Indian Metals & Ferro Alloys Limited — Q3 FY25 earnings call

Call held 4 Feb 2025

Management summary

Indian Metals & Ferro Alloys Limited reported a resilient Q3 FY25 performance despite challenging market conditions and softening ferrochrome prices. The company is actively pursuing strategic expansions in ferrochrome capacity and diversifying into ethanol production, with clear timelines and investment figures. Management anticipates a market recovery and price uptick from March 2025, supported by integrated operations and cost optimization efforts.

Highlights

  • Ferrochrome production was 65,865 tons and sales were 65,490 tons in Q3 FY25.

  • The average selling price for ferrochrome in Q3 FY25 was Rs. 96,943 per ton.

  • EBITDA cost per ton for Q3 FY25 was Rs. 77,827, expected to remain at similar levels in Q4 FY25.

  • Kalinganagar Phase-1 is expected to be operational by April-June FY27, adding 40,000-45,000 tons in FY26.

  • Total ferrochrome capacity is targeted to reach 0.5 million tons in 3-4 years.

  • A 120 KL ethanol plant, with a Rs. 150 crore investment, is projected to generate Rs. 300 crores revenue and 10% EBITDA margin, operational by Dec 2025 or Jan 2026.

  • The company generated approximately Rs. 370 crores in cash for the nine months ended December 2024.

  • IMFA holds around Rs. 890 crores in invested funds, bonds, and FDs, maintaining a debt-free status.

Concerns

  • Softening ferrochrome prices due to Chinese steel oversupply

Key financials

  1. Ferrochrome Production 65,865 tons
  2. Ferrochrome Sales 65,490 tons
  3. Chrome Ore Cost ₹9,085/ton
  4. Coke Cost ₹14,628/ton
  5. Power Cost ₹5.27/unit
  6. Ferrochrome Avg Selling Price ₹96,943/ton
  7. EBITDA Cost ₹77,827/ton
  8. Other Expenses ₹106 Cr
  9. 9-month Cash Generation ₹370 Cr
  10. Total Invested Amount (Treasury) ₹890 Cr

What they filed

Q1 FY27: revenue up 49.5%, net profit up 109.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue692 643 567 642 719 +4%703 +9%763 +35%960 +50%
EBITDA171 128 71 125 138 −19%164 +28%159 +124%281 +125%
Net profit126 93 47 91 99 −21%131 +41%103 +119%191 +110%
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.

Guidance & targets

Capacity

  • Ferrochrome Production (Kalinganagar Phase-1) Capacity · Next financial year (FY26) · High confidence 40,000-45,000 tons
    So, both the furnaces should be operational by end of September. So, six months, we should be getting around 40,000-45,000 tons next year.

    — Prem Khandelwal

  • Ferrochrome Total Capacity Capacity · 3 to 4 years · High confidence 0.5 million tons
    And then in phase two, we will start thereafter, so which is again likely in 3 to 4 years. So, that's how we are planning to reach around 0.5 million tons in 3 to 4 years' time.

    — Prem Khandelwal

Mine Production

  • Mahagiri Mine Production Mine Production · By FY27 · High confidence 6 lakh tons
    At that rate, by FY27, we will be producing 6 lakh tons from Mahagiri.

    — Sandeep B. Narade

  • Sukinda Mine Production (opencast) Mine Production · By FY27 · High confidence 3 lakh tons
    That will be just 3 lakh tons only from opencast.

    — Sandeep B. Narade

Diversification

  • Ethanol Plant Capacity Diversification · Operational Dec 2025 or Jan 2026 · High confidence 120 KL
    So, it's a 120 KL plant with roughly Rs. 150 crore of investment, which will generate around Rs. 300 crore of revenue and EBITDA margin expected around 10%.

    — Prem Khandelwal

  • Ethanol Plant Investment Diversification · Operational Dec 2025 or Jan 2026 · High confidence Rs. 150 crores

    — Prem Khandelwal

  • Ethanol Plant Revenue Diversification · Post operational (Dec 2025 or Jan 2026) · High confidence Rs. 300 crores

    — Prem Khandelwal

  • Ethanol Plant EBITDA Margin Diversification · Post operational (Dec 2025 or Jan 2026) · High confidence 10%

    — Prem Khandelwal

Pricing

  • Ferrochrome Prices Pricing · From March onwards (2025) · Medium confidence Uptick
    Anything from March onwards there will be a uptick in the prices and now there is a rollover of the same prices.

    — Sureshbabu Chigurupalli

Cost

  • EBITDA Cost per ton Cost · Q4 FY25 · High confidence Remain at Q3 levels (Rs. 77,827)
    Q4 I think it would remain more or less at these levels.

    — Prem Khandelwal

Volume

  • Next Financial Year Volumes Volume · Next financial year (FY26) · High confidence Up by another 50,000 tons
    Next financial year volumes can go up by another 50,000.

    — Prem Khandelwal

Capex

  • Kalinganagar Project Cash Outlay Capex · By end of this year (FY25) · High confidence Rs. 150 crores
    So, as of now, we have invested about around Rs. 150 odd crores. And overall we expect that if I go with actual cash outlay, another Rs. 150 odd crores will be by end of this year, which we will be spending it out.

    — Saunak Gupta

  • Kalinganagar Project Cash Outlay Capex · Next year (FY26) · High confidence Rs. 450-500 crores
    So, next year, we are expecting somewhere around Rs. 450 crores to Rs. 500 crores in the cash outlay.

    — Saunak Gupta

Power

  • Renewable Power Tariff Power · Commence by June 2026 · High confidence Rs. 3.84 paisa
    That is ex-generator bus bar tariff Rs. 3.84 paisa.

    — Binoy Agarwalla

Risks & concerns

  • Softening ferrochrome prices due to Chinese steel oversupply

    high

    Chinese steel oversupply led to lower ferrochrome consumption and prices, impacting Q3 FY25 results.

    Management acknowledged

  • Headwinds in commodity markets

    medium

    General challenging market environment for commodities impacting performance.

    Management acknowledged

  • Market cap decline and shareholder value protection

    medium

    Analyst expressed concern over sharp decline in IMFA's market cap and requested management to address shareholder value protection.

    Analyst not addressed

Areas of evasion (2)

  • Commenting on competitors' business plans or market impact
  • Detailed O&M cost breakdowns for specific items

Q&A highlights

1 direct, 1 evasive
Ferrochrome price outlook and confidence for an uptick Direct
Because there is no drop in the Chinese prices in the last month. So, generally the free fall is stopped and there roll over happened with the same price. So, that there is a sustainable, it is not a tenability to operate at these levels. So, we are anticipating there will be a reverse of the prices.

Reveals management's reasoning for expecting a price recovery despite current softness, linking it to Chinese market stability and unsustainable current operating levels for non-integrated producers.

Asked by Divya Agrawal

Payback period for the Rs. 1750 crore CAPEX on ferrochrome expansion Partial
No, it's very difficult to project the payback as such because our industry is very cyclical. So, if the prices are good, then it can be 2-3 years also. But if it is not so good, then it could be 5-6 years. So, predicting any number is very difficult.

Highlights the cyclical nature of the industry and the inherent difficulty in projecting returns on large capital investments, indicating a wide range of potential payback periods.

Asked by Madhur Rathi

Availability of ferrochrome in India for Jindal Stainless's aggressive expansion plan Evasive
You should be asking that to them, not to us. We can't comment on their business plan. [...] No, at present we are producing less ferrochrome because of the ore concern. Much information at this moment is not available.

Management deflected a question about market supply dynamics related to a major competitor's expansion, indicating either a lack of specific market insight or an unwillingness to comment on competitive strategy.

Asked by Kaushak

3 min read 7 chapters

Detailed narrative

Q3 FY25 Performance Overview

IMFA reported a resilient Q3 FY25 performance despite challenging market conditions, with profits seeing some pressure due to market dynamics. The company acknowledged that performance came in 'below expectations' but emphasized a focus on long-term value creation and operational excellence. Management anticipates some further contraction in the next quarter but expects a recovery from March onwards, reinforcing their commitment to stakeholders.

Ferrochrome Production, Sales & Realization

For Q3 FY25, ferrochrome production stood at 65,865 tons, with sales reaching 65,490 tons. The average selling price for ferrochrome during the quarter was Rs. 96,943 per ton, reflecting a steep fall due to market conditions. Approximately 60% of sales are under long-term contracts, with the remaining on a spot basis, and 90% of total sales are exports.

Cost Structure & Efficiency

The EBITDA cost for the quarter was Rs. 77,827 per ton, and management expects it to remain at similar levels for Q4 FY25. Key input costs included chrome ore at Rs. 9,085 per ton (landed at Choudwar), coke at Rs. 14,628 per ton, and power at Rs. 5.27 per unit. Other expenses increased to Rs. 106 crores from Rs. 88 crores last year, primarily due to higher repairs, maintenance, and freight costs.

Expansion & Diversification Initiatives

IMFA is on track with its expansion plans, including Kalinganagar Phase-1, which is expected to be operational by April-June FY27, with the second furnace by September, adding 40,000-45,000 tons in FY26. The company aims to double its ferrochrome capacity to 0.5 million tons in 3-4 years. Diversification includes a 120 KL ethanol plant with a Rs. 150 crore investment, projected to generate Rs. 300 crores in revenue with a 10% EBITDA margin, becoming operational by December 2025 or January 2026.

Mining Operations & Chrome Ore Supply

The company has received CTE and CTO to double its mining output to 1.2 million metric tons from Sukinda and Mahagiri mines. Mahagiri is targeted to produce 6 lakh tons by FY27, up from 3 lakh tons, while Sukinda will contribute 3 lakh tons from opencast mining by FY27. The conversion of opencast to underground mining at Sukinda is a time-consuming process, taking about 5 years to start ore production.

Market Outlook & Pricing

Ferrochrome prices experienced a steep fall in the last quarter, mainly due to Chinese steel oversupply. Management expects prices to remain similar for January and February 2025 but anticipates an 'uptick' from March onwards, citing the unsustainability of current low operating levels for non-integrated producers and stabilization in Chinese prices. The benchmark for long-term contracts is based on Tsingshan prices, with quarterly negotiations for customers like POSCO.

Financial Position & Capital Allocation

IMFA maintains a debt-free status with approximately Rs. 890 crores invested in various funds, bonds, and FDs, which contributed to PAT. Cash generation for the nine months ended December 2024 was around Rs. 370 crores. Capital expenditure for the Kalinganagar project is projected at Rs. 150 crores by the end of FY25 and Rs. 450-500 crores for FY26. The company also secured a 25-year renewable power agreement with Jindal Group, commencing June 2026, at a tariff of Rs. 3.84 paisa per unit.

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