Indian Metals & Ferro Alloys Limited : Less than 10 PE

https://youtube.com/shorts/LyreK6LW4do?si=0SZ5sOq5nv_0QywW 

  • Indian Metals & Ferro Alloys Limited : Less than 10 PE 
  • IMFA is India's largest, fully integrated producer of high quality ferro alloys with 190 MVA installed furnace capacity backed up by 204.55 MW captive power generation and extensive chrome ore mining tracts
  • Long experience of the promoters; company one of the largest exporters of ferro chrome
  • The promoters have an experience of more than five decades in operating / managing ferro-chrome plants.
  • IMFA is one of the leading domestic producers and exporters of ferro chrome. 
  • The total installed capacity is 190 MVA across six furnaces located at two manufacturing sites in Odisha. 
  • IMFA exports ~90% of its total annual production. 
  • The long-term volume contracts that IMFA has with some of the global leaders in the stainless-steel industry, mitigate demand risks to an extent.
  • Chrome ore and power are the two most important cost drivers of ferro-chrome producers, apart from met (metallurgical) coke.
  •  IMFA has two operational chrome ore mines with a peak annual mining capacity of ~6.5 lakh metric tonnes (MT).
  • The location of the plants in the coal-rich region of Odisha results in a competitive landed cost of coal. Moreover, the location of the manufacturing sites close to ports helps in controlling the outward freight cost.
  • The company’s integrated nature of operations, (largely self-reliant in chrome ore and power) results in a competitive cost structure. 
  • The chrome ore mines’ proximity to the plants benefits the company owing to low inward freight costs. For its power unit, IMFA sources domestic coal from a mix of linkages, washery rejects and through e-auction.
  • Sizeable capex and associated risks – 
  • The company has announced a capex programme accumulating around Rs.1,600 crore, towards setting up of a greenfield ferrochrome unit (~1 lakh TPA) at Kalinganagar and brownfield mine expansions (expansion of Sukinda’s capacity from 3.51 lakh TPA to 6 lakh TPA through switching from opencast to underground mining and increasing Mahagiri’s underground mining capacity from 3 lakh TPA to 6 lakh TPA). 
  • The capex plans, which are large vis-à-vis IMFA’s current balance sheet size, exposes the company to operational and execution risks. 
  • The company is likely to largely fund the expansion through internal accruals. Any significant debt contracted to fund the capex, which weakens the coverage metrics, will be a credit negative.

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