Lloyds Metals

The company reported a strong operational performance in Q3 FY25. The sponge iron division achieved its highest-ever production in the 9-month period, operating at optimum capacity. Iron ore dispatches for 9M FY25 stood at 7.8 million tons, with 2.4 million tons dispatched in Q3 FY25. The company is fully mobilized to mine and dispatch 25 million tons, pending EC approval, which is expected within 60-70 days.

For the first nine months of FY25, revenue grew by 11% year-on-year, driven by robust iron ore and sponge iron volumes. EBITDA saw a significant 31% year-on-year growth, primarily led by the iron ore and sponge iron segments. Iron ore realizations improved by 8% YoY in Q3 FY25 to INR 5,894 per ton and by 10% YoY in 9M FY25 to INR 5,718 per ton. The EBITDA per ton for iron ore in Q3 FY25 was INR 2,021, a 21% YoY increase.

Execution of key projects is progressing as planned. The DRI plant at Ghugus and the 4-million-ton pellet plant are nearing completion, with commissioning and testing underway, expected to be operational by the end of this quarter or early next. The 1.2-million-ton steel plant at Chandrapur has completed its designing, and orders for major equipment have been placed. The BHQ beneficiation plant's pilot is ready, consistently delivering 66% Fe content and 37-40% yield, with primary engineering complete and equipment procurement in progress. Phase 1 of the beneficiation plant is targeted for completion by 2027, with subsequent modules (15 million tons each) in following financial years.

The company has spent INR 2,700 crores on capex in the first nine months of FY25, with a total of INR 4,400 crores invested to date. The projected capex for FY25 is around INR 5,000 crores. For the next two years, the company plans to invest INR 6,000-6,500 crores annually to achieve its project goals. Management emphasized maintaining cost competitiveness and sustainable profits through these investments, with a long-term vision to be a cyclical-free steel industry with low debt.

The integration of the Thriveni MDO business is a strategic move, expected to yield significant benefits. The NCLT process for demerger is ongoing, with the MDO business expected to be fully integrated and contribute to Lloyds Metals from April 1, 2025. This integration is projected to add approximately INR 2,500 crores to Lloyds Metals' revenue from the new Thriveni entity, which has a projected revenue of INR 5,500 crores in FY25. The MDO business will contribute to cost savings and earnings accretion from the immediate basis with increased EC limits.

A public hearing for the EC approval for 25 million tons of mining was held on January 28, 2025, and went well. Management expects the EC approval process to be completed within 60 to 70 days, with mining operations ready to commence within 30 days of receiving the EC. The company aims to achieve 25 million tons of iron ore production in the next financial year, with 10 million tons targeted for FY25. The JORC certified DSO reserves are 157-160 million tons and BHQ reserves are around 700 million tons, ensuring a long mine life.

While iron ore and sponge iron segments showed strong growth, DRI realizations were muted in Q3 FY25. However, captive iron ore supplies played a crucial role in protecting margins. The power segment's volumes remained flat year-on-year, and muted power prices impacted its EBITDA. The company is optimizing efficiencies in the power segment to counter market challenges^🌐 and has tied up for 100 MW renewable energy at a landed cost of INR 4.50-4.75 per unit, which is significantly lower than MSEDCL's cost of INR 8.50 per unit.