Indian Metals

Indian Metals reported improved revenue and margins in Q1 FY26, driven by a pick-up in ferrochrome prices and efficiency initiatives. Ferrochrome production for the quarter was 65,929 metric tons, while chrome ore production stood at 1,03,780 metric tons. The EBITDA cost for the quarter was approximately Rs. 77,500 per tonne. Power costs increased to Rs. 5.27 per unit in Q1 FY26 from Rs. 4.97 per unit in Q1 FY25, with coal cost at Rs. 2.68 per unit.

The Kalinganagar greenfield ferrochrome expansion project is progressing on schedule, with the first furnace expected to be operational by June 2026 and the second by September 2026. The underground Sukinda Mines expansion is also on track. Additionally, the 120 KLD ethanol project in Therubali commenced construction in Q1 FY26 and is targeted for commissioning by Q4 FY26, contributing to the company's diversification efforts.

Chrome ore production in Q1 FY26 was 1,03,780 metric tons, a decrease from 2,20,000 metric tons in Q4 FY25, primarily attributed to the early arrival of the monsoon. The chrome ore cost for Q1 FY26 was around Rs. 8,400, up from Rs. 7,500 in the previous quarter. Management noted that the current raising cost for both mines is about Rs. 3,000, but this will increase with the transition to fully underground mining, a necessary step due to ore body depth.

IMFA is producing niche low-silicon, low-phosphorus, high-chromium alloy products, which constitute about 5-6% of its total capacity, or around 15,000 tonnes of production. These value-added products command a premium ranging from Rs. 4,000 to Rs. 20,000 per tonne. The company aims to direct 40% of its incremental capacity towards the domestic market, shifting from its current export-heavy mix, to cater to India's growing stainless-steel demand, which is expanding at a CAGR of around 6%.

Analysts raised the potential impact of a proposed $100 per tonne export tax on chrome ore in South Africa, which could significantly increase ferrochrome costs for Chinese producers and benefit Indian players. Management acknowledged the potential but advised caution, noting past instances where such proposals fizzled out and the complexities of Chinese investments in South Africa. IMFA believes it is cost-competitive compared to China, though slightly less so than Kazakhstan and Turkey.

The company is continuously evaluating and implementing initiatives for operational efficiency and cost optimization across its conversion processes. Management stated that the overall EBITDA cost has remained stable around Rs. 77,500 per tonne over the last two quarters. The implementation of ERP Oracle Fusion in the last financial year is expected to provide greater visibility and drive further digital operational efficiency improvements.