Attended the AGM today. Here are my notes from the meeting:

• Expansion –
  • Malda Plant commissioned in March 2023 and is operating at 50% capacity utilization which is expected to be ramped up to 75% by year end.
  • Would spend 700 Cr for reaching 6000 TPD capacity on the following plants:
    • Started construction at Sitarganj for 1000 TPD. Commissioning in January 2024.
    • Himmatnagar – Would start construction and Commissioning in Q3 2025
  • On schedule to reach 6000 TPD by 2025
  • Expansion to be funded by internal accruals
• Sales Target of 10,000 Cr for FY25 is largely on track
• Payback for New Projects – GAEL looks at 5 year pay back period.
• Exports
  • GAEL is exporting to more than 100 countries. Focussing on North and South America now.
  • Committed to increase our market share in International markets.
  • Export realization – keeps on changing basis the international corn prices and competitive scenario.
  • GAEL has required approvals from MNCs giving consistency in exports and therefore better able to export vis-à-vis competitors (both domestic and outside).
  • Industry is allowed to import corn duty free for production of starch.
  • China + 1 helping exports
  • China is not as strong in exports as earlier; neither exporting aggressively nor importing.
  • Target to keep increasing exports.
  • Not much of a difference in maize prices between domestic and international markets.
  • Corn prices are competitive wrt China. In China, the prices are regulated.
• Fermentation
  • First project to come in 2025.
  • Supply to Food, Pharma and Feed industry.
  • Total outlay at 1000 Cr for next 5 years.
  • Asset Turnover = 2000 Cr revenue expected on 1000 Cr capex.
  • One plant being setup in North while other in South India.
  • This would be an import substitution business.
  • Requires large amount of power – as far as power costs go, there is not much of a difference between India and China. Our power cost is comparable to that of China.
  • Incorporated subsidiary for this business.
• Ethanol Update – Two ethanol projects are on hold due to Raw Material uncertainty and one not started yet. Final decision would taken in few months.
• Raw Material fluctuations –
  • Most critical part for the industry.
  • Procure raw material on time.
  • Be connected to farmers directly.
  • India gets two maize crops (Rabi and Kharif) and Purchase is spread throughout the year.
  • GAEL has a large storage capacity equivalent to 3-6 months of grind capacity.
• Pricing depends not only on the Raw Material prices but also on the demand-supply scenario.
• Maize derivative capacity – 32-35%. Target is for 45% of grind capacity.
• Buyback and increase in dividends – no such plans in near future as company is on growth trajectory.
• Increase in power cost for FY23 was mainly attributable to fuel price increase.
• Spinning division – Have converted cotton yarn to polyester. If the profitability does not turn then a decision would be taken in this financial year.
• Operate at 5-6% margins for own brands [Total sale of 1000 Cr for edible oil branded business]
• Agro division expected to do better in this Financial year.
• Renewable Energy Capacity – 25%
• Import Duty on products manufactured by GAEL – 10 to 40%
• Impact of Malda plant on revenue would be seen in the next 3 quarters.
• Market Share
  • Sorbitol – 30%
  • Glucose – 40%
  • Dextrose – 45%
  • Starch 5 MT industry and our share is 25-28%. Expect industry to increase to 6 MT in next 2 years.
• Capital Allocation for next 5 years:
  • Maize – 1700 Cr
  • Expansion of Grind capacity – 700 Cr
  • Fermentation – 1000 Cr

Disclaimer: There may be some mistakes in these notes

Express Adda With Ruchir Sharma (Investor, Author, Fund Manager and Political Commentator)

Ruchir Sharma always delivers. this time as well. Audience consist some well known investors… Liked hence posting.

“In Jan.2023, PSP was awarded an order of ₹1,344 crore from Surat Municipal Corporation for construction of tallest administrative building.”

Yearly recurring as long as the project isn’t over.

• Surat Municipal Project: Expected revenue for the year is around Rs. 300 crore, with potential growth to Rs. 450 crore to Rs. 500 crore from FY25 onwards as finishing activities start.

Is this a yearly recurring income? What sort of project is this?