MINING AND MINERALS INDUSTRY

.

Group 5 Aditya Mehta Devang Kamdar Kaustubh Tiwary Neha Kedia Rishav Patawari Shone Thattil V. Vinod Kumar

OVERVIEW OF MINING AND MINERALS INDUSTRY Important for economic development of the country India produces 89 minerals out of which 4 are fuel minerals, 4

metallic and 52 non-metallic and 22 minor minerals India has about 7% of the world’s proven coal Reserves Coal supplies almost 50% of the country’s requirements Reserves are enough for meeting India’s needs for the next

hundred years Mines and Minerals industry is contributing around 3% to the

country’s GDP. It provides employment to 1.1 million people with 16% share

in exports Largest producer of Mica in the world Third in production of coal, lignite and barites Governed by central and State government

KEY MINING POLICIES

Two major laws governing the sector are

1. Mines and Minerals Development and Regulation

Act, 1957

2. Mines Act, 1952

Further the government has formulated National

Mineral Policy to permit the investment in

exploration and exploitation of Minerals.

FDI – MINING AND MINERALS INDUSTRY

In 1999, Foreign Investment Policy was liberalized to

promote Foreign Direct Investment in the Mining sector

74% is permitted under automatic route for exploration

and mining of diamonds and precious stone.

100% is allowed for the exploration and mining of gold

and silver and minerals other than diamonds and

precious stone.

100% under automatic route for metallurgy and

processing

FDI - MINING AND MINERALS INDUSTRY

100 percent in Private Indian companies setting

up/operating power projects as well as coal and

lignite mines for captive consumption.

100 percent FDI is allowed for setting up coal

processing plants with certain restriction

MAJOR PLAYERS IN THE INDUSTRY

20 MICRONS LIMITED

Market Capitalization – Rs. 59.24 crores

Net Profits – Rs. 1.34 crores

SESA GOA LIMITED

Market Capitalization – Rs. 21751.84 crores

Net Profits – Rs. 1942.49 crores

GUJARAT MINERAL DEVELOPMENT CORPORATION

Market Capitalization – Rs. 3424.86 crores

Net Profits- Rs. 231.42 crores

VARIOUS MINING AND MINERALS INDUSTRIES

NATIONAL MINERAL DEVELOPMENT

CORPORATION

Market Capitalization- Rs. 141402.02 crores

Net Profits- Rs. 4372.38 crores

HIMADRI CHEMICALS AND INDUSTRIES LIMITED

Market Capitalization- Rs. 1148.61 crores

Net Profits- Rs. 46.78 crores

LIQUIDITY RATIO

CURRENT RATIOCOMPANY 2008-09 2007-08 2006-07

20 MICRONS 3.28 3.08 3.14

SESA GOA 2.89 2.26 2.23

GMDC 1.57 1.63 1.70

NMDC 10.10 10.69 13.24

HIMADRI IND. 4.78 7.03 5.90

• Inter-corporate Deposits of Rs.1000 cr (SESA GOA)

• NMDC has huge cash (Rs.9,700cr) reserves

deposited in banks as term deposits

QUICK RATIOCOMPANY 2008-09 2007-08 2006-07

20 MICRONS 2.30 2.16 2.15

SESA GOA 2.47 1.49 1.15

GMDC 1.51 1.57 1.65

NMDC 9.84 10.47 12.93

HIMADRI IND.

3.21 4.10 4.15

2008-09 2007-08 2006-070

2

4

6

8

10

12

14

20 Microns ltd.Sesa goa ltd.Gmdc ltd.Nmdc ltd.Himadri ltd.

EARNING RATIO

RETURN ON EQUITYCOMPANY 2008-09 2007-08 2006-07

20 MICRONS 3.75 16.27 15.03

SESA GOA 42.99 53.45 40.25

GMDC 18.99 24.86 11.26

NMDC 37.57 39.21 39.99

HIMADRI IND. 12.18 24.32 25.70

• Decline in demand in last 2 years due to Recession

• Decrease in Profitability – Decrease in ROE

RETURN ON ASSETSCOMPANY 2008-09 2007-08 2006-07

20 MICRONS 0.084 0.11 0.104

SESA GOA 0.51 0.70 0.50

GMDC 0.14 0.17 0.09

NMDC 0.51 0.54 0.56

HIMADRI IND. 0.10 0.19 0.19

• SESA GOA and NMDC has increased its Total Assets

TURNOVER RATIO

FIXED ASSETS TURNOVER RATIO

COMPANY 2008-09 2007-08 2006-07

20 MICRONS 1.85 1.56 1.34

SESA GOA 7.38 5.84 3.79

GMDC 0.53 0.54 0.34

NMDC 4.89 4.19 3.27

HIMADRI IND.

1.39 1.66 2.11

INVENTORY TURNOVER RATIO

COMPANY 2008-09 2007-08 2006-07

20 MICRONS 9.11 10.49 12.21

SESA GOA 20.53 13.89 7.57

GMDC 18.27 25.28 13.97

NMDC 32.28 39 33.05

HIMADRI IND.

3.89 4.08 6.02

• Larger the ratio better for the

company

AVERAGE COLLECTION PERIOD

COMPANY 2008-09 2007-08 2006-07

20 MICRONS 54 53 48

SESA GOA 25 33 40

GMDC 32 32 49

NMDC 36 24 26

HIMADRI IND.

60 47 30

• Average collection Period for Industry is 30 days.

• Only SESA GOA has been able to reduce its collection

period

COVERAGE RATIO

INTEREST COVERAGE RATIO

COMPANY 2008-09 2007-08 2006-07

20 MICRONS 1.78 2.10 2.12

SESA GOA 779.31 1482.42 415.68

GMDC 7.86 6.81 3.28

NMDC N/A N/A N/A

HIMADRI IND.

4.32 10.51 8.10

• Sesa Goa has secured loan of Rs.1.91 cr

TAX BURDEN RATIO

COMPANY 2008-09 2007-08 2006-07

20 MICRONS 0.54 0.74 0.77

SESA GOA 0.74 0.67 0.67

GMDC 0.63 0.65 0.56

NMDC 0.66 0.66 0.66

HIMADRI IND.

0.74 0.78 0.75

LEVERAGE RATIO

DEBT EQUITY RATIOCOMPANY 2008-09 2007-08 2006-07

20 MICRONS 1.64 1.71 1.88

SESA GOA 0 0 0

GMDC 0.50 0.85 1.26

NMDC 0 0 0

HIMADRI IND.

0.77 0.68 1.05

• Sesa Goa and NMDC are the Debt free companies

• Debt free companies are performing better than

companies having debt

• Rest of the companies are paying off their debt to

release interest burden

Ratios 20 Microns

Sesa Goa

GMDC NMDC Himadri Chemicals

Industry Average

Debt Equity

1.64 0 0.50 0 0.77 0.49

Current 3.28 2.89 1.57 10.10 4.78 1.16

Quick 2.30 2.47 1.51 9.84 3.21 -

FAT 1.85 7.38 0.53 4.89 1.39 1.17

Invent. Turnover

9.11 20.53 18.27 32.28 3.89 11.48

Interest coverage

1.78 0 7.86 0 4.32 17.87

Tax Burden

0.54 0.74 0.63 0.66 0.74 -

ROE 3.75 42.99 18.99 37.57 12.18 -

ACP 55 26 33 37 60 29

ROA 0.084 0.51 0.14 0.51 0.10 -

FUTURE OUTLOOK

Demand in this sector is expected to increase several

folds within next 5-10 years due to completion of

ongoing coal based power projects and demand from

metallurgical and other industries

New mining policy to attract Rs. 5 trillion within 5-6

years

Government seeking a phased withdrawal of its

participation from non-strategic metal sector in order

to encourage private players to take the centre stage

FUTURE OUTLOOK

Potential Areas for exploration ventures

including Gold, Diamond, Copper, Zinc, Lead,

Nickel, etc.,

Development and production of surplus

commodities such as Iron ore, Bauxite, Mica,

etc.,

Strengthening of Logistics in coal distribution

Focusing on technology in future

2007 2008 20090

20

40

60

80

100

120

140

160

NET SALESNET PROFIT

20 MICRONS LIMITED

2007 2008 20090

1000

2000

3000

4000

5000

6000

NET SALESNET PROFIT

SESA GOA LIMITED

2007 2008 20090

200

400

600

800

1000

1200

NET SALESNET PROFIT

GMDC LIMITED

2007 2008 20090

1000

2000

3000

4000

5000

6000

7000

8000

NET SALESNET PROFIT

NMDC LIMITED

CONCLUSION

Analyzing the five different companies of mining

industries we inferred that Sesa Goa and NMDC are the

top performing companies in this sector. One of the

main reasons for their top performance is that they are

debt free companies. They are performing efficiently

and giving good returns to their shareholders. They have

stable ‘Return on Equity’ throughout the considered

period despite weak global cues in the later FY’08. While

in case of other companies Return on Equity is declining.

Sesa Goa is the company which shows the positive

growth in almost all the considered ratios.

CONCLUSION (CONTD..) The low performance of other companies can be justified

by unskilled labor force and lack of proper infrastructural

facilities. Poor logistics leads to lot of wastage of minerals

and hinder the progress of the company. Tax Burden faced

by the company is also very high which restricts the

industry to initiate new activities for its growth.

The Mining Industry has a greater opportunity for further

growth. There are several areas of potential exploration

which includes Gold, Diamond, Copper, Lead, Zinc, Nickel

etc., and other rare metals and fertilizer minerals.

Developing R&D would also help the industry to identify

new opportunities and help in overall development of the

country.

REFERENCES www.capitaline.com www.investopedia.com www.nmdc.co.in www.sesagoa.com www.gmdcltd.com www.wikipedia.com www.fdimagazine.com