A capitalist hug for Maoists by Lloyd Metals and Energy
Recently, Lloyd looked to share ownership of the company (where the mine accounts for most of the value) with its blue-collar workforce through stock options. Some of these workers are former Maoists who have laid down arms and are looking for steady income.
To be sure, the company has faced its fair share of resistance since starting operations, including kidnapping of executives and arson by Maoists. However, it has stayed the course, growing its revenues 24 times between FY21 and FY24 to ₹6,575 crore after it started mining the red dust in the region that eventually becomes steel.
Now, in a move unheard of in the metals and mining industry, Lloyd Metals and Energy made news on Thursday after it granted stock options to its 6,000-strong workforce, a bulk of whom are making modest wages doing manual work in its mines or on its factory floors. The story was first reported by the Times of India.
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The company granted 42,800 shares as stock options to its workers at ₹4 apiece. At a market price of ₹1,340.95 per share as of close on Thursday, these shares translate to a value of ₹5.8 crore. Its sister concern Lloyd Engineering Works, too, granted stock options worth ₹5.6 crore, and so has unlisted group firm Thriveni Earthmovers Pvt. Ltd.
“Rewarding employees with company ownership is something we truly believe in,” said the company’s managing director Rajesh Gupta said, adding that they have been granting stock options to employees for the past seven years.
“We started with a small pool of 10-12 people and took it to our entire white-collar workforce two years ago. This year, we have given stock options to our entire blue-collar workforce, too,” Gupta added.
The company made an employee stock ownership plan (Esop) pool of 11 million shares seven years ago, most of which have been granted so far. There are some 170,000 shares still left in the pool, which are worth almost ₹23 crore as per the current share price.
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Gupta acknowledges the tumultuous social fabric of the region, where about 47 workers on the company’s roster today once bore arms for the Maoist ideology. “But they have given up arms since then and have found work with us,” he says.
Granting stock options to employees is not as common in the age-old metals and mining industry as it is in sunrise sectors like information technology or in new-age startups, company experts said.
“Nor is it common to grant options to the workmen. This is a move in the right direction and worth applauding,” said Chandrasekhar Sripada, clinical professor of organisational behaviour at Indian School of Business, Hyderabad. “Esops are an investment in building a sense of ownership amongst the workforce and it should pay off in the long run.”
The stock of Lloyds Metals and Energy gained over 6% to close at ₹1,340.95 on the BSE on Thursday compared to a 1.83% gain in the Sensex. The stock has more than doubled in the past one year, taking the company’s valuation to over ₹70,000 crore.
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The company plans to make further inroads in the region, with a planned 4-million-tonnes-per-annum pellet plant and an 85-km-long slurry pipeline in the works in Gadchiroli. It also plans to build a 360,000-tonnes-per-annum direct reduced iron unit and a 100-megawatt power plant in nearby Chandrapur.
Further expansion plans include another 4-million-tonne pellet plant in Gadchiroli and a 1.2-million-tonne wire rod mill in Chandrapur. The expansions are planned to be funded from internal accruals, maintaining the company’s net-debt free balance sheet.
“Considering the company’s focus on integrating the steel value chain, increasing capacity, exemption from paying additional premium, strategic mine locations near steel manufacturing hubs of nearby states, we expect a strong momentum ahead,” analysts at Anand Rathi said in a research note dated 28 November.
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The brokerage expects the company to outpace the growth in the steel and mining sector, with a 65% compounded annual growth rate in its Ebitda (earnings before interest, tax, depreciation and amortization) between FY24 and FY27.
The analysts mentioned operational risks due to Maoist conflicts, potential delays in receipt of environmental clearance, and fluctuations in iron ore prices as the key risks for the stock.
