Indian Metals & Ferro Alloys Ltd Q3 FY2025 Concall Summary

Key Takeaways

• Cyclical price hit absorbed: Ferrochrome ASP fell to Rs. 96,943 as Chinese oversupply crushed prices, yet IMFA’s integrated model and rupee depreciation cushioned the blow.
• Bottoming-out call, not a recovery yet: Management sees prices rolling over with no further drop in the last month, calling a bottom in both Chinese and European markets, with an uptick expected from March or Q1 FY26.
• Kalinganagar on track, peak capex ahead: Consent to establish is in hand, first furnace powers up by June 2026, and FY26 will see the maximum cash outlay of Rs. 450-500 crores for the project.
• Mining expansion fully permitted: CTE and CTO received to double production to 0.12 crore tons from both Sukinda and Mahagiri mines; Sukinda underground conversion has begun.
• What to watch next quarter: Whether the promised ferrochrome price uptick materializes from March, the pace of Kalinganagar capex drawdown, and any clarity on the ethanol plant’s revenue contribution.

Ferrochrome Market & Pricing

• Chinese oversupply drove the fall: China oversupplied steel this quarter and is now diluting steel stocks, so there was no consumption for ferrochrome; many Chinese smelter states are operating at lower capacities.
• Price floor appears set: No drop in Chinese prices in the last month; the free fall has stopped and prices rolled over at the same level, which management says is not tenable for operations.
• Recovery timeline: Management expects similar prices for the next two months, then an uptick from March onwards, anticipating market conditions to improve in the latter part of this quarter and Q1 FY26.
• Benchmark pass-through: Chinese prices came down to 75 cents, which is reflected in the benchmark and already impacted realizations this quarter.
• Contract mix provides some stability: Contracts span three years, five years, monthly, and one year; prices are determined every quarter but contract tonnage locks in volumes for longer periods.
• Domestic market is not a full hedge: There is a constraint on how much can be sold in the local market; not all production can be absorbed domestically.
• Freight adds a layer: Prices are CIF based, so ocean freight changes directly impact selling prices; freight costs increased last quarter but are now softening.

Chigurupalli: "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."

Kalinganagar Expansion

• Consent secured, ordering underway: Consent to establish was obtained in November for the Kalinganagar project; major packages order is in progress.
• First furnace by June 2026: Management expects to power up the first smelter around Q1 FY27 (April to June 2026), with the second smelter following with a gap of three months; both furnaces operational by end of September 2026.
• Phase-1 output: Around 40,000–45,000 tons of additional capacity expected from Kalinganagar in FY27.
• Phase two to follow: Phase two expansion will start thereafter, likely in 3 to 4 years, to reach around 0.05 crore tons.
• Peak capex in FY26: Rs. 150 odd crores spent in 9 months of FY25; another Rs. 150 odd crores expected by year-end; next year maximum cash outlay at Rs. 450-500 crores.
• Payback is cycle-dependent: Management declined to project a payback period, noting it could be 2-3 years if prices are good, or 5-6 years if not.

Chigurupalli: "We are expecting to power up our first furnace by around first quarter of 26-27 by April to June. The June we are expecting, June 26 we are expecting to power up one smelter, and the other smelter with a gap of three months."

Mining & Backward Integration

• Doubling mine output permitted: CTE and CTO received to double production up to 0.12 crore tons from both Sukinda and Mahagiri mines; all permissions are already in place.
• Sukinda underground conversion started: Conversion of the opencast mine to underground has begun.
• Mahagiri ramp-up: By FY27, Mahagiri will be producing 6 lakh tons.
• Sukinda ramp-up: Sukinda targets 6 lakh tons by FY32; for FY27, just 3 lakh tons from opencast.
• No overseas ore interest: Management sees no opportunity in South African mines, citing enough ore in India and enough plant capacity to expand domestically; going outside is an unknown terrain.

Khandelwal: "No, I don't see any opportunity there because we have enough ore here itself. And we have enough plant to expand our capacity in India. So, no point in going outside and exploring opportunities there, because it's an unknown terrain."

Costs & Margins

• EBITDA cost per tonne steady: Q4 EBITDA cost per tonne expected to remain more or less at Q3 levels of Rs. 77,827.
• Other expenses rose on repairs and freight: Increase from Rs. 88 crore to Rs. 104 crore mainly on account of repairs maintenance and outward carriage; freight costs are now softening.
• Coke prices flat: Coke sourced from Colombia is almost flat for the quarter and similar prices are expected in the coming quarter.
• Coal prices stable: Coal prices for the power plant will remain the same as Q3 FY25.
• Nickel may rise: Nickel prices are expected to rise based on Indonesia's report.
• Q1 FY26 costs uncertain: Management said it is difficult to predict costs for Q1 next year at the moment.

New Ventures & Capital Allocation

• Ethanol plant entry: IMFA has entered ethanol production, utilizing idle capacities at Therubali with a 120 KL plant and Rs. 150 crore investment; Rs. 300 crore of revenue expected.
• No ethanol expansion yet: No expansion plan for ethanol currently; once the plant is operational, management will assess the nuances and then decide.
• Renewable power from June 2026: Power from the Jindal Group agreement will commence by June 2026.
• Debt-free with strong treasury: IMFA remains debt-free with almost Rs. 900 crores of total invested amount; treasury delivered good returns despite the market being down, adding to PAT.
• 9-month cash generation: Around Rs. 370 odd crores generated in the first 9 months.
• Inorganic growth open but nothing live: Management is open to inorganic growth opportunities but has nothing specific or reportable at the moment.

Gupta: "And the most important point is that we are debt-free and having almost Rs. 900 crores of total invested amount."

Leadership Transition

• CFO handover in March: Saunak Gupta will take over as CFO from 8th March; Prem Khandelwal will continue as senior advisor.

Khandelwal: "Yes, I will continue as senior advisor here. Okay. But Saunak Gupta is going to be in Chair from next call onwards."

Guidance & Commitments

Key Metrics