definitely product is another angle we've been trying to segment the market,
14:58build categories around reproductive diagnostics,
15:01build categories around autoimmune disorders, et cetera.
15:04So that's the second part of it.
15:06And third is I think our business is highly operational,
15:10and we just need to make sure that we integrate various processes,
15:15departments seamlessly so that we are able to service the market well.
15:18So I think on multiple dimensions, we want to drive the business.
15:21And at the end of the day, continue to be the most trusted brand,
15:25and that really helps us.
15:28How do you see Suburban panning out?
15:32Dr. Manchanda, it's been a drag this quarter as well.
15:36What is the kind of timeline you see for improvement there?
15:40Yeah, definitely it's been slower than what we expected,
15:43but I'm fairly confident that we will definitely be able to achieve
15:47what we have set out for ourselves.
15:50We want to build a very strong brand in Mumbai market,
15:53and Suburban really offers a great platform.
15:57Size of the business that we have in one city, Suburban provides,
16:01is a very, very sort of a – I think the stage is set for us
16:04really to drive growth in western regions, especially in Mumbai city.
16:08And we are trying to build a direct-to-consumer brand,
16:11more preventive in sort of a product portfolio.
16:14So we are very hopeful that it will actually deliver
16:17what we have set ourselves for.
16:20Just last point, I want to understand how some of the budget announcements
16:24would have helped you.
16:26There were custom duty cuts announced on x-ray tubes, et cetera.
16:30There's been a constant move towards reducing custom duties
16:33on some of these products, key to diagnostics.
16:36Does this help you at all?
16:40Maybe yes and no, but I think a significant part of our cost
16:44goes behind servicing the customers, which is about courier network,
16:49lab network, and overheads in terms of salaries, et cetera.
16:52So to my mind, while budget does impact either favorably or unfavorably,
16:58but to my mind, I think our cost structure lies somewhere else
17:01which is not really influenced by the budget.
17:03Okay, okay. Thank you so much, Dr. Manchanda, for speaking with us,
17:08the management of Dr. PathLab there, talking about the quarter gone by
17:11and how they are clear that they will meet their growth targets
17:15without taking price increases.
17:17Remember, they haven't taken price increases since February 2023.