NMDC Vs GMDC: In a world where resources are limited but human wants are limitless, the demand for minerals is continuously increasing. Mining activities continue to be crucial for the extraction of necessary minerals in order to meet demand. In this article, we will examine NMDC Vs GMDC as two companies that deal in the complex and heavily regulated mining and minerals sector.
Table of Contents
NMDC Vs GMDC – Stock Analysis
NMDC
Company Overview
The National Mineral Development Corporation (NMDC) was founded in 1958 and is a Navaratna company under the Ministry of Steel, with the President of India owning 60.79% of the company. The company’s core business is iron ore extraction.
Segment Analysis
The majority of NMDC earnings come from the sale of iron ore. Madhya Pradesh, Chhattisgarh, Karnataka, Telangana, and Jharkhand are among the Indian states where the corporation has a physical presence. The corporation owns 26% of ICVL in Mozambique and 92.32% of 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 corporation. The mineral is typically used to create electricity or for other industrial purposes, and it is sold to a variety of industries, including textiles, chemicals, ceramics, bricks, and captive power.
Segment Analysis
In FY23, the company obtained revenue from the sale of products such as lignite (88.30%), bauxite (1.56%), thermal power (6.13%), renewable energy (3.90%), and other projects (0.11%). They generate all of their revenue within India.
Industry Analysis
The Indian Mines and Minerals Industry is one of the world’s largest producers. The industry is subject to global demand and supply fluctuations. The infrastructure boom may assist the industry in increasing its production capacity, and excess demand over supply may aid in price increases.
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 has allowed 100% FDI, which will help investments as well as technology to mine efficiently while avoiding environmental spills.
NMDC Vs GMDC – Financials
We will look into the comparison and fundamentally analyze these two companies.
Revenue and Net Profit
The revenues of NMDC and GMDC in FY23 were Rs. 17,666.68 crore and Rs. 3,501.44 crore, respectively, with a CAGR of 9.8% and 16.82%. For the past five years, GMDC has outperformed NMDC in terms of revenue growth. It is worth noting that GMDC’s revenue increase is due to a price increase in the lignite segment.
| Particulars/ Financial Year | 2018-19 | 2019-20 | 2020-21 | 2021-22 | 2022-23 | CAGR (%) |
|---|---|---|---|---|---|---|
| NMDC - Revenue (Cr.) | ₹ 12,152.67 | ₹ 11,699.22 | ₹ 15,370.06 | ₹ 25,964.79 | ₹ 17,666.88 | 9.80% |
| YoY Growth (%) | - | -3.73% | 31.37% | 68.93% | -31.95% | - |
| GMDC - Revenue (Cr.) | ₹ 1,879.67 | ₹ 1,520.94 | ₹ 1,339.23 | ₹ 2,732.07 | ₹ 3,501.44 | 16.82% |
| YoY Growth (%) | - | -19.08% | -11.94% | 104% | 28.16% | - |
In FY23, the net profits of NMDC and GMDC were Rs. 5,537.72 crore and Rs. 1,215.73 crore, respectively, with a CAGR of 4.54% and 53.33%. Both companies’ profits fluctuated over a five-year period, with GMDC going negative in FY21 but rebounding to positive the following year. Here, GMDC is growing faster than NMDC.
| Particulars/ Financial Year | 2018-19 | 2019-20 | 2020-21 | 2021-22 | 2022-23 | CAGR (%) |
|---|---|---|---|---|---|---|
| NMDC - Net Profit (Cr.) | ₹ 4,637.07 | ₹ 3,601.52 | ₹ 6,247.47 | ₹ 9,440.42 | ₹ 5,537.72 | 4.54% |
| YoY Growth (%) | - | -22.33% | 73.46% | 51.10% | -41.34% | - |
| GMDC - Net Profit (Cr.) | ₹ 219.93 | ₹ 146.49 | ₹ -39.35 | ₹ 445.90 | ₹ 1,215.73 | 53.33% |
| YoY Growth (%) | - | -33.39% | 126.86% | 1306.85% | 172.64% | - |
Profit Margins
In FY23, NMDC’s OPM was 34.25%, while GMDC’s was 38.49%. Over a five-year period, the average was 49.66% and 20.53%. Both companies’ returns are excellent, but NMDC’s OPMs are superior to GMDC’s. NMDC OPM is trending downwards YoY.
In FY23, NPM was 31.35% for NDMC and 34.72% for GMDC. Except for FY21, NMDC has a declining trend that is comparable to OPM. Following low margins in the COVID period, GMDC NPM has been trending upward, and other income increased by 151.51% YoY to 393.57 crore in FY23 to aid its margin.
| Particulars/ Financial Year | 2018-19 | 2019-20 | 2020-21 | 2021-22 | 2022-23 | Average (%) |
|---|---|---|---|---|---|---|
| NMDC - OPM (%) | 56.97% | 51.29% | 57.18% | 48.62% | 34.25% | 49.66% |
| GMDC - OPM (%) | 29.58% | 8.67% | -0.46% | 26.38% | 38.49% | 20.53% |
| NMDC - NPM (%) | 38.16% | 30.78% | 40.64% | 36.36% | 31.35% | 35.45% |
| GMDC - NPM (%) | 11.69% | 9.97% | -2.89% | 16.32% | 34.72% | 13.96% |
Return Ratios
In FY23, GMDC’s RoE was 22.90% and NMDC’s 27.26%. NMDC and GMDC averaged 24.03% and 8.10% over a five-year period. Compared to GMDC, NMDC has a higher ROE. In contrast to NMDC’s declining trend, GMDC has seen an improvement in its returns.
In FY23, the respective RoCEs for NMDC and GMDC were 36.04% and 31.31%, respectively. Over a five-year period, the average was 33.36% and 10.86%. Nonetheless, a higher RoCE than RoE denotes a more effective use of debt financing, which is advantageous to the business.
Although GMDC has lower returns than NMDC, NMDC’s higher base effect from prior years has projected higher returns for it.
| Particulars/ Financial Year | 2018-19 | 2019-20 | 2020-21 | 2021-22 | 2022-23 | Average (%) |
|---|---|---|---|---|---|---|
| NMDC - RoE (%) | 18.38% | 13.41% | 21.71% | 39.42% | 27.26% | 24.03% |
| GMDC - RoE (%) | 5.07% | 3.44% | -0.94% | 10.03% | 22.90% | 8.10% |
| NMDC - RoCE (%) | 28.19% | 22.41% | 29.65% | 50.51% | 36.04% | 33.36% |
| GMDC - RoCE (%) | 9% | 4.87% | -8.43% | 17.57% | 31.31% | 10.86% |
Debt Analysis
Both NMDC and GMDC have excellent financial stability and very little debt. A business that has little debt can grow, and having more working capital will help it continue to limit its debt.
NMDC and GMDC’s interest coverage in FY23 was 102.64% and 729.07%, respectively. Because it equals the number of times interest can be covered by profits, this ratio makes creditors and investors feel more at ease.
| Particulars/ Financial Year | 2018-19 | 2019-20 | 2020-21 | 2021-22 | 2022-23 | Average |
|---|---|---|---|---|---|---|
| NMDC - D/E | 0.01 | 0.02 | 0.07 | 0.1 | 0.02 | 0.04 |
| GMDC - D/E | 0 | 0 | 0 | 0 | 0 | 0 |
| NMDC - Interest Coverage | 179.41 | 619.82 | 530.18 | 334.24 | 102.64 | 353.25 |
| GMDC - Interest Coverage | 213.36 | 108.8 | -175.15 | 236.84 | 729.07 | 222.58 |
NMDC Vs GMDC – Key Metrics
We will look into some of the key metrics of NMDC and GMDC.
| Particulars | NMDC | GMDC |
|---|---|---|
| CMP | ₹ 179 | ₹ 403.9 |
| EPS | ₹ 19.82 | ₹ 31.81 |
| RoE | 27.26% | 22.90% |
| RoCE | 36.04% | 31.31% |
| Promoter Holding | 60.79% | 74% |
| Market Cap (Cr.) | ₹ 50,743 | ₹ 12,341 |
| Dividend Yield | 5.91% | 9.05% |
| Enterprise Value (Cr.) | ₹ 38,303.03 | ₹ 10,216.25 |
Future Plans
NMDC
- NMDC intends to use brownfield expansion to increase its production capacity from 67 million tonnes per year (MTPA) in FY26 to 100 MTPA in FY30.
- Through the development of greenfield projects like Deposits 13 and 14, the company anticipates benefits from its joint venture with the Chhattisgarh Mineral Development Corporation.
- The greenfield steel plant located in Chhattisgarh, NMDC Iron and Steel Plant (NISP), is nearing completion to begin operating at a capacity of 3.0 MTPA.
- In addition to building a beneficiation plant in Bacheli, the company is currently building a 15 million pipeline that will connect Bacheli and Nagaragar. They can more affordably transport iron ore to any location due to these expansions.
GMDC
- The company is working to run six additional lignite mines, which will help it improve its market share, production, and position. Utilizing the cost of lignite can help cut costs and aim to capture nearly 50% of the Gujarat market.
- By strengthening its beneficiation capabilities, the bauxite portfolio can further diversify its revenue streams, with an estimated investment of 15 to 45 crore.
- The company is upgrading its thermal systems in order to diversify into solar energy and contribute to a greener future. They anticipate cost savings and financial success from this initiative.
- Drone technology is used in harsh environmental conditions to explore minerals like lithium, copper, gold, and other minerals. It can be used to locate minerals more quickly and effectively, which leads to better mineral discoveries.
Conclusion
We are nearing the conclusion of NMDC Vs GMDC. These two companies possess potential but also restrictions in the sector, and for a greener future, they are prone to these changes.
However, for a greener future, more minerals are required, and it might be an opportunity or adversity for the industry. What is your view of these companies? Do they hold potential? Let us know your views in the comments section below.
Written by Santhosh
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