IMFA - Indian Metals & Ferro Alloys Limited Share Price

Management's outlook for Indian Metals & Ferro Alloys Limited (IMFA) is optimistic, emphasizing the company's resilience and operational excellence during Q1 FY '26. Key highlights from the earnings call include the following forward-looking points:

1. Revenue Growth: The company reported improved revenue and margins, primarily due to a recovery in ferrochrome prices and effective cost optimization initiatives. This reflects management's focus on disciplined execution and operational efficiency.

2. Project Updates: The greenfield ferrochrome expansion project in Kalinganagar is on schedule, with the first furnace expected to come online in June 2026 and the second in September 2026. Additionally, underground mining expansion at Sukinda is progressing as planned, enhancing production capacity.

3. Financial Position: IMFA maintains a robust financial position, highlighted by a net debt-free balance sheet. This financial strength provides a solid foundation for ongoing operational improvements and capacity expansions.

4. Cost Management: The EBITDA cost for Q1 FY '26 was reported at approximately Rs.77,500 per ton, indicating that the management is successfully managing costs despite slight increases due to higher chrome ore prices and maintenance costs. Current chrome ore cost is around Rs.8,400 per ton, showing a rise from Rs.7,500 in the previous quarter.

5. Market Dynamics: The management acknowledged potential opportunities arising from competitors reducing their production, particularly Tata Steel's forecasted sharp decrease in ferrochrome output. This positions IMFA favorably to capture greater market share and possibly enhance domestic pricing power.

6. Future Focus: The company is shifting its strategic focus towards domestic consumption, anticipating that increased production capacity will cater more to local needs as opposed to solely relying on exports, which account for 90% of its current output.

Overall, IMFA aims to balance expanding capacities while enhancing operational efficiencies and adapting to changing market dynamics favorably.

1. Question: "Binoy, I would like to understand the ratio between renewable energy and captive power, thermal power. From our last concall, I understand that 25% renewable power enables us to use 75% thermal power. So, 25-75 ratio, is it a ratio of government of India? Or is it a European ratio? Renewable power versus thermal?"

   Answer: As per the guidelines from MOP, each year they have kept an REC obligation to be met. For this year, it is set at 33.01% but, our thermal power and renewable energy availability is around a 75-25 range. There are no established guidelines for that specific ratio.

2. Question: "I have two questions. My first question was in terms of our cost of production. How does our production cost compare with global peers in China, South Africa, and Kazakhstan?"

   Answer: We are better compared to China and many countries. Kazakhstan is one of the few countries faring better than us in terms of production cost. South Africa is currently facing high electricity charges due to their power issues.

3. Question: "What about South Africa?"

   Answer: South Africa's electricity charges have increased by around 950% over the last two decades, with a recent hike of 12.5%, leading to competitiveness issues in their production costs.

4. Question: "Can you give a rough percentage? How much cheaper are we compared to China? And how much more expensive is Kazakhstan compared to us?"

   Answer: At present, I can't provide an exact percentage, but we are better compared to most countries except Kazakhstan and some Asian countries. The price difference could be single digits.

5. Question: "Once the new capacity comes on board, how will this change our current cost of production?"

   Answer: The Kalinganagar project, with its first furnace set to operate in June '26 and second in September '26, will reach full operational efficiency eventually, keeping costs similar to current levels adjusted for inflation.

6. Question: "Can you tell us the production numbers for this quarter?"

   Answer: Our ferrochrome production for this quarter is 65,929 metric tons, and chrome ore production is 1,03,780 metric tons.

7. Question: "What would be our EBITDA cost for this quarter?"

   Answer: The EBITDA cost for this quarter is approximately 77,500.

8. Question: "Sir, how much ore did we raise this quarter?"

   Answer: We raised about 1,04,000 tons of ore in Q1.

9. Question: "Sir, this you are talking about the ferrochrome or the chrome ore?"

   Answer: I'm referring to the ferrochrome production. The estimates for the chrome ore raised were affected by early monsoons and our existing stock levels.

10. Question: "Could you explain the domestic scenario regarding our chrome ore mining?"

    Answer: Last year, domestic ferrochrome production was around 1.325 million tons; currently, capacity utilization is low. We foresee the production this year to be around 1.25 to 1.3 million tons.

11. Question: "Sir, do we do any value-added products?"

    Answer: Yes, since January, we have been producing low-silicon, low-phosphorus products with high chromium alloy. Currently, this niche product is around 15,000 tons, about 5-6% of our total capacity.

12. Question: "What is the cost of production for Q1 FY '26?"

    Answer: The EBITDA cost for the quarter is about 77,500.

13. Question: "What would the power costs be for the current quarter?"

    Answer: The total power cost per unit this quarter is Rs. 5.27.

14. Question: "What is our current cost of raising ore?"

    Answer: Currently, our raising cost is about Rs. 3,000 for both mines. It will increase with the transition to underground mining, but exact future costs are not predictable.

15. Question: "Is it just realization growth driving EBITDA per ton increase?"

    Answer: Our EBITDA cost has remained around 77,500, attributed to decreased input costs like met coke, as well as operational efficiencies. However, external market volatility affects unpredictability.

16. Question: "Are there plans for new capacities in China?"

    Answer: As of now, there are no indications of major new ferrochrome capacities coming up in China, and the overall industry demand is weak.

17. Question: "With Tata Steel reducing production, how do you see opportunities arising for us?"

    Answer: Given Tata Steel's reduced production capacity, we aim to utilize our maximum capacity to capture domestic market demand steadily, focusing on operational efficiencies.

18. Question: "What's the rationale behind the acquisition of Metallix Aviation?"

    Answer: The acquisition allows us to move non-core assets to a separate entity for strategic focus, especially as we wait for DGCA approvals for the operations related to aviation.

19. Question: "How much domestic ferrochrome is being used versus exported?"

    Answer: About half of India's ferrochrome is consumed domestically, with the other half being exported. As we expand, the focus will shift more towards domestic consumption.

20. Question: "What is the total chrome ore price for this quarter?"

    Answer: The chrome ore cost for this quarter is approximately Rs. 8,400 per ton.