Sarda Energy

The acquisition of SKS Power is proving to be a major growth driver, with PLF improving to 74% in Q3 and hitting 97% in January 2025. Management expects the plant to contribute approximately ₹400 crores to annual profitability. While maintenance shutdowns and lower exchange prices were headwinds, operational efficiency measures have significantly improved the load factor compared to 56% in FY24.

Sarda is rapidly securing its fuel supply through multiple coal mine projects. The newly acquired Gare Palma IV/5 underground mine has 39 million tons of extractable reserves, with extraction expected to start in FY26. Additionally, the Shahpur West mine is targeted for production within two years, which will reduce dependence on high-grade imported coal from South Africa for ferroalloy units.

The company's hydropower segment remains a high-margin pillar, with EBITDA levels around 80%. The 25 MW Rehar hydropower project is currently in trial runs and will be commercially operational by the end of FY25. A 50 MW captive solar project is also underway, though it faces slight delays due to transmission line construction by state utilities.

The ferroalloy division faced a difficult quarter with realizations for ferro manganese dropping 19% QoQ. Production was also impacted by a 22-day maintenance shutdown at the Vizag plant and a furnace modification in Raipur. Management noted that while manganese ore prices have recently moved up, they are waiting to see how global demand reacts to new protectionist measures in the US and Europe.

Long-term borrowings peaked at ₹2,400 crores following the SKS acquisition, but net consolidated debt is manageable at ₹1,400 crores due to an equivalent cash and investment cushion. The company has already begun repaying the SKS acquisition loans. Despite the high debt, the credit rating was reaffirmed at AA- by Crisil, reflecting strong cash flow generation.