NMDC Vs GMDC: In a world where resources are limited but human needs are unlimited, the demand for minerals is constantly increasing. Mining activities are still crucial for the extraction of necessary minerals to meet demand. In this article, we will examine NMDC Vs GMDC as two companies that deal in the complex and highly regulated mining and minerals industry.
NMDC Vs GMDC – Stock Analysis
NMDC
![NMDC logo](https://tradebrains.in/wp-content/uploads/2023/11/image-48.png)
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.
![telegram channel](https://tradebrains.in/wp-content/uploads/2023/01/telegram-channel.png)
Segment Analysis
The majority of NMDC revenues 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
![GMDC logo](https://tradebrains.in/wp-content/uploads/2023/11/image-49.png)
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 company. 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 energy (6.13%), renewable energy (3.90%), and other projects (0.11%). They generate all their revenue in India.
Industry Analysis
The Indian Mines and Minerals Industry is one of the largest producers in the world. The industry is subject to global demand and supply fluctuations. The infrastructure boom can help the industry in increasing its production capacity, and excess demand over supply can help in price rise.
After years of restrictions, the Indian government is considering giving licenses to the private sector. The mining industry is undergoing transformation as the government has allowed 100% FDI, which will help investments as well as technology to mine effectively avoiding environmental spills.
NMDC Vs GMDC – Finances
We will look at the comparison and basically 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%. Over 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 price increase in the lignite segment.
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 turning negative in FY21 but rebounding to positive the following year. Here, GMDC is growing faster than NMDC.
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%. The returns of both the companies are excellent, but NMDC’s OPM is better than GMDC’s. NMDC OPM is trending down YoY.
In FY23, NPM was 31.35% for NDMC and 34.72% for GMDC. Except for FY21, NMDC has a declining trend comparable to OPM. Following low margins in the COVID period, GMDC NPM trended upwards, and other income increased by 151.51% YoY to Rs 393.57 crore in FY23 to help its margin.
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 the declining trend of NMDC, 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%. However, a higher RoCE than RoE indicates a more efficient use of debt financing, which is advantageous to the business.
Although GMDC has lower returns than NMDC, the higher base effect of NMDC from previous years has projected higher returns for it.
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.
The interest coverage of NMDC and GMDC in FY23 was 102.64% and 729.07%, respectively. Since it is equal to the number of times that interest can be covered by profits, this ratio makes creditors and investors feel more at ease.
NMDC Vs GMDC – Key Metrics
We will look at some of the key metrics of NMDC and GMDC.
Future Plans
NMDC
- NMDC intends to use brownfield expansion to increase its production capacity from 67 million tonnes per annum (MTPA) in FY26 to 100 MTPA in FY30.
- Through the development of greenfield projects such as Deposits 13 and 14, the company anticipates benefits from its joint venture with the Chhattisgarh Mineral Development Corporation.
- The green steel plant located in Chhattisgarh, NMDC Iron and Steel Plant (NISP), is nearing completion to start functioning with 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 cheaply transport iron ore to any location because of these expansions.
GMDC
- The company is working to run six more lignite mines, which will help it improve its market share, production and position. Leveraging the cost of lignite can help cut costs and aim to capture nearly 50% of the Gujarat market.
- By strengthening its profitability capabilities, the bauxite portfolio can further diversify its revenue streams, with an estimated investment of Rs 15 to 45 crore.
- The company is upgrading its thermal systems to diversify into solar energy and contribute to a greener future. They foresee savings and financial success from this initiative.
- Drone technology is used in harsh environmental conditions to explore minerals such as lithium, copper, gold and other minerals. It can be used to locate minerals more quickly and efficiently, leading to better mineral discoveries.
Conclusion
We are nearing the conclusion of NMDC Vs GMDC. These two companies have potential but also limitations 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 could be an opportunity or a misfortune for the industry. What is your opinion on these companies? Do they hold potential? Let us know your thoughts in the comments section below.
Written by Santhosh
By using the stock screener, stock heat map, portfolio backtestingand stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also keep up to date with stock market newsand make a well-informed investment.
![](https://tradebrains.in/wp-content/uploads/2021/06/Portal-Mobile-App-Ad-2023-Web.jpg)
Start Your Stock Market Journey Today!
Want to learn stock trading and investing? Be sure to check out exclusive Stock Market courses from FinGrad, Trade Brains’ learning initiative. You can enroll in FREE courses and webinars available at FinGrad today and get ahead in your business career. Join now!!