Indian Metals and Ferro Alloys Limited (533047) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the earnings conference call of Indian Metals and Ferro Alloys Limited, hosted by Veritas Reputation. [Operator Instructions]. Please note that this conference is recorded. I now hand the conference over to Mr. Abhishek Savant from Veritas Reputation. Thank you, and over to you, sir.

Good evening, everyone. We warmly welcome and express our gratitude to each one of you for being a part of today's earnings conference call for Indian Metals and Ferro Alloys Limited. I am Abhishek Savant, your host for this session and it brings me great choice to guide you through the proceedings as we analyze the annual financial results for the quarter and full year ended 31st March 2024. We are glad to announce an excellent operational performance during the year with the highest ever ferrochrome production, chrome ore resin, and captive power generation, which has set the stage for a strong financial performance. This achievement has come despite all external challenges and it further solidifies IMFA's position as India's foremost fully integrated manufacturer of ferrochrome in the metals and mining industry. While the detailed financial results are available on our company's website and the stock exchanges, it's essential to note that our discussion may include forward-looking statements contingent upon known and unforeseen risks, uncertainties and various other factors, to offer a comprehensive overview of our annual financial performance, and address any queries you may have. We are honored to have an esteem team members of our management team present today. Mr. Prem Khandelwal, CFO and Company Secretary; Mr. Bijayananda Mohapatra, Chief Operating Officer; Mr. Deepak Mohanty, overseeing the Ferro Alloys business unit; Mr. Binoy Agarwalla, who heads the Power Business Unit; and Mr. Sandeep Narade, who is in-charge of the Mines Business unit. Our agenda for today begins with a concise summary of our Q4 as well as annual financial performance. Following that, we'll open the floor for a Q&A session, providing you with the opportunity to engage directly with our management team. Without any further delay, I now hand over the call to Mr. Prem Khandelwal, our CFO and Company Secretary, to guide us through the financial highlights. Over to you, sir.

Thank you, Abhishek, and good evening, ladies and gentlemen. I welcome all of you to this Q4 and FY '24 earnings con call of the company. FY '24 has been very satisfying year for the company in the sense that the company has achieved the highest ever operational performance in terms of ferrochrome production, power generation and mining output and has been the second best year in terms of PAT. So financial numbers and consol numbers are already in public domain. So, I'm not going to repeat those numbers again. But I would like to clarify just one item that one-off item, which is in the fourth quarter results relating to Utkal Coal Limited. As you may be aware of, the company had invested INR 111 crores in the share capital of Utkal Coal and had advanced a loan of INR 243 crores to the company for coal mining projects. But on the principal amount of INR 243 crores, the company had stopped recognizing interest since the date of calculation of coal block in 2014. But in fourth quarter, the nominated authority has quantified the compensation amount at INR 353 crores, consequent to which the company has recognized the interest of INR 243 crores of principal amount, from 2014 to 2024, and the interest amount comes to around INR 220 crores. But as the compensation amount of INR 353 crores is not enough to cover the entire principal and investment amount along with the interest, the balance amount of INR 221 crores has been written off which is from the part of other expenses and the interest component of INR 221 crores from part of other income. Apart from that, all other things are normal things. So with that, I would now request to start the Q&A session.

[Operator Instructions] The first question is from the line of Aashav Patel from Molecule Ventures PMS.

First of all, I would like to thank the entire team for -- and congratulate the entire team for an excellent set of numbers in a globally very tough environment. To start with my first question is in quarter 4 consolidated P&L, we have seen an increase in other income by roughly around INR 50 crores compared to the usual range. So can you please specify what led to this increase in other expenses?

Other expenses? You're talking about consol d account or?

Yes, consolidated other expenses?

Consol other expenses, we had the usual like repairs and maintenance has gone up by INR 12 crores because of boiler repairs and furnace pumps repairs is done, these are one-off kind of expenses and the selling expense has gone up by INR 6 crores, primarily because of more tonnage we have sold in this quarter and the routine overhead cost escalation of around INR 10 crores and there is a write-up of goodwill. As I said in my opening remarks, we have written up the investment of INR 111 crores in UCL. So there was a goodwill amount of INR 21 crores also lying in the consol account, which we yet to write off. So if you put all these together, you'll get the figure.

Got it, sir. So all these items shouldn't be, for example, goodwill write-off and everything should be part of exceptional line item?

Saunak, why have we done? Can you explain that?

So primarily, this is on the basis of a routine expenditure and going by the India's requirement it is that since whatever was a indecent amount that we had in the standalone financials of IMFA in UCL, which -- when you also put amount of about INR 111 crores we are providing for impairment. On the same basis, on the goodwill, which has been created in the consolidated financials has to be also written off as a part of the other expenses and we cannot treat it as exceptional expenses. So that is why we have taken it in the normal course of business.

Got it, sir. Sir, my second question is that our EBITDA, what would be our EBITDA production cost for quarter 4? And how do you expect it to pan out in quarter 1?

Just a moment, let me see EBITDA cost. EBITDA cost for Q4 is around INR 82,000 -- INR 83,000 a tonne. And I think Q1, it should be in the same range, more or less in the same range.

Similar. But sir, we have seen coking coal has been correcting significantly in the last 6 months. And met coke is also expected to be corrected in a similar fashion. What was our coke cost in quarter 4? And what is the coke cost in our inventory.

Deepak, would you explain that?

Yes. Actually, our coke cost, it is something like in the quarter 4, it is around INR 15,500 around, okay. And which was in the previous year, if you consider it was something like INR 22,000, INR 23,000. So it has come down quite a bit because of the down trend. And our existing coke, whatever we have, what we are using at the moment, so that is more or less in line with these, but it is as you are telling also the prices have come down even we have booked for the -- what will be fit in the next quarter, early next quarter in June. So those will -- those prices are coming down quite a bit. So going ahead, of course, that will take 3 months and on all those things, actual leases will be after maybe 4 to 5 months. But still our coke cost for the next quarter will be hovering in the same line.

Okay. But for Q2 onwards, we can expect a significant decrease improved cost?

In Q2, no, no, it is remaining more or less in line. That's what in Q2. Q3, it will go down. So roughly about...

For how many months we hold the coke inventory, sir?

Yes. We keep around 3 months inventory because it comes from mostly from Colombia. So if there's a shipping time of 45 days and then stacking the material for shipment, all those things. So normally, we keep the inventory for 3 months.

The next question is from the line of Shubham Sethiya from Bajaj Finance.

Sir, what was the specific consumption of coal in quarter 4 and for overall FY?

Binoy.

[Foreign Language].

Sir, what was the specific consumption of coal for quarter 4 and then overall FY.

Overall specific coal is coming around ARB 1.01 per megawatt.

And sir, specific consumption of coke per metric tonne of ferrochrome production?

So basically, for ferrochrome, it is around 450 to 500 cases of the fixed carbon is required. So you can say 0.5 or 0.6, if you take on the fixed carbon basis, 0.5 to 0.6 tonnes per metric tone.

Okay, okay. Sir, my next question is on the power cost. So what was the tentative power costs for quarter 4?

Quarter 4 or you are asking for FY '25 Q1?

No, no. For FY -- for quarter 4 FY '24.

Power cost variable cost is INR 4.37.

And fixed cost, sir?

Sorry?

Fixed cost?

Fixed cost is around INR 1.30.

INR 1.3, sir?

INR 1.30. 3-0. INR 1.30.

3-0. INR 1.30. And sir, for quarter 1, what we are expecting?

We are expecting will be -- variable cost will be around INR 4.20.

Okay.

And fixed cost will be at par with Q4.

Sir, my next question is on the NSR side. So we saw a very good NSR for overall quarter 4 and then for FY '24. What is our forecast for this Q1 and Q2 in terms of NSR?

You mean net realization?

Realization?

Market has improved a little bit up to Q4. So I think we can see an increase of around INR 3,000 to INR 4,000 for Q1.

So total will be, sir, around?

This quarter, it was around INR 102,000. So we may see INR 105,000, INR 106,000 in the next quarter.

Our next question is from the line of Joe Shah from Seven Seas.

Prem, going back to our last con call, you told that construction of boundary wall for Kalinga Nagar project was not started, it could not be started because of some administrative issue. So now what is the status of this Kalinga Nagar lane, when we are going to start boundary wall construction?

BNM, would you answer that?

Yes. Regarding this Kalinga Nagar project site, so there is a R&R issue, compensation issue. The IDCO has already even the disbursement process started and they have initiated for administration, but in the meantime, election has already started, so they will discuss with our families after the election. So mid-June. So thereafter this process will be the strated, construction of boundary wall.

Let me shade this chart because there won't be delay on this side after month, so we'll be able to start constructing of boundary wall.

No, no. District administration will help us for the construction because of the election, they don't want any law.

Right, right. Okay. Okay. Okay. Now one more question about this ethanol. What is our annual capacity in liters per year, how many liters will be produced per year from the ethanol.

Sir, the projects we are putting is around 120 liters per day. Basically, it is from mainly sunlight and damaged food grain. So it would take 300 working days.

Now, production capacity. What about production capacity?

Production capacity is 120-kiloliter per day.

Okay. Okay. 120-kiloliter per day. And how many -- the strength of a rice bran we need for one kiloliter?

In terms of rice bran, we are more focused about the maize. So it will basically maize based because that area maize cultivation is too much.

Okay.

That's one. So that will be exact figure I have to check further.

The next question is from the line of Saket Kapoor from Kapoor & Company.

[Foreign Language] Sir, as you alluded to the earlier participant about the other expenses for this quarter, which is to the tune of INR 162 crores, that includes INR 21 crores of the royalty, the goodwill part?

Yes.

And other than that, sir, then the remaining INR 20 crores is also a non-rating one? Or what should we take into account for that remaining balance INR 20 crores.

Again, as I said, the INR 12 crores is repairs and maintenance, this is again nonrecurring, but INR 6 crores of selling expenses is because of higher tonnage. So that is recurring in nature and other overrate of INR 10 crores is again nonrecurring in nature.

Other -- last point, sir?

Other overrate of INR 10 crores is again one-off kind of thing, so that's may not repeat again.

Okay. Okay. Sir, when we look at your note #7 there is -- note #6 rather therein, you have proposed about some acquisition of 52 lakh shares of UCL. Sir, if you could explain the nature of the transaction and how much we will spend to acquire this 21% stake?

As you are aware of IMFA is holding 79% stake in UCL. So our balance 21% is held by promoter companies. And we are in the process of merging the UCL into IMFA, but we have been advised that if you should make UCL 100% subsidiary, the merger process will be much easier. That's what we are trying, but UCL since the value is nil, we are buying the 21% remaining stake at INR 1 to make it 100% subsidiary and then we'll launch the merger scheme.

Right, sir. And sir, when we look at the segmental reporting, therein, we find that under the mining category on a revenue of INR 139 crores, we have booked a loss of INR 110 crores. So are these all goodwill and all these issues that get captured into the segment under mining? Or how will you explain this, sir?

Saunak, are you aware of that?

So over there, what usually happens is that all the costs over in mine, everything including whatever is the expenses that has been incurred for resin as well as mining is actually shown under the segment. But since you know this is a captive consumption, so only those if we have sold outside are considered, otherwise, whatever the value of transfer, that is accounted there as a revenue, and that is what has given to our new business, the retail value business. So on a stand-alone mining, it shows the overall -- all the costs, which have been incurred in the mines are booked under the mining costs.

Okay. But this is only a one-off for this quarter only. When every quarter, we are putting -- we are booking revenue in this trajectory of INR 130 crores and the profit is closer to -- our loss is closer to INR 1 crores. But only for this fourth quarter, we are seeing this loss rising to INR 110 crores. So that was my only reason. Even last year also...

It is actually dependent upon whatever results of mining and dispatch plan to our ferroalloys business, so that can be quarter to quarter depending upon whatever is our production plan.

These are the extraordinary costs. It's a significant number, INR 112 crores for the year as a whole.

No, it's a routine cost of it.

Right, sir. Sir, when we spoke about this ethanol project, what is the CapEx that we have outlined for the project? And when will we start spending on the same?

BNM.

The project cost is around INR 140 crores and now we have applied for the single loan clearance to the Government of Odisha and also we have applied to this environment clearance to MoEF. So we have this one hearing on 14th May, where there is some concern that also we have replied. Hopefully, we'll get this by next month. So after that, this land belongs to us. So then we can start our land preparation and all these things. Then simultaneously, will go for the project execution.

And when will this -- any time line when will be commissioning this project?

This will be generally requires around 12 to 14 months.

12 to 14 months. And on a CapEx of INR 140 crores, what should be the expected top line is 120,000 liters you mentioned, I think so, kiloliters.

No, no, there is 120 KLD, we used to call the kiloliters per day.

Per liter, I said, sorry. So at today's value of ethanol, what should be our optimum revenue at full capacity?

Saunak?

Yes. So it is what you correctly mentioned, it is 150,000 or basically 150 KLD. And in that cost of INR 140 crores, INR 30 crores is related to our own land, so we will not actually have any pay out on that. So overall, our involvement will be somewhere around INR 100 crores, INR 110 crores.

Saunak, he is asking about revenue turnover?

Turnover will be somewhere around once we achieve that 150 KLD, it will be around INR 200 crores to INR 220 crores to start with. But it will depend upon the market sizes, which can increase.

Right. And the margins are also in double digits. That this product is -- because I think the OMC will be stretching the product from...

OMCs are the controlling authority.

OMC are the controlling authority.

Yes.

Right, sir. And last point is on the tax provision part, sir. We find that there is a higher tax outgo. Any prior period item also we are seeing? Or what could be the reason that the profitability is definitely higher. So what is our tax rate currently.

Tax rate is 25%, Saket. We have gone for new regime. So tax rate is 25%. I don't think tax rate will be high because of high profitability tax is high.

Correct. Right. And just to conclude, employee benefits also include the director remuneration, the promoter commission also. That is the reason why it has gone up for this quarter.

No, no, it has gone up because of the normal increment as well as the commission also because of higher profit, higher commission.

Yes. I would also like to thank the Board for the increased dividend payout and also the commitment with which Panda sir, alluded to during the television interview where he did attributed the fact that he will be sharing the payout with his investor as has been the case as a precedent be. So we are really grateful to the team for adhering to these facts and rewarding their shareholders in the best possible way.

Thank you, Saket. This has already been the management priority to reward the shareholders wherever possible.

Correct. Correct, sir. And we have acted on the same part.