Gare Palma IV-7 mine in Chhattisgarh, earmarked for the non-power sector, was the most sought after one in the current lot put on auction in the first tranche.
While accepting that the company got the Gare Palma IV/7 coal block relatively expensive, Sandeep Jajodia, chairman and managing director, Monnet Ispat says it was important that the company run the plant than shut it altogether.
Speaking to CNBC-TV18, Jajodia says the mining cost of the Gare Palma IV/7 block is relatively low and hence, is a good buy for the company.
Read: Monnet Ispat & Energy wins coal block in Chattisgarh
Furthermore, he says the logistics will not be an issue at all as the company previously owned the block right night to GP IV/7.
"The block is also just 55 km away from the end-use plant, so it's a good buy for us," he adds.
Below is the verbatim transcript of Sandeep Jajodia's interview with Sumaira Abidi & Reema Tendulkar on CNBC-TV18.
Sumaira: From what we understand you were quite aggressive in this bid so we want to understand from you now why is it that you were so keen on this block, isn't it that it has a slightly inferior grade?
A: That is true but the question in front of all prior allottees of coal blocks is that should they shut their plant or should they get a coal mine to run it. The thing is that prior allottees have been given a very step-brotherly treatment for example sponge industry, the sponge industry came into being only post allocations of coal blocks. They were given coal blocks by the government and then they were asked to put up their committed investments.
All of us have put thousands of crore as investment and suddenly the coal blocks were taken away. Now, we have compete with other sectors such as aluminium, like captive power plants have been asked to bid in the same blocks which were allocated for iron and steel, cement has been allowed to bid in the blocks which were meant for iron and steel. So, we don't have a choice. We have our back against the wall and we have only question to say should we shut our plants and render 2000-4000 people out of job or should we take the block at any cost; that is the only option left in front of us.
However, having said that, it is expensive but the mining is very easy; the mining cost is low because it is open cast mining. There is a washery in the mine itself which can be used then to enhance the grade of the coal. So, things can be worked around as far as costs are concerned. Why we went for it? I would say in one line we had no other choice.
Monnet Ispat stock price
On February 23, 2015, at 14:13 hrs Monnet Ispat was quoting at Rs 62.30, up Rs 6.25, or 11.15 percent. The 52-week high of the share was Rs 161.55 and the 52-week low was Rs 54.30.
The latest book value of the company is Rs 404.80 per share. At current value, the price-to-book value of the company was 0.15.
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