IMFA - Indian Metals & Ferro Alloys Limited Share Price

Major Q&A from the Earnings Transcript

Q1: Can you quantify the synergies from the acquisition of the ferrochrome plant?
A1: Thank you for your kind words. The operational synergies can be quantified at around Rs. 4,000 per ton due to reduced logistics costs; Kalinganagar is closer to our chrome ore mines than our Therubali site. Therefore, as we ramp up production from this more logistically favorable location, our weighted average production costs will decrease, enhancing our EBITDA.

Q2: If the facility comes online in Q4, what kind of incremental volumes can we expect?
A2: The unit has two operational furnaces, but there will be some ramp-up time post-transfer. We don't expect significant tonnage in Q4 due to this. Real advantages will be realized in FY '27, where we anticipate output of 70,000 to 80,000 tons from the unit.

Q3: Can you provide insight on the expected EBITDA margin for Q3 given recent price improvements?
A3: Yes, we anticipate a better margin than the 19.3% reported in Q2 due to improved realizations. Domestic prices are currently around Rs. 1,15,000 to Rs. 1,18,000 a ton, with international prices showing similar upward trends. I remain confident in strong Q3 and Q4 performances barring any unforeseen circumstances.

Q4: What were the production metrics for Q2?
A4: In Q2, our production of ferrochrome was 65,671 metric tons, while chrome ore production was 169,615 metric tons. Ferrochrome sales totaled 69,765 metric tons, and our captive power generation was 309.41 million units.

Q5: Will you need to purchase ore post-acquisition, and what is your ore raising target?
A5: We won't be purchasing any ore; our requirements will be entirely met by our captive sources. Our target is to raise about 8.5 lakh tons in FY '26, and eventually aim for 12 lakh tons as we optimize our operations and acquisitions.

Q6: How do you plan to handle fluctuations in raw material prices, given the reliance on coke and coal?
A6: We primarily procure metallurgical coke based on demand, as long-term contracts are challenging. While coal prices are regulated by Coal India, we are seeking to optimize costs through hybrid renewable energy, which will stabilize our overall power costs as we deepen our integration strategy.

Q7: What will be the impact on margins with the increase in production capacity and changing market strategies post-acquisition?
A7: As our production increases to 500,000 tons, we believe our ability to leverage integrated operations will help maintain competitive margins. The market demand is robust, and while other players are expanding, the overall market should absorb this increase without leading to oversupply.

Q8: Can you verify the expected power requirements post-acquisition and how you plan to meet them?
A8: Our power needs will primarily be sourced from our existing agreements along with a new tie-up for 110 megawatts of renewable energy. This will sufficiently cover our expanded capacity without needing additional procurement from external sources.

Q9: Will your future sales mix shift more towards domestic markets?
A9: Yes, we aim for a more balanced approach moving towards a 60% export and 40% domestic sales mix, leveraging our strategic location in Kalinganagar to serve India's growing demand for ferrochrome, especially for stainless steel production.

Q10: Can you elaborate on the expected CAPEX needed to operationalize the acquired facility and the upcoming greenfield project?
A10: The base purchase consideration is Rs. 610 crores. We anticipate around Rs. 50 crores to commission the fifth furnace under construction, with additional CAPEX as required for integrating and upgrading existing facilities. Overall, we plan to utilize internal accruals for funding these projects.