IFGL Refractories Limited — Q3 FY25 earnings call

Call held 10 Feb 2025

Management summary

IFGL Refractories delivered a mixed Q3 FY25, characterized by strong domestic growth of 25% YoY, driven by India's robust steel demand and strategic capacity expansions. However, global subsidiaries faced significant headwinds from declining steel demand and elevated raw material costs, resulting in a consolidated net loss of INR 2 crores. The company is strategically diversifying into non-steel sectors through a new JV and optimizing global operations, anticipating a market recovery and continued domestic strength.

Highlights

  • Indian business reported over 25% growth this quarter and 18% for the first 9 months of the fiscal year.

  • Standalone domestic revenue crossed INR 500 crores for the first time in 9 months of FY25.

  • New joint venture, IFGL Marvel Refractories Limited, incorporated in December, enabling expansion into high-potential sectors like cement, glass, non-ferrous, and gasification.

  • India's steel demand is forecasted to expand by 8% over 2024 and 2025, fueled by robust infrastructure investment.

Concerns

  • Global steel demand expected to decline by 0.9% in 2024.

  • Consolidated total income for 9M FY25 was down 3% YoY to INR 1,218 crores.

  • Consolidated EBITDA margin for Q3 FY25 stood at 5.1%, leading to a net loss of INR 2 crores for the quarter.

  • Raw material costs, particularly alumina, almost doubled from USD 320-330 to USD 650-660, impacting gross margins.

Key financials

  1. Consolidated Total Income ₹382 Cr +3%YoY
  2. Consolidated EBITDA ₹19 Cr
  3. Consolidated EBITDA Margin 5.1%
  4. Consolidated PAT ₹-2 Cr
  5. Standalone Total Income ₹235 Cr +18%YoY
  6. Standalone PAT ₹5 Cr

What they filed

Q1 FY27: revenue up 12.8%, net profit up 54.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue411 379 449 454 489 +19%469 +24%483 +8%512 +13%
EBITDA33 17 33 36 38 +15%23 +35%39 +18%37 +3%
Net profit12 -2 8 11 13 +8%-3 −50%14 +75%17 +55%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Order book

medium confidence
Management noted a promising uptick in incoming orders and interest from customers, particularly in the US market, despite global headwinds.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹160 Cr
    • New plant and Joint Venture
    I think '24, '25, we spent almost INR 160 crores, INR 170 crores of capex. And not much to be done in this quarter, except for new plant and JV and all that we will try to do.
  • Debt Net ₹11.64 Cr
    With respect to the liquidity position, we had a net debt of INR 11.64 crores with a strong balance sheet.
  • M&A IFGL Marvel Refractories Limited Joint venture · Incorporated

    To expand beyond our core business and enter high potential sectors such as cement, glass, non-ferrous and gasification industry.

    No revenue contribution in FY26; expected from H2 FY27. Plant capacity of 25,000 tons/year, with ramp-up to 90% utilization within 2 years of start.

    Additionally, we are excited to announce our newly formed joint venture with The Marvels Group, IFGL Marvel Refractories Limited, which was officially incorporated in December. This joint venture marks a significant milestone in our journey, enabling us to expand beyond our core business and enter high potential sectors such as cement, glass, non-ferrous and gasification industry.
  • Liquidity Cash ₹180 Cr
    Cash and cash equivalents stood at INR 180 crores on consolidated basis as on December '25.

Guidance & targets

Revenue

  • Indian Business Revenue Growth Revenue · Past 3 years (achieved) · High confidence 25%
    Over the past 3 years, we have consistently achieved 25% growth year-on-year demonstrating the resilience and potential of domestic market.

    — Arasu Shanmugam

  • Standalone Domestic Revenue Revenue · 9 months FY25 (achieved) · High confidence INR 500 crores
    Additionally, we are proud to have crossed for first time INR500 crores revenues in 9 months in the FY '25 from stand-alone domestic revenue.

    — Arasu Shanmugam

  • Vizag Plant Revenue Contribution Revenue · H2 FY26 · High confidence INR 48-50 crores
    roughly if you take 80,000 and to the amount of INR 48 crores.

    — Arasu Shanmugam

Market Growth

  • India Steel Demand Expansion Market Growth · Over 2024 and 2025 · High confidence 8%
    India's steel demand is forecasted to expand by 8% over 2024 and 2025

    — James McIntosh

Capacity

  • India Cement Production Capacity · By 2029 · High confidence 900 million tonnes
    in coming 4 years when we touch 2029, India is going to produce 900 million tonnes.

    — Arasu Shanmugam

  • JV Plant Capacity Capacity · Once operational · High confidence 25,000 tons/year
    the plant is of 25,000 ton a year capacity.

    — Arasu Shanmugam

Volume

  • JV Basic Brick Consumption Volume · When India produces 900 million tonnes of cement · High confidence 150,000 to 160,000 tons/year
    that will make a basic brick consumption, the JV which is going to produce the consumption will be almost 150,000 to 160,000 tons a year.

    — Arasu Shanmugam

Utilization

  • JV Plant Ramp-up Utilization · Within 2 years of ramp-up start · High confidence 90%
    our ramp-up will certainly start 4 months down the line from 40%. And there onwards, I would say that within maybe 2 years, we will reach 90%.

    — Arasu Shanmugam

Market Share

  • Non-ferrous Business Revenue Contribution Market Share · Next 5 years · Medium confidence 15%
    And we're aiming for the non-ferrous business to contribute 15% of the revenue in next 5 years.

    — Suraj Sonulkar

Market context

  • Global Steel Demand Rebound Market Growth · 2025 · Medium confidence 1.2%
    a broad-based recovery, excluding China is projected in 2025 with global steel demand anticipated to rebound by 1.2%.

    — James McIntosh

What to watch in Q4 FY25

FY26 Revenue and Margin Guidance

Next quarter (Q4 FY25 call)
Current Not provided this quarter
Target Specific FY26 revenue and margin targets

Why it matters

Management deferred providing FY26 guidance, making it a key item for the next earnings call to assess the company's forward-looking outlook and strategic direction.

definitely, the next quarter when we see FY '26, we will come out.

Risks & concerns

  • Challenging Global Subsidiaries Performance

    high

    Operations in the U.S.A., Germany, and the U.K. are facing subdued demand, steel plant shutdowns, economic/geopolitical uncertainties, and elevated raw material costs, leading to margin pressure.

    Management acknowledged

  • Raw Material Cost Inflation (Alumina)

    high

    The alumina index almost doubled from USD 320-330 to USD 650-660, significantly impacting gross margins and requiring ongoing discussions for price adjustments with customers.

    Management acknowledged

  • Global Steel Demand Decline

    medium

    Global steel demand is expected to decline by 0.9% in 2024, impacting the primary market for IFGL's products, though a recovery is projected for 2025.

    Management acknowledged

Q&A highlights

5 direct, 1 evasive
Technology transfer from Sheffield Refractories for cement/steel shotcreting solutions. Direct
The critical difference is made by the way it is applied through the latest equipment with automatic control, right? And that setup is already under manufacturing and almost, I would say, roughly 60% complete. We are expecting that the whole setup to land in India sometime in end April. So from May onwards, we will take up this and then implement in customers in both cement as well as steel.

Details a key strategic initiative to enhance product offerings and market reach in India, with clear timelines for implementation and expected benefits for cement and steel customers.

Asked by Rohan Mehta

New Joint Venture with Marvels International Group for diversification into non-steel sectors. Direct
See this IFGL Marvels JV that I would say it is going to be a really path breaking movement for IFGL. Why do I say so? Because our diversification into non-steel market so far historically IFGL heavily dependent on steel... this JV is going to give us first ever fired basic bricks which is going to be highly consumable in cement plant.

Highlights a significant strategic shift to de-risk from steel sector dependence and tap into high-growth non-ferrous sectors like cement, glass, and gasification, with substantial market potential.

Asked by Rohan Mehta

Employee cost increases over the past 8 quarters and expected stabilization. Partial
Now in just 12 months, we've already got an order of 7,000 tons and sold. That's the kind. So the administration we've put earlier in FY '24 the cost was different now it is shared. So the same way 1.5 years to 2 years anything between 16 to 18 months down the line, the administration which is now we're putting in place right now, we'll be delivering the numerator in coming 16 to 18 months which is absolutely normal for our kind of a business in the [Inaudible].

Addresses a recurring concern about rising employee costs, attributing it to strategic investments in new facilities and administration, with an expectation of normalization over the medium term (16-18 months).

Asked by Payal Shah

Guidance for FY26 revenue (consolidated, standalone) and margins. Evasive
You see, because we're already -- we're in the fag end of the financial year and there are lot of budget speech on February beginning by Nirmala Sitharaman,Honourable Finance Minister. There are something for steel but all those things to come on ground, deliver results, it's going to be a lag of 2, 3, 4 months by which this year will be over. So as we are almost nearing end of the financial year, we do not want to change any guidance. But yes, definitely, the next quarter when we see FY '26, we will come out.

Management declined to provide specific FY26 guidance, citing the end of the fiscal year and upcoming budget announcements, indicating a preference to wait for more clarity before committing to forward-looking numbers.

Asked by Payal Shah

Gross margin decline, impact of raw material cost inflation (alumina), and pass-on strategy. Direct
In other side pressure is raw material, particularly, aluminium index if you see aluminium index from USD 320 -330, it went up to USD 650 - 660. I mean, it's almost like dependent at times... And we are also now discussing with customers on bill or may be aside of mentioning to the previous question, we may be -- we're going, we're planning and we're confident to indulge in the situation with the first quarter -- end of first quarter FY '26 and there onwards.

Explains the significant impact of raw material cost inflation (alumina doubling) and pricing pressure from customers on gross margins, outlining plans for price adjustments and expected margin revival from Q1 FY26.

Asked by Sahil Sanghvi

EI Ceramics (US subsidiary) restructuring progress, impact on margins, and recovery timeline. Partial
The work that we're doing in EI Ceramics at the moment should let us see probably not in the yes, nothing in the next quarter, in the next quarter. We might start to see some differences there in the margins. And as Arasu mentioned in that the Indian market, the American market is exactly the same... Market comes back, then the margins will definitely be there.

Provides an update on the challenging US subsidiary, indicating ongoing restructuring efforts and linking potential margin improvement to broader market conditions and policy support, with initial signs possibly visible next quarter.

Asked by Sahil Sanghvi

Marvel JV plant commissioning, ramp-up, and revenue contribution timeline. Direct
You see once when the JV plant commences in operation, we're expecting that the plant is of 25,000 ton a year capacity. And our ramp-up will certainly start 4 months down the line from 40%. And there onwards, I would say that within maybe 2 years, we will reach 90%... No, FY '26, nothing. It will be FY '27 second half.

Clarifies the capacity, ramp-up timeline, and the significant detail that the JV will not contribute to revenue until H2 FY27, which is later than some might have anticipated, impacting near-term growth projections.

Asked by Sahil Sanghvi

Board-level discussions regarding an exit strategy for the Germany/Europe market. Direct
None whatsoever.

Reassures investors that despite ongoing challenges in the European market, the company has no plans to exit, indicating a long-term commitment to these operations and potential for future recovery.

Asked by Rohan Mehta

3 min read 6 chapters

Detailed narrative

Robust Domestic Performance Drives Growth

IFGL Refractories demonstrated strong performance in the Indian market during Q3 FY25, with the domestic business reporting over 25% year-on-year growth for the quarter and an 18% growth for the first nine months of the fiscal year. Standalone domestic revenue for 9M FY25 surpassed INR 500 crores, contributing 71% to the total standalone revenue. This growth is supported by India's resilient economy and a projected 8% expansion in steel demand over 2024-2025, fueled by significant infrastructure investments.

Global Subsidiaries Face Headwinds and Margin Compression

In contrast to the domestic market, IFGL's global subsidiaries in the U.S.A., Germany, and the U.K. encountered a challenging environment. Factors such as subdued demand, major steel plant shutdowns, economic and geopolitical uncertainties, and elevated raw material costs impacted their performance. This led to a consolidated total income growth of only 3% YoY to INR 382 crores in Q3 FY25 and a 3% decline for 9M FY25 to INR 1,218 crores. Consolidated EBITDA margin compressed to 5.1% in Q3 FY25, resulting in a net loss of INR 2 crores for the quarter.

Strategic Diversification through New Joint Venture

A significant strategic move was the incorporation of IFGL Marvel Refractories Limited in December, a joint venture aimed at diversifying the company's product portfolio beyond its traditional steel industry focus. This JV will produce fired basic bricks, highly consumable in the rapidly expanding Indian cement sector, which is projected to reach 900 million tonnes by 2029. The JV also targets entry into non-ferrous sectors like glassmaking and gasification, with a plant capacity of 25,000 tons/year, expected to ramp up to 90% utilization within two years of commissioning, though revenue contribution is anticipated from H2 FY27.

Raw Material Cost Inflation Impacts Profitability

The company's gross margins were significantly affected by a sharp increase in raw material costs, particularly alumina, whose index price almost doubled from USD 320-330 to USD 650-660. This, coupled with pricing pressures from customers and increased logistics costs, resulted in a 6-9% reduction in contract prices. Management is actively engaging with customers for price adjustments and expects raw material costs to soften in 3-4 months, aiming for a revival in margins from Q1 FY26.

Capacity Expansion and Operational Enhancements

IFGL is investing in capacity expansion and operational efficiency to support future growth. Key initiatives include the inauguration of an alumina production line at its Gujarat toll manufacturing facility, which has already supplied 7,000 metric tons to cement manufacturers. The Continuous Casting Flux plant in Visakhapatnam is now fully automated, and a new magnesia carbon production line has been launched as part of Phase 3 expansion. The Vizag plant is expected to contribute INR 48-50 crores in revenue from H2 FY26.

Capital Expenditure and Liquidity Position

The company incurred approximately INR 160-170 crores in capital expenditure during FY24-25, primarily directed towards new plants and the joint venture. Despite these investments, IFGL maintains a healthy liquidity position, reporting a net debt of INR 11.64 crores and consolidated cash and cash equivalents of INR 180 crores as of December 2025. The annualized ROCE and ROE stood at 6.5% and 4.2% respectively, reflecting prudent financial management.

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