Godawari Power is engaged into the manufacturing of Sponge Iron (105,000 TPA), Steel Billets (150,000 TPA) with captive power generation facility (18 MW). The plant is located at Siltara Industrial area, in Raipur District of Chattisgarh State. The company was incorporated as Ispat Godawari Ltd. in 1999 and thereafter changed its name in June 2005.
Financials
The company has got an aggregate debt of Rs.831.37 million as against an equity and general reserve of only Rs. 261.49 million.
The company is in the fourth year of operations and has had a turnover of Rs.1931 million last fiscal and profit after tax of Rs.241.07 million.
The EPS last fiscal has been Rs.67.43 which is up from Rs.28.77 for the year ended 31st March 2004. A look at the cash flow statement shows that the company has generated cash worth Rs.303..40 million last fiscal from its operating activities, this was a mere 27.89 million in the fiscal before and was negative for the two financial years 2003 and 2002.
Object of the Issue
The issue is meant to raise money for expansion and buying stake in group companies to make them subsidiaries.
The expansion projects are estimated to cost Rs.1733.20 million and there is a plan for equity investments Jagdmaba Power and Alloys Limited and Sagar Energy and Steels Limited to make them 51% subsidiaries which is estimated to cost Rs.350 million.
Key Risks
One risk that comes to the fore is that the company is still young and the last year has been quite good for the company but one good year cannot really tell about the long term prospects of the company.
Another risk that comes to notice is that the balance sheet is heavily loaded with debt as referred to above.
This is the second phase of expansion that the company proposes to undergo, there has already been delay in the first phase implementation which is slated to hit profitability in the current fiscal.
The steel cycle has already boomed and now the best part of the bullish phase of the steel cycle is already over. Prices are poised to come down going forward. As it is there is significant competition to the company from various sources.
