Kirl. Ferrous

Kirloskar Ferrous reported a robust Q1 FY26 with sales growing 8.5% YoY to ₹1,685 crores, and EBITDA increasing 14% YoY to ₹214 crores. PAT saw a significant jump of 26.3% YoY to ₹96 crores. This performance was achieved despite commodity price pressures, particularly in pig iron and steel, which saw realizations decline by 8% and 6% respectively. The company highlighted strong demand for castings and tube mills, with tube sales growing 32% YoY.

The company successfully reduced its overall power and fuel cost to 6.1% in Q1 FY26, down from 8.9% in the prior year, primarily due to the full commissioning of its 70 MW power plant. Further cost benefits are anticipated from the ongoing erection and commissioning of windmills. These initiatives are part of a broader strategy to enhance cost competitiveness, improve margins, and align with green energy goals.

Kirloskar Ferrous has outlined ambitious expansion plans across its segments over the next 2-4 years, requiring an additional CAPEX of ₹2,000-2,500 crores. This includes increasing casting business to 260,000 metric tons per annum, steel making capacity from 300,000 to 650,000 metric tons per annum, and tube capacity to 300,000-350,000 metric tons per annum. For FY26, the company plans a CAPEX of ₹500-600 crores, focusing on green power, the Koppal steel project, Hiriyur upgradation, and casting machining.

A significant project involves converting pig iron to steel blooms at the Koppal facility, with a planned capacity of 3.6 lakh metric tons per annum. This project, estimated to cost ₹700-800 crores, has received MOEF clearance and consent to establish, with work expected to commence shortly and operationalization targeted within 2-2.5 years. This initiative aims to mitigate the high cost of steel manufacturing at Jejuri and improve value addition.

The casting business is experiencing strong demand, with all foundries operating at full capacity. The company is actively adding new customers and expanding its presence, including through Oliver Foundry, which is contributing about 1,000 tons per month. For a specific Ford casting product, after completing development and approvals, the company is in serial production and expects to ramp up volumes to 8,000-10,000 numbers per month within the next month and sustain this rate for the next six months.

The Jambunatha Mine, with an EC capacity of 1.2 million tons per annum, is a key strategic asset. The company plans to mine both low and high-grade iron ore, implement beneficiation and pelletizing, aiming for 1.5 million tons per annum of own iron ore. This project, which recently received the preferred bidder letter, is expected to be completed within three years, securing raw material supply for 25 years and providing a cost advantage of approximately ₹1,500 per ton.

Despite volume growth, revenue was impacted by commodity price deflation across segments. Pig iron prices have fallen 38% over the last two years, and realizations for pig iron, casting, tube, and steel were down 8%, 1%, 9%, and 6% YoY respectively. The company also faces challenges from continuous Chinese dumping in the seamless tube market, leading to intense price competition. Management is focused on cost reduction and value addition to navigate these pressures.

The company is actively preparing its application for listing on the NSE, which is currently pending the completion of merger activities, including the recently announced Adicca and Oliver proposal. Management indicated that the application would be filed once internal processes are finalized, with an aim to complete it early, addressing analyst interest in broader market access.