Detailed Narrative
Robust Q3 FY26 Performance Driven by Realizations
Indian Metals reported a strong Q3 FY26, with EBITDA margins exceeding 23%, a significant improvement from the 18-19% in Q2 FY26. This performance was primarily attributed to a roughly INR6,000 per tonne increase in ferrochrome realizations. Ferrochrome production for the quarter stood at 67,196 tonnes, with sales at 64,802 tonnes, while chrome ore raising was 265,468 tonnes. Management expects similar EBITDA margins in Q4 FY26, with domestic ferrochrome prices currently ranging from INR118,000 to INR120,000 a tonne.
Aggressive Capacity Expansion and Acquisition Strategy
The company is actively pursuing significant growth through both organic and inorganic routes. The acquisition of Tata Steel's ferrochrome plant at Kalinganagar (KNR 2) for a base consideration of INR610 crores is expected to close in February 2026, adding 99 MVA of furnace capacity. Concurrently, the greenfield Kalinganagar project (KNR 1) is on track, with the first furnace expected to be commissioned in June 2026. These expansions are projected to increase ferrochrome production from the current ~260,000 tonnes to ~400,000 tonnes in FY27 and 475,000-500,000 tonnes in FY28.
Strategic Capex and Financial Prudence
IMFA has outlined a substantial capex plan, with approximately INR600 crores for FY27 and INR400-500 crores for FY28, totaling INR1,000 crores over the next two years. This includes ~INR300 crores remaining for KNR 1, ~INR50 crores for the ethanol project, and ~INR200 crores for mines in FY27. The acquisition of KNR 2, costing around INR700 crores including GST, will be entirely funded by internal accruals. The company maintains a conservative stance on debt, with current long-term debt drawdown at only ~INR80 crores against a sanctioned limit of INR470 crores, and a target debt-equity ratio not exceeding 0.3.
Integrated Model and Cost Advantages
Management emphasized the resilience and competitiveness derived from its fully integrated business model, which includes captive chrome ore mines and power generation. This integration helps mitigate cost pressures, particularly from rising chrome ore prices. The Kalinganagar facilities are strategically located, offering logistical advantages expected to reduce weighted average EBITDA costs by INR1,500-2,000 a tonne in steady-state operations. The company aims to increase its ore raising to 1 million tonnes in FY27, fully catering to its expanded capacity from captive mines.
Diversification into Ethanol and Critical Minerals
IMFA is commissioning a 120 KLD ethanol plant in March 2026 with a capex of INR150 crores. This is viewed as a small diversification, leveraging existing infrastructure at Therubali, and further expansions will depend on its value accretion. Additionally, the company is evaluating opportunities in the critical minerals space, acknowledging the global scramble for these resources and IMFA's competence in mining and processing. However, specific plans for critical minerals are still in early stages.
Evolving Sales Mix and Market Outlook
The company plans to shift its export-heavy sales mix (currently >90% exports) to a 60-40 split (exports-domestic) over the next two years, aiming to meet domestic demand as the largest producer in India. While acknowledging market volatility🌐, management expressed confidence in near-term market dynamics and expects ferrochrome prices to remain supportive, with a long-term fair price range estimated at INR105,000-110,000 per tonne. IMFA also highlighted its focus on long-term contracts and niche ferrochrome products with premiums.