Indian Metals & Ferro Alloys Ltd Q1 FY2026 Concall Summary

Key Takeaways

• Sequential recovery, not a breakout: Revenue and margins improved QoQ on ferrochrome price pick-up and cost optimization, but ore production halved due to an early monsoon, and management declined to quantify most cost and margin drivers.
• Cost competitiveness is the moat, but the details are opaque: IMFA claims a double-digit percentage cost advantage over China and better positioning than South Africa, yet repeatedly refused to provide the numbers that would let investors verify the claim.
• Kalinganagar expansion is the visible catalyst: The greenfield project is on track, with the first furnace due June 2026 and the second in September 2026; it will also shift the export-heavy mix (90:10) "drastically" toward domestic sales.
• Underground mining transition is the invisible risk: Ore-raising costs will "definitely increase" as mines go underground, but management will not say by how much, even as Tata Steel surrenders a Sukinda mine and faces a ₹1,902 crore penalty over the same shift.
• What to watch next quarter: Whether ore production ramps as promised in Q3, any clarity on South Africa's proposed chrome ore export tax, and whether the ethanol plant stays on track for Q4 FY26 commissioning.

Performance & Cost Structure

• Revenue and margin drivers: Sequential improvement came from ferrochrome price pick-up, cost optimization, and operational efficiency initiatives; no absolute revenue or margin figures were disclosed.
• EBITDA cost held steady: EBITDA cost remained in the ~₹77,500 range (plus/minus ₹500) for the last year, with met coke cost reductions offset by higher other operational costs and forex impact as the rupee moved from ~78 to ~87.
• QoQ cost uptick: A marginal ~₹500 cost increase from last quarter was driven by slightly higher chrome ore cost and planned repair and maintenance spend.
• Power cost headwind: Power cost rose from ₹4.97/unit in Q1 FY25 to ₹5.27/unit in Q1 FY26.
• Cost efficiency runway: Management sees 1-2% further efficiency potential in coming years, supported by the new Oracle Fusion ERP implementation that provides better visibility into the full conversion process from chrome ore to ferrochrome.
• Met coke outlook: For Q2, met coke prices are expected to remain in a similar range, but forex volatility will affect the landed cost.

Gupta: "When the overall price actually drops in the market, we will see that our margins have been better off compared to our peers. So, that is the advantage we are having."

Ore Production & Mining Transition

• Q1 ore production collapsed: Chrome ore raising fell to 1,04,000 tons from 2,20,000 tons in Q4 FY25, driven by two factors: Q4 had over-produced versus budget, building more than four months' stock at plants and over two months' stock at mines, and the monsoon arrived three weeks early (last week of May versus the usual June 15).
• Production ramp-up promised: Management expects to ramp ore production as required in Q3.
• Underground shift is structural, not regulatory: The move from open cast to underground mining is driven by technical feasibility as ore bodies deepen, not by regulatory compulsion.
• Cost will rise, quantum undisclosed: Current ore-raising cost is about ₹3,000/ton across both mines; management confirmed it "will increase" when operations go fully underground but declined to give any number, citing dependence on mining type and other uncertainties.
• Tata Steel's cautionary tale: Tata Steel surrendered a Sukinda mine because it could no longer pursue open cast mining and faced only underground options, receiving a ₹1,902 crore penalty notice; its ferrochrome production reportedly dropped from 50,000 to 15,000 tons per month.
• IMFA's head start: IMFA planned early for underground mining; the Mahagiri underground mine is heading for 6 lakh tons in the next 1-2 years, and at Sukinda Mine, development of decline, ventilation and main shafts began over a year ago while open cast continues simultaneously.

Narade: "Right now, our raising cost is about Rs. 3,000 together of both the mines. And definitely it will increase when we go fully underground. As of now I cannot give the exact number of what the cost will be, but it will increase."

Competitive Position & Market Dynamics

• Cost advantage claimed but unquantified: IMFA says it is better than China and South Africa, with a "substantial, double-digit percentage advantage" over China; only Kazakhstan and Turkey produce at lower cost. Management declined to give exact percentage figures, citing market volatility, forex movement, and geopolitics.
• South Africa under pressure: South Africa faces power price hikes (~950% over two decades, including a recent 12.5% hike) and availability issues, eroding its competitiveness.
• China dynamics: No big new ferrochrome capacities are coming up in China; stainless-steel demand is weak due to geopolitical uncertainty and tariff talks; China restricts ferrochrome exports with a 40% export duty, aiming for self-sufficiency.
• Supply-demand balance: Production cutbacks in South Africa and some reduction in India have balanced weak downstream demand.
• Domestic vs export realizations converge: Whether selling domestically or for export, prices settle at similar levels with only a slight lead or lag.
• Ferrochrome imports into India negligible: Very limited ferrochrome is imported, only for certain grades tied to specific stainless-steel manufacturing requirements.
• South African export tax proposal: A proposed \$100/ton export tax on chrome ore by South Africa is too early to assess; management noted Chinese investments in South Africa add complexity to the outcome.

Chigurupalli: "We are better compared to the China and many countries. Only a few countries which are faring better than us are like Kazakhstan, that is producing at a lower price than us."

Expansion Projects

• Kalinganagar greenfield on track: The ferrochrome expansion project is progressing per the execution plan, with the first furnace to come into operation in June 2026 and the second in September 2026.
• Teething issues expected: Initial teething issues are anticipated at Kalinganagar, and full scale-up will take time.
• Cost at scale: At full scale-up, cost will be more or less at current levels, duly adjusted for inflation; Kalinganagar will provide a slight logistic advantage, though management declined to quantify it.
• Ethanol plant commenced: Construction of the 120 KLD ethanol plant in Therubali began in Q1; commissioning is targeted by Q4 FY26.
• Mines expansion duration: The full mine expansion plan will continue for about four to five years.
• Niche products started: IMFA began producing low-silicon, low-phosphorus, high-chromium alloy products from January 2025, currently at 5-6% of capacity; management is still exploring whether this share can increase, noting the market for niche grades is limited with entrenched players.

Gupta: "But we can't comment much on something which will happen after 1.5 years in the current geopolitical situation."

Balance Sheet, Mix Shift & Other Updates

• Net debt-free: The balance sheet as of June 2025 end is net debt-free.
• Export-to-domestic mix set to flip: The current 90:10 export-to-domestic ratio "is going to change drastically" as expansion comes in; the direction is more domestic, less exports, with the focus on catering to domestic demand, though management declined to give a target ratio.
• Metallix Aviation subsidiary: IMFA incorporated a 100% subsidiary called Metallix Aviation that holds certain helicopters used primarily for IMFA's own business purposes to access mines and the Therubali plant; management did not address the strategic rationale or complementarity when asked.
• Inorganic opportunities: If any opportunity arises from Tata Steel's situation, IMFA will evaluate and report, but no commitment was made.

Venkatesh: "Overall, when we look at the ratio of 90-10, that is going to change drastically."

Guidance & Commitments

Key Metrics