NMDC Ltd:Annual Report 2023-24 Analysis

NMDC Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Established in 1958 as a fully owned government undertaking. NMDC was formed to explore, develop, and exploit mineral resources other than coal, oil, natural gas, and atomic minerals.

Headquarters Location and Global Presence:

Headquartered in Hyderabad, Telangana, India. While primarily focused on the Indian market, NMDC has been exploring opportunities for international expansion through joint ventures and acquisitions.

Company Vision and Mission:

• Vision: To be a global leader in the minerals and mining sector, committed to sustainable and responsible practices.
• Mission: To explore, develop, and extract minerals in an efficient, environment-friendly, and socially responsible manner, contributing to the economic growth of the nation.

Key Milestones in Their Growth Journey:

• 1968: Inauguration of Bailadila Iron Ore Mine-14, a significant milestone in iron ore production.
• 1980s: Diversification into diamond mining with the Panna Diamond Mine.
• 2008: Achieved the status of a “Navratna” company, recognizing its financial and operational excellence.
• 2023: Commenced production from Chhattisgarh’s first Ultra Mega Steel Plant NMDC Steel Limited (NSL).

Stock Exchange Listing Details and Market Capitalization:

Listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). (Market capitalization fluctuates, refer to financial news sources for current figures).

Recent Financial Performance Highlights:

(Refer to NMDC’s official website or financial news sources for recent financial results).

Management Team and Leadership Structure:

NMDC operates with a board of directors comprised of both executive and non-executive members. The Chairman & Managing Director (CMD) is the head of the organization.

Notable Awards or Recognitions:

NMDC has received awards for its performance in mining, environment management, and corporate social responsibility. (Specific awards can be found on the NMDC website or in press releases).

Their Products #

Complete Product Portfolio with Categories:

• Iron Ore (Lumps and Fines)
• Diamonds
• Pellets
• Sponge Iron (through NMDC Steel Limited)

Flagship or Signature Product Lines:

Iron ore is NMDC’s flagship product, contributing the most significant portion of its revenue.

Manufacturing Facilities and Production Capacity:

• Bailadila Iron Ore Mines (Chhattisgarh): Multiple mines with significant iron ore production capacity.
• Donimalai Iron Ore Mine (Karnataka): Contributes substantially to NMDC’s iron ore output.
• Panna Diamond Mine (Madhya Pradesh): India’s only diamond mine.
• Nagarnar Steel Plant (Chhattisgarh): Through NMDC Steel Limited.

Quality Certifications and Standards:

NMDC maintains quality certifications such as ISO 9001 for its quality management systems, demonstrating its commitment to quality control and process improvement.

Recent Product Launches or R&D Initiatives:

NMDC Steel Limited production of steel and value added products. Exploration and development of new mineral deposits is an ongoing R&D initiative.

Primary Customers #

Target Industries and Sectors:

• Steel Industry: NMDC’s primary customers are steel manufacturers in India.
• Pellet Manufacturers: Iron ore fines are sold to pellet manufacturers.

Geographic Markets (Domestic vs. International):

Predominantly focused on the domestic market.

Major Client Segments:

Industrial (Steel manufacturers and pellet producers).

Distribution Network and Sales Channels:

NMDC primarily sells its iron ore through long-term contracts and e-auctions.

Major Competitors #

Direct Competitors in India and Globally:

• India: Tata Steel, JSW Steel, SAIL (Steel Authority of India Limited), Vedanta Limited (Iron Ore Division).
• Globally: BHP, Rio Tinto, Vale

How They Differentiate From Competitors:

NMDC differentiates itself through its large-scale operations, consistent ore quality, long-standing relationships with major steel producers, and its status as a government-owned enterprise.

Industry Challenges and Opportunities:

• Challenges: Fluctuations in global iron ore prices, environmental regulations, land acquisition issues, logistical bottlenecks.
• Opportunities: Increasing steel demand in India, government initiatives promoting infrastructure development, expansion into new markets, diversification into value-added products.

Market Positioning Strategy:

NMDC aims to maintain its position as a leading iron ore producer in India by focusing on operational efficiency, cost optimization, and sustainable mining practices.

Future Outlook #

Expansion Plans or Growth Strategy:

• Increasing iron ore production capacity.
• Further development of NMDC Steel Limited and downstream value added products.
• Exploring opportunities for mineral exploration and mining in new regions.

Sustainability Initiatives or ESG Commitments:

NMDC is committed to sustainable mining practices, including environmental protection, community development, and responsible resource management.

Industry Trends Affecting Their Business:

• Growing focus on sustainable mining and environmental responsibility.
• Technological advancements in mining and processing.
• Increasing global demand for steel and iron ore.
• Government policies and regulations related to the mining sector.

Long-Term Vision and Strategic Goals:

NMDC aims to strengthen its position as a leading player in the Indian mining industry and contribute to the nation’s economic growth by ensuring a secure supply of raw materials for the steel industry.

3-Year Trend Analysis of Key Financial Metrics #

• Revenue: FY24: ₹21,294 crores, FY23: ₹17,667 crores, FY22: ₹25,964.79 crores. Revenue decreased in FY23 before rebounding in FY24.
• Profit Before Tax (PBT): FY24: ₹8,012 crores, FY23: ₹7,637 crores, FY22: ₹13,023.36 crores. PBT declined significantly in FY23 and saw a partial recovery in FY24.
• Profit After Tax (PAT): FY24: ₹5,632 crores, FY23: ₹5,529 crores, FY22: ₹9,447.59 crores. PAT followed a similar trend to PBT, with a significant decrease in FY23, followed by slight increase in FY24
• Net Worth: FY24: ₹25,406 crores, FY23: ₹22,332 crores, FY22: Not available in the provided text. Net worth increased consistently.
• Earnings Per Share: FY24:19.22, FY23:18.86, FY22: not provided.
• Capital Expenditure: FY24: ₹2,066 crores, FY23: Not available in the provided text, FY22: Not available in the provided text.
• Dividend: FY24: ₹2,124.69 crores, FY23: ₹1,934.21 crores, FY22: ₹4,319.72 crores. The dividend payout decreased significantly in FY23, and saw a partial rebound in FY24.

Business Segment Performance #

• Iron Ore: The dominant segment, contributing approximately 98.7% of total revenue in FY24. Iron ore production increased by 10% to 45.02 MT and sales increased by 16% to 44.48MT in FY24.
• Pellets: Pellet production for FY24 was: 2,63,053 tonnes
• Other Minerals and Services: Contributes a minor portion to the overall revenue.

Geographical Segments #

• India: The primary market, accounting for nearly all (over 99%) of the revenue.
• Australia: Newly entered market via subsidiary, Legacy Iron Ore Limited, contributing negligibly to total revenue but marking geographical diversification.

Major Strategic Initiatives and their Progress #

• Capacity Expansion: NMDC aims to increase iron ore production capacity to 100 MTPA by 2030.
• Ongoing Projects: Includes Screening Plant III (Kirandul Complex), Slurry Pipeline Project, doubling of KK line, and Township Project at Kirandul. Progress varies, with the Slurry Pipeline Project at 57% completion as of March 31, 2024.
• New Projects: Includes Screening Plant II (Donimalai Complex) and a new crushing plant and downhill conveyor system at Dep-14 & 11C (Kirandul).
• Technology Upgradation: Implementation of Fleet Management System (FMS) at Bacheli and Kirandul Complexes, automation of belt scales, and use of Unmanned Aerial Systems (UAS) for mineral exploration.
• Diversification: Mining operations commenced at the Mount Celia Gold Project in Australia. NMDC is exploring coking/thermal coal mines in Mozambique and has acquired coking/thermal coal mines in Jharkhand.

Risk Landscape Changes #

• Price Fluctuation: The company identified price volatility as a key risk
• Geopolitical Tensions: Continuing geopolitical tensions have been identified as a threat.
• Competition: Increased competition from other mines as new leases are auctioned.

ESG Initiatives and Metrics #

• Environmental: Focus on renewable energy sources (wind and solar power), waste management (installation of organic waste converters), effluent and emission management, and biodiversity conservation (contributions to Karnataka and Chhattisgarh Forest Departments).
• Social: CSR initiatives are focused on education, healthcare, and rural development projects.
• Governance: NMDC states high standards of corporate governance, with emphasis on transparency, accountability, and integrity.

Management Outlook #

• Growth Strategy: NMDC plans to reach 100 MTPA Iron Ore production capacity by 2030.
• Technological Advancement: A continued focus on digitalization and automation.
• Sustainability: Increased Investment in sustainable mining practices.
• Diversification: Into Coal Mines to start operations by the FY2025-26.
• Responsibility: NMDC is showcasing a renewed commitment to responsible mining.

Detailed Analysis #

NMDC Limited - Financial Analysis #

Balance Sheet Analysis (3-Year Comparative) #

(INR in Crores)

Significant Changes in Major Line Items (YoY) #

• Capital Work-in-Progress: Increased by 63.78% (FY24 vs FY23), indicating investment in capacity expansion.
• Other Non-Current Assets: Showed a significant increase over 3 years, with almost 66%.
• Other Bank Balances: Increased by 75% (FY24 vs FY23).
• Other Financial Assets: Decreased significantly by -36.78% (FY24 vs FY23).
• Current Tax Assets (Net): Decreased by 25.96% (FY24 vs FY23).
• Trade Receivables: Decreased by 19.52% (FY24 vs FY23).
• Borrowing (Current): 58.24% increase (FY24 vs FY23).

Working Capital Trends #

• Current Assets: Increased from ₹16,954.39 crores in FY22 to ₹21,548.53 crores in FY24.
• Current Liabilities: Increased from ₹6,868.20 crores in FY22 to ₹8,404.82 crores in FY24.

Debt Structure and Maturity Profile #

• Lease Liabilities (Non-Current): Show a decreasing trend.
• Borrowings (Current): Show significant fluctuations; a high value in FY23 suggests short-term debt financing.

Off-Balance Sheet Items #

• The C & AG comments identify a contingent liability regarding dues to the Government of Andhra Pradesh. Further disclosure is needed in the notes.

NMDC Limited Financial Analysis: FY 2023-24 #

Revenue Breakdown #

Segment-Wise Revenue #

• FY 2023-24:

  • Iron Ore (Domestic): ₹21,049.47 crores
  • Pellets Sales: ₹232.40 crore
  • Wind Power Sales: ₹6.25 crore
  • Legacy Iron Ore Limited: A$ 7.905 million

• FY 2022-23:

  • Iron Ore: ₹17,447.39 crores
  • Pellets sales: ₹165.50 crores
  • Wind Power: ₹6.08 crores

Revenue Growth #

• Iron Ore Revenue: Increased by 20.65% YoY
• Overall Total income went up by 20.88% YoY

Geographical Breakdown #

• FY 2023-24:
  • Domestic: ₹21,293.81 crores
  • Overseas: ₹14.04 crores
• FY 2022-23:
  • Domestic: ₹17,666.88 crores
  • Overseas: Nil

Cost Structure Analysis #

• Key cost components include the consumption of raw materials, employee benefit expenses, power and electricity, repairs and maintenance, and royalty & other levies. Specific cost figures, except for employee benefits and certain other expenses, are detailed.

Margin Analysis #

• FY 2023-24:
  • Profit Before Tax (PBT) before exceptional item: ₹8,295 crores (30% increase YoY)
  • Profit After Tax (PAT): ₹5,632 crores (1.86% increase YoY)
  • EBITDA: ₹8,709 crores (28% growth YoY)
  • Operating Profit Margin: 34% (6% higher than FY23)
• FY 2022-23:
  • PBT: ₹7,637 crores
  • PAT: ₹5,529 crores

Non-Recurring Items #

• FY 2023-24: Exceptional item included an expenditure of ₹282.15 crores.
• FY 2022-23: Exceptional item included an income of ₹1,237.27 crores.

EPS Analysis #

• FY 2023-24:
  • Basic & Diluted EPS: ₹19.22
• FY 2022-23:
  • Basic & Diluted EPS: ₹18.86
• EPS realized an upswing of 1.91% in FY 2023-24.

Cash Management Analysis #

Cash Flow and Liquidity Analysis #

Operating Cash Flow (OCF), Investing Cash Flow (ICF), and Free Cash Flow (FCF) Components (Consolidated): #

• FY 2023-24:
  • OCF: ₹7,394.80 crore.
  • ICF: ₹(6,076.43) crore.
  • FCF: ₹1318.37 crore (OCF + ICF).
• FY2022-23
  • OCF: 1,837.59
  • ICF: 202.25
  • FCF: ₹ 2039.84 crore (OCF + ICF).

Working Capital Management Efficiency: #

• FY 2023-24:
  • Trade receivables turnover ratio: 5.42.
  • Trade payables turnover ratio: 8.78
• FY 2022-23:
  • Trade receivables turnover ratio: 4.13.
  • Trade payables turnover ratio: 5.67

Capex Analysis: #

• FY 2023-24: Total additions to tangible and intangible assets (including capital work-in-progress) was ₹1845.81 crore.
• FY 2022-23: Total additions to tangible and intangible assets (including capital work-in-progress) was ₹1788.52 crore.

Dividend and Share Buyback Trends: #

• FY 2023-24:
  • Interim dividend: ₹1,685.11 crore.
  • Final Dividend : 439.59
  • Total dividend: ₹2,124.69 crore (including interim and proposed final).
  • Dividend as % of PAT: 38%.
• FY 2022-23:
  • Total dividend: ₹1,934.21 crore.
  • Dividend as % of PAT: 35%.

Debt Service Coverage: #

• FY 2023-24: 1.75
• FY 2022-23: 2.70

Liquidity Position and Cash Conversion Cycle: #

• Current Ratio (FY 2023-24): 2.56.
• Current Ratio (FY 2022-23): 2.97
• Cash and Cash Equivalents (FY 2023-24): ₹109.39 crore, plus significant bank balances.
• Cash and Cash Equivalents (FY 2022-23): 93 crore, plus significant bank balances.

Financial Analysis: Key Performance Indicators #

Profitability Ratios (3-Year Trends) #

Return on Net Worth (RONW/ROE) #

• FY24: 22.17%
• FY23: 24.76%
• FY22: 37.71%
• Analysis: NMDC’s RONW has decreased in the last three years, down from 37.71%, but still displays strong profitability relative to shareholder equity.

Return on Capital Employed (ROCE) #

• FY24: 21.1%
• FY23: Data not provided directly.
• FY22: Data not provided directly.
• Analysis: Cannot provide trend analysis.

Profit Before Tax (PBT) Margin #

• FY24: 37.62% (8,012 Crores / 21,294 Crores)
• FY23: 43.23% (7,637 Crores / 17,667 Crores)
• FY22: 50.16% (13,023.36 Crores / 25,964.79 Crores)
• Analysis: NMDC’s PBT margin shows a decreasing trend over the last three years.

EBITDA Margin #

• FY24: 39.58% (8,709 Crores / 21,294 Crores)
• FY23: 34% (8,048.16 Crores / 17,666.88 Crores)
• FY22: 51.41% (13,349.27 Crores / 25,964.79 Crores)
• Analysis: The company’s EBITDA margin shows a decreasing trend over the last three years.

Net Profit Margin #

• FY24: 26.45% (5,632 Crores / 21,294 Crores)
• FY23: 31.31% (5,528.63 Crores / 17,666.88 Crores)
• FY22: 36.39% (9,447.59 Crores / 25,964.79 Crores)
• Analysis: NMDC’s Net Profit margin shows a decreasing trend over the last three years.

Liquidity Metrics #

Current Ratio #

• FY24: 2.56 (21,407.00 / 8,360.61)
• FY23: 2.97 (17,507.13 / 5,904.02)
• FY22: 2.46 (16,918.67 / 6,865.41)
• Analysis: A decreasing current ratio indicates a slight decrease in short-term liquidity, but it’s still very healthy.

Efficiency Ratios #

Inventory Turnover Ratio #

• FY24: 8.75 (using sales revenue because the COGS is not available)
• FY23: 8.21
• FY22: Not available
• Analysis: Increased, indicating better efficiency.

Trade Receivables Turnover Ratio #

• FY24: 5.42
• FY23: 4.13
• FY22: Calculated as 5.46
• Analysis: An increased turnover ratio shows better efficiency in collecting revenues from customers.

Leverage Metrics #

Debt to Equity Ratio #

• FY24: 0.13
• FY23: 0.09
• FY22: Information is not provided in a format to calculate.
• Analysis: NMDC exhibits an increasing trend in its debt to equity ratio over the provided periods.

Interest Coverage Ratio #

• FY24: 102.51 (calculated dividing PBT+Interest by Interest)
• FY23: 105.28
• FY22: 333.34
• Analysis: Although the values are decreasing, they are high enough to service its interest obligations.

ESG Framework #

Environmental Metrics and Targets #

• NMDC aims to increase the share of renewable energy in total energy consumption to 25%.
• Wind energy capacity stands at 10.5 MW, with rooftop solar installations at 1.5 MW.
• NMDC targets 100% recycled water usage for dust suppression at mine sites by 2025.
• Plans are to install solar power projects on vacant land.
• Effluents are treated and reused across project sites via effluent and sewerage treatment plants.
• GHG emissions reduction is a priority, with Scope 3 Greenhouse Gas Inventory developed.
• NMDC aims to achieve ‘Net Zero’ by 2040

Social Responsibility Programs #

• NMDC spent INR 150 crores on CSR initiatives in FY24, focusing on inclusive growth and equitable development.
• Key areas of CSR focus: education, healthcare, and rural development projects.
• Flagship programs include “Shiksha Sahayog Yojana” and “Balika Shiksha Yojana,” providing scholarships for tribal children.
• The company runs a “Hospital on Wheels” initiative.
• Investments are made in community development, addressing education, healthcare, and rural development needs.

Governance Structure and Effectiveness #

• NMDC’s Board of Directors is diversified, including functional, government nominee, and independent directors.
• The Board has overall responsibility for establishing and overseeing the company’s risk management framework.
• The Board has constituted a Risk Management Committee
• NMDC complies with statutory provisions of the Companies Act, 2013; SEBI LODR Regulations, 2015; and Guidelines on Corporate Governance for Central Public Sector Enterprises, 2010.
• Secretarial Audit Report for FY 2023-24 does not contain any qualification, reservation, or adverse remark.
• Minutes of the Board meetings of subsidiary companies are placed before the NMDC Board.

Sustainability Investments and ROI #

• Significant capital expenditure projects are aimed to enhance ore production and expand mining capacities.
• Investments are made in renewable energy projects, including solar and wind energy.
• Investments focus on eco-friendly ore transportation through slurry pipelines and railways.
• NMDC invested in a 2 MTPA Pellet Plant and 10 MTPA Beneficiation Plant along the Slurry Pipeline route.

Regulatory Compliance and Future Preparations #

• NMDC operates with full compliance with environmental laws and regulations.
• NMDC is intensifying efforts to curtail GHG emissions, enhance wastewater recycling, manage solid waste, and conserve biodiversity.
• The company’s sustainability initiatives and practices align with national and international standards, including ISO 9001, ISO 14001, ISO 45001, and SA 8000.
• NMDC’s strategies align with India’s goal of achieving Net Zero Emissions by 2070.