About Business :
Gujarat Mineral Development Corporation Limited (GMDC) is a major minerals and lignite
mining company owned by Government of Gujarat.
It deals in mining of Lignite, bauxite, fluorspar & it has also won coal blocks in Chhattisgarh and Jharkhand but allocation got recently cancelled
by Hon'ble Supreme Court of India because of misc. reasons of obvious fraud & jugaad done in getting allocated.
SWOT Analysis :
- Sarkari Company with mopopolized allocation of Mineral & lignite sites.
- Pricing power in lignite because of being the only producer of Lignite in Gujarat
- GMDC is JV with other companies to do business in areas where it has no direct access but has power of funds & getting govt. clearances needed to execute those projects.
- Being Sarkari (Government)company it has to execute project for the sake of Govt. which are not highly profitable but necessary for government to serve people of the great state of Gujarat.
- Got pushed into wind energy project jabardasti which doesn't seem to be so profitable at all because Mr. Narendra Modi's vision are apparently getting executed by great PSUs of Gujarat.
- Mining turnover drops because of monsoon every year somehow making it cyclical kind of business which should be eliminated by improving mining technology making workers able to work in rainy season.
- Sarkari hartal (Strike) are sometime real pain in the ass for GMDC.
- The BJP Government has come out with Mines and Minerals
(Development and Regulation) Amendment Act, 2015 for enhanced transparency in mining business. This change will kick start investments in the mining sector & hence in GMDC. Clarity on licensing terms, auctions, transfer of concessions will enable the GMDC to attract investment on its own terms, without having to depend on end-use plants.
- Advanced research in producing bio-fertilisers by use of Lignite is a new avenue that GMDC can explore which in turn can also provide better yield to farmers.
- GMDC may explore opportunities for mining and sale of secondary minerals available within its Lignite mines which are just getting wasted because of less caring attitude of Sarkari company.
- GMDC is thinking in line for Exploration of Business Opportunity in Beach Sand Mining. Which I believe can be a game changer for it.
- It is going to set up a Wind Power Plant of 50 MW in near future. Don't know why I put it as opportunity as I don't see it as a quality decision by GMDC but Govt. ka pressure hai.
- With Govt. introducing Auction Process
for allotment of coal blocks & also other mineral leases by which GMDC may have to participate in competitive auctions for new mining leases but there are some hacks in these auction rules which helps a govt. undertaking like GMDC immensely to get alloted.
- BJP's lack of progress in finalization
of Land Acquisition, Rehabilitation and Resettlement 2013 Act will increase input cost for GMDC & not to forget the time delay of Sarkari Kaam.
- Mining being an environment hazard business, GMDC has to restore areas where it has already mined & with increasing norms of environmental concerns these expenses are on rise.
Business Verdict :
GMDC has consistent mining business even though few hiccups after global meltdown of 2008 which caused Chinese production to decline but now its turnover seems to be picking up. With Zero(0) debt & diversified investments in different mining projects GMDC is a Value Pick with very stable & sustainable business with high profit margins because of monopoly status in lignite in state of Gujarat.
With international coal price along with many other minerals had a steep fall since 2012 in international markets GMDC has also fallen sharply from its peak due to people dumping it like there is no tomorrow (thanks to there stock broker's advice ) but I see minor decline in turnovers & robust profit margins maintained. GMDC is a Multibagger stock in India available undervalued which is like an opportunity of decade to invest in this Mineral extracting value pick.
What are Value Picks ?
Value picks are stocks of companies that are believed to be undervalued at NSE or BSE. It is an outcome of huge sattebaaji directed by Stock brokers in that stock making Markets overreact to good and bad news, resulting in stock price movements that do not correspond with the company's long-term business or fundamentals.
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Is Value Pick Tax Free ?
YES, Profit arising from holding Equity shares for 1 Year or more is covered under Long Term Capital Gain ( LTCG
) as per Income Tax Act 1961 ( Section 54 )
About me :
Currently managing assets of
5 Crore+ & still sleep like a baby every night because Valueguyz makes life simpler.
I am passionate about 3 things in my life Financial System, Fitness &
I got introduced to Financial system through Forex Trading back in 2007 during my 3rd Year of Engineering & It was too complex yet magnificent. Officially I entered Indian Stock Market in early 2008 at the very beginning of Global Financial Crisis, but what the hell did I know for me it was the last semester & time to get serious about my passion ie,
RoCE : Return on Capital Employed (Effective)
PAT(Avg.) : Net Profit after tax ( Average )
CMP : Current Market Price
MoS : Margin of Safety
This analysis is my personal opinion shared on public media (Blog) & is not a recommendation of any sort in any manner.
I am currently not registered with SEBI in any capacity but in process of being a registered Research Analyst with SEBI. I have no financial interest in aforesaid company & don't hold any stock on the date of writing this post.