Indian Metals and Ferro Alloys Limited (IMFA.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Earnings Conference Call of Indian Metals and Ferro Alloys Limited, arranged by Veritas Reputation. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aryan Rana from Veritas Reputation. Thank you, and over to you, sir.

Thank you, Sarthak. Good afternoon, everyone, and very warm welcome to the Indian Metals and Ferro Alloys Limited's analyst conference call to discuss the company's financial performance for the second quarter ended and half year ended September 30, 2025. On behalf of IMFA, I would like to thank all participants, analysts, investors and stakeholders for joining this afternoon. Before we begin, please note that some statements made during this call may be forward-looking in nature. These statements are based on current expectations, estimates and projections, and actual results may differ materially. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether due to future developments or otherwise. We have with us today Mr. Subhrakant Panda, Managing Director; Mr. Bijayananda Mohapatra, Whole Time Director and COO; Mr. Saunak Gupta, Chief Financial Officer; Mr. Binoy Agarwalla, Head of Power Business Unit; Mr. Sandeep Narade, Head, Mines Business Unit -- last but not the least, Captain Sureshbabuji, Head, Ferroalloys Business Unit. We'll begin with the opening remarks from the Managing Director and CFO, followed by Q&A. I now invite Mr. Subhrakant Panda, our MD, to share his perspective on the quarter and key developments. Mr. Subhrakant Panda, over to you, sir. Thank you so much.

Thank you, Aryan. And ladies and gentlemen, I would like to welcome all of you to IMFA's Q2 FY '26 Earnings Call. As you heard, we have the full management team available. And given the important development of a few days ago, I'm also part of this call to give you an update into the strategic directions of the company going ahead. So before getting into the financial performance, let me talk about the important milestone in our growth journey, which we announced on the 4th of November pertaining to the asset transfer agreement we have signed with Tata Steel for the ferrochrome plant at Kalinganagar. This is a strategic move, which will reshape IMFA's scale, market position. And in fact, it fast tracks our growth plans significantly and enables us to deliver value on a consistent and sustainable basis. So as I mentioned, we have signed the definitive agreement on the 4th of November. This is for 99 MVA furnace capacity, which is 4 furnaces totaling 66 MVA, which are complete and ready to operate and can produce about 100,000 tonnes of ferrochrome and a 33 MVA furnace, which is under construction and when complete, can produce about 50,000 tonnes of ferrochrome. This is spread out on over 115 acres of land in Kalinganagar. We have agreed to a base purchase consideration of INR 610 crores -- and speaking to the value of the -- to the strength of the balance sheet, this is going to be entirely funded from internal accruals. And of course, as we have clarified that all the ore for our existing capacity for our ongoing greenfield expansion as well as this acquisition is going to be met from our captive chrome ore mines. This is a significant acquisition because combined with our existing capacity of 284,000 tonnes, 100,000 tonnes greenfield capacity and acquisition being 150,000 tonnes, it will take us beyond the 0.5 million tonne mark, making us India's largest producer of ferrochrome and the sixth largest producer globally. Significant operational synergies because the unit we are acquiring is very close to our greenfield project site. Besides there are logistics efficiencies as well because it is located closer to our chrome ore mines as well as our customer base. And if you look at the export market, then to Paradip Port. So all in all, I think it is something which is a game changer for IMFA. And subject to certain conditions and requisite approvals, we expect to close it within 3 months. In fact, both sides are aligned to expedite it, and we would hope to -- we would try to close it within the calendar year, if possible. Now let me turn a little bit to our operational and financial performance. Of course, Saunak will go deeper into the details, but I will just provide a broad overview. If I go back and take a look at the start of H2 of the previous financial year FY '25, that is when the commodities globally and including ferrochrome were in a lot of turmoil due to various geopolitical developments and tariff-related uncertainty and ferrochrome prices have had come down sharply. In the 4 quarters since then, which is Q3 and Q4 of FY '25 and Q1 and now Q2 of FY '26, we have seen a steady improvement in prices each subsequent quarter, and that happened in Q2 as well. But given that a lot of our tonnage is priced in on a quarterly basis and even where there is monthly pricing, the real improvement came towards the end of Q2 we have not fully benefited from prices, but that will change in the ongoing Q3 of FY '26 because you would be aware of the increase in the benchmark price. You are also aware that spot prices have moved up substantially. And all of this is happening on the back of higher chrome ore costs for nonintegrated producers. And because of turmoil in South Africa, there have been sharp production cutbacks. And because of all of this, we not only expect the ongoing Q3 FY '26 to be noticeably better, but we expect this trend to continue into Q4 as well. And as you know, we don't really go beyond a couple of quarters in terms of predicting or giving any directionality to prices. But suffice it to say, I think the demand environment remains strong. India's own stainless steel production is -- and consumption is growing rapidly given the country's economic growth and the focus on infrastructure development globally as well, we see positive signs. So I remain sanguine about the future without giving any specific guidance in that regard. But suffice it to say that I remain confident about the future. And what also gives me a lot of confidence is IMFA's fully integrated business model, spanning mining, smelting and captive power generation. which continues to provide stability and makes us a cost competitive producer on a global scale. And of course, you are aware that we are doing a pivot towards renewable energy with 110 megawatts of hybrid renewable energy being signed up to come online next year, which will power our growth plans. So we remain focused on responsible growth on operational excellence and most importantly, value creation for all stakeholders. And with this, let me invite Saunak Gupta, our CFO, to take you through the detailed financial performance. Of course, what I look forward to is the Q&A thereafter, which will enable us to provide further clarity where needed. Thank you.

Thank you. And good afternoon to everyone. On Q2 performance, we have already shared our Regulation 33 financials, so everybody would have taken note of it. But going by what our MD said, we just wanted to just highlight that we are seeing an increasing profitability trend in last 3 quarters. So as you may note, our PAT in Q4 was INR 47.07 crores. In Q1, it improved to INR 91.48 crores with the increase in the average realization price to about INR 95,000. And this quarter, it has further improved by 8% to INR 98.77 crores, which is with an average realization of INR 101,000. And our EBITDA also is healthy 19.3%, more or less in the similar range, we were in Q1. And in Q3, we are expecting to be better because the price realization benefit, there is always about a couple of months lag to realize it out. So we are expecting this in Q3 also, we would further better the performance. So that's on the summarized viewpoint. Since there were some queries related to last year's quarter 2 EBITDA versus this year's quarter 2 EBITDA changes, though we should be also looking into the sequential performances because as you have known, the prices in the international market actually declined in H2 last year, and it is in a recovery mode. And in quarter 2 of last year, it was in a very high level or peak of around USD 96, USD 97. So currently, the markets are growing up or increasing trend. On the EBITDA movement, primarily you would have seen that last year, quarter 2, we were at INR 170 crores and this quarter 2 is INR 138 crores, primarily because due to a change in the renewable power obligations, there is a change in law. So for that, since you know that we are coal-based, we have a coal-based captive power plant. And for that, we have certain conditions to be met on the renewable power usage. So based on that, we have purchased RPO obligation-based certificates amounting to INR 16 crores during the quarter. So it's a onetime impact. The differential impact is about INR 14 crores for that. And that is to actually align with whatever the change in law. And the second one is that, as you all know that almost 90%, 91% of our business is export oriented, and we have invoiced in USD. And with the dollar fluctuations, we have a hedging policy to derisk the future export sales against ForEx fluctuation. So in this quarter, we booked a notional cost of INR 14 crores on the mark-to-market accounting as per accounting standard of India. So this is higher as the mark-to-market, which is done on the closing rate of the quarter, that is 30th September, the ForEx rate was INR 88.79 versus on 30th June, it was INR 85.54. So that is why there is a onetime impact, which has come here, which is a notional level cost. And however, if the rupee appreciates in future, we will get the gain on that. So this is the -- purely an accounting impact. The equivalent benefit of this, almost like INR 16 crores is embedded in revenue. And that revenue is higher also because of our INR 16 crores of ForEx gain we have made during this quarter. So overall, if you see, it is not having any impact. But when you see the overhead part, there is a jump of about INR 14 crores due to this. So these are the 2 important things. And the third one is that usual increase in the logistics cost of about INR 2 crores and other overheads of another INR 2 crores. So if you take this into impact, our current EBITDA would go up to INR 170 crores plus, which is similar to last year. So if you take out these outlier, Q3, we are expecting to do much better than this. But nonetheless, our Q2 overall EBITDA was at 19.3%, which is healthier, and we expect in quarter 3, we would be better. So that's from my side. Now I open it up for everyone for the questions, anything they specifically have.

[Operator Instructions] Our first question is from the line of Parthiv Jhonsa from Anand Rathi.

Congratulations on a strategic acquisition we all were waiting for. Sir, my first question is pertaining to the synergies from the acquisition. I think in the opening remarks, you mentioned that you'll have a lot of synergies right from mine to the location and all the other synergies. Is it possible to quantify once you acquire the asset, what kind of synergies on a per tonne basis are you expecting? Is it possible to quantify?

Could you hear the question?

Yes, I could. Sorry. I think I was accidentally on mute. So Parthiv, first of all, thank you for your kind words. And so let me take a stab at quantifying the synergies. So first of all, as you know, our current operations are in Choudwar and Therubali. And Choudwar, we have the advantage of the power plant being located right there as well as being close to the chrome or mines, whereas in Therubali, we have to transport over a substantial distance. So we have a logistical disadvantage to the extent of about maybe INR 4,000 a tonne or so. So every -- as compared to Choudwar. Now Kalinganagar is more like Choudwar being close to the mines. And therefore, every tonne that we produce in Kalinganagar is as competitive as Choudwar. Now in terms of -- when we look at the weighted average cost of production and therefore, the resultant EBITDA, et cetera, the more we produce towards closer to the mines, the better we are. Now -- and that will further go up at some point in time when we start supplanting Therubali tonnage by producing that in Kalinganagar, that is where there will be further advantages. So I mean, I hope I was able to clarify the point, which is that as our production goes up from 260,000 to 400,000 tonnes in FY '27 and further to 475,000 tonnes in FY '28 and beyond, it is being produced in a more friendly -- logistically friendly location.

My second question is pertaining -- I believe you said that you are trying your level best to complete this acquisition by the end of this particular calendar year. Is it possible to quantify if this facility comes up, say, for example, in Q4, what kind of additional or incremental volumes can we expect on a quarterly basis? Is it the facility like operational as on date? And can you ramp it up immediately?

Okay. So a couple of questions. I just want to add one more point about synergies which is that there will be some outbound logistical advantages as well. I mean, in the sense that when we -- any tonnages dispatched from Therubali to the domestic market is -- has a higher freight element, whereas Therubali is quite ideally located from a Vizag port point of view for particularly containerized exports. So we will be sort of reassigning our customer base a little bit and a lot of the domestic consumption or supplies will be out of Kalinganagar. So there will be some outbound logistical advantages as well, which could be probably about INR 1,000 to INR 1,500 a tonne is our estimate. Now as far as the closing date is concerned, we are certainly both sites, as I said, are aligned to close this as quickly as possible. And in terms of the unit as on date, 2 out of the 4 furnaces are operating but not at full load. And we will -- I mean, of course, I think in the process of handing over and getting the necessary permissions, there will be disruption for some time, probably 2 to 3 weeks is what we are estimating. But thereafter, we should be able to ramp it up reasonably quickly. But we are not taking -- as an abundant caution, we are not taking any tonnage in Q4 of the ongoing fiscal. But even if it were to come in, honestly, it would not be something very significant. So the real advantage of it would come from in FY '27. Now having said that, when we ramp up and operate the 4 furnaces, we'll have to figure out how the situation plays out. But we are fairly confident about achieving, let's say, between 70,000 to 80,000 tonnes of output in FY '27 from this unit with the potential to -- with the upside potential to that number. But I'm more comfortable indicating something like 70,000 to 80,000 tonnes in FY '27.

That's actually quite helpful, sir. Sir, my next question is pertaining to the ferro prices as on date. I believe the prices are up and like sir said that you usually get the benefit 1 quarter lag. So is it possible that this 19.3% kind of an EBITDA margin, there is a substantial upside and you can achieve what highs you were able to achieve a couple of quarters back -- about 24%, 25% kind of a range?

So I mean, we will certainly achieve more than Q2 EBITDA in FY -- in Q3, partly because we will not have the onetime outliers as Saunak put it. But even otherwise, purely on a realization basis, there is a substantial up move. As you know, domestic prices are ranging between INR 115,000 to INR 118,000 a tonne. And internationally, I mean, excluding China, it is more than $1, so about $2 to $4. And even in China, the monthly prices that they have declared are significantly higher than 2 or 3 quarters ago. So we will see a definite improvement in the EBITDA margins for Q3. And we are comfortable at this point in time indicating that we expect that to continue in Q4 as well with the usual caveat that barring any exceptional circumstances.

That's helpful, sir. So is it possible to let us know the production and the ore raised during Q2?

Yes. I will ask Saunak to sort of give that number. I know that in our press release, those numbers were not there, but I think it was a very content-heavy press release. So focusing primarily on the acquisition, but we will most certainly share the output numbers. Saunak, would you like to just mention that, please?

Yes. So for quarter 2, our production of ferrochrome was 65,671 metric ton. And chrome ore production was 169,615. Ferrochrome sales improved in this quarter, and it was 69,765. These were the production and sales figure. And on the power side, that's the captive power, it was 309.41 million units.

So I believe, sir, you have -- I believe in last quarter con call, you had mentioned that you have ample of inventory of ore. And also this time, I believe you have done almost over 170,000. So it is fair to assume that once the acquisition facility comes up on stream, we'll have ample of ore and on hand to immediately take care -- captive ore on hand to take care of that basically...

So Parthiv, let me answer that. I think you were there on the CNBC call yesterday also. So I want to clarify so as to remove any out of confusion or doubt in this regard that we do not intend to buy any ore going ahead, and we will be meeting our requirement both for the existing capacity plus greenfield plus acquisition from our captive mines. And in that regard, in fact, if I'm not mistaken, 3, 4 quarters ago, there had been some questions relating to the high level of ore that we were carrying as stock, and we were actually building it up because as you know that for quite a while, we had been around that 6 lakh tonnes of ore using per annum. And in FY '25, we crossed 7 lakh tonnes for the first time. And in FY '26, we are now with the acquisition having been signed off on. So it's all systems go. And we are looking to touch about 8.5 lakh tonnes of ore raising in FY '26. And our -- of course, our eventual target is to get to 12 lakh tonnes. Now -- and if you look at the production, clearly, there is for 3 to 4 years, there is going to be a sort of a gap between what the annual requirement is and what our annual raising is. And that gap is going to be met from the stock that we have built up as well as some low-grade ore, which is available for blending purposes. So all in all, all the ore required will be in-house. And that, of course, substantially adds to value creation.

[Operator Instructions] Our next question comes from the line of Priya Agarwal from Kotak Investment.

First of all, congratulations to the IMFA team for such a great quarter and on the acquisition part. I would like to know what was quarter 2 performance for IMFA in terms of specific ore, specific coke and specific power?

Sorry, I didn't quite -- I couldn't quite get the question. If you are asking about the data in terms of production and output, we just shared that, but Saunak can repeat the numbers.

I wanted to ask, sir, regarding the specific consumption in terms of per tonne of [indiscernible], how much ore was consumed? How much coke was consumed and how much power was?

So Priya, we will not get into the specifics because these are, again, commercially sensitive data, but broadly in line with the acceptable -- accepted parameters. So no outliers in that regard.

Okay. And secondly, I wanted to ask that this -- as you have mentioned that the benefits from the recent acquisition will start from FY '27. So how much percentage of decrease in the cost can we expect?

So it's not a decrease in cost because if you look at our production cost in Choudwar and our production cost in Therubali, they will broadly remain what they have been. But what is relevant here is that production will be coming online at a location, which is Kalinganagar. So just to clarify, we are now using the terminology, Kalinganagar 1 for our greenfield projects and Kalinganagar 2 for the acquisition -- acquired unit. So production coming up in Kalinganagar overall will be far more competitive than -- I mean, will be very competitive. So our weighted average cost of production goes down. But in other locations, it sort of remains the same. And the best way I can explain it is that if this production was to come up in some other location, it may not have been as competitive. So I hope I'm able to explain the thought process here that the production is in a location which is logistically very competitive and efficient.

Our next question comes from the line of Anshika Agarwal from Kotak Bank.

I wanted to know the domestic and export percentage of [indiscernible]?

Sorry, there's a lot of cross stock. I'm not able to hear the question. So domestic and exports and domestic for Q2. Is that what you are asking?

Yes, domestic and exports...

So second quarter, we did supply a little bit more tonnage towards -- to the domestic market. So broadly, I think we were at about 90% exports and 10% domestic sales there or thereabout. But I'd like to take this opportunity to also share that going ahead, we are certainly going to align a little bit more towards the domestic market, given our strategic positioning in Kalinganagar, which is -- and in Orissa, which is really emerging as the stainless steel hub of India. So in a couple of years' time, with the entire capacity online, greenfield and acquisition, we are expecting to be about 60-40. So 60% exports and 40% domestic. But of course, we retain the flexibility to direct more tonnage towards the domestic market or towards the export market if circumstances so warrant.

Other thing, second question, what is our spot and LTC percent?

So really, if you look at it from a long-term contract and a spot perspective, the bulk of it is long term because the only difference being that -- I mean, certain customers, we have annual contracts or in fact, with POSCO, given that we have a joint venture, we have a 5-year contract, which is priced every -- repriced every quarter. So purely in terms of spot tonnages, it is very insignificant. But Suresh, is there any additional data that you can add to this question or that about broadly answers it?

You have broadly answered. That is an insignificant and it is almost around 7% to 8% will go on for spot.

What will be the ratio between this?

Come again?

Your line is not audible. Could you please move to an area with better connectivity?

And what will be our future spot and LTC percentage after this acquisition, everything?

So Anshika, by and large, we prefer longer-term commitments because I think that assures us offtake while keeping some tonnage available for the spot market. But even in the long-term contracts, as I mentioned, these are repriced either every month or every quarter. So that is -- we will continue to follow that strategy. But having said that, I mean, as we direct more towards the domestic market, the domestic market tends to be not against long-term contracts. So to that extent, I think domestic sales will be more on a cargo-to-cargo basis for pricing, but we will sort of see how it plays out. But our preference is for longer-term relationships where there is assured offtake from our point of view and assured supply from our customers' point of view.

Anshika mam's line seems to have disconnected. We will now move on to the next participant in the queue. The next question comes from the line of Deepak Pandey from Sagun Capital.

Congrats on the acquisition part. Sir, my question actually pertains to the global supply-demand scenario. With the cuts in South Africa, where do we stand versus Chinese players currently in cost of production, if you can throw some light.

So actually, in as much as South Africa is concerned, as you know, that there has been a gradual decline in South African output. Until about 5 or 6 years ago, they were the world's largest producer of ferrochrome and then seeded that position to China. And Chinese production has gone up significantly at the -- primarily at the cost of South African production. That's because of their internal logistics costs as well as increasing power costs. So while that tussle is going on between whether there should be special tariffs for South Africa or not. Basically, I think there is -- the preference has been towards exporting the chrome ore entirely to China, so to say. Now if I look at China, while they have emerged as the world's largest producer of ferrochrome, but they are relatively speaking, high cost because they are entirely dependent upon imported chrome ore. Now your specific question, Deepak, about Chinese cost of production versus ours, it's a little difficult to sort of estimate what the Chinese cost of production is because it's not an open economy and not too much published data available. But based on experience, based on conversations, the sense we get is that they are perhaps somewhere around that $1,000 per tonne mark. And I know this is a number which is covered in the Anand Rathi -- mentioned in the Anand Rathi report as well. And we sort of corroborate that with our experience in the sense that if you look at the recent past, prices sort of bounce back from a certain level, which is indicative that, that has reached the variable cost of production of Chinese producers. So I can't give you any concrete data, but that this has gone out of experience. And if you look at in the last 3 or 4 quarters, I think the lowest we saw was about $0.75, $0.77. And it started pulling back from that level, indicating that a lot of production was underwater in terms of value at that point in time.

Got it. That's very helpful. Sir, secondly, on the -- you said domestic spread will -- split will move on -- move up in the revenue part. But is there a difference in realization or EBITDA per tonne in domestic versus export? Or is that largely the function of market prices only?

So no, there is no significant difference. There is a timing difference, and let me explain that. So first of all, there is no significant difference because duty on ferrochrome is -- import duty is negligible. It's what -- I think it's 5%, if I'm not mistaken. So there is no duty protection, which means that ferrochrome prices domestically are higher or anything of that sort. But there is a timing difference because -- I mean, if you are -- and that will happen even with exports because if we are pricing a particular customer on a quarterly basis, and we are pricing another customer on a monthly basis, then that timing difference can lead to pricing difference as well. And how it works with quarterly pricing is that there are many instances where we have fixed a certain price and with that customer and it goes -- the spot prices goes down thereafter. And there are many instances where we fix a quarterly price and the spot price moves up. So when you have a long-term relationship, you adjust for these vagaries and make sure that it's a win-win situation. But if you look at it at a singular point in time, then what you will find is differences between customers even when it is exports or between customers when it is exports and domestic simply because of the timing difference. The one other factor here, of course, is China is a unique situation where they have huge production capacity, and it is also a producer's price that is declared by them. So China tends to be a little more competitive than the rest, but there are structural reasons for that.

Got it. Sir, last question is on the domestic supply and demand scenario.

Deepak Pandey sir, extremely sorry to interrupt. Can I please ask you to rejoin the question queue for -- our next question comes from the line of Parthiv Jhonsa from Anand Rathi.

Saunak, is it possible just to repeat the production and the sales number again? Actually, I missed it out.

Yes. So on the production side of ferrochrome, we did 65,671 and on chrome ore 169,650. And ferrochrome sales was 69,765...

Just again, Saunak, I just wanted to check with you quickly. You said that you had a onetime impact of about INR 16 crores in power and fuel expenses line item basically. So that basically translates to about 2% or 2.2% of the top line. So is it fair to assume that if this was -- this is basically a onetime. So this won't be there in the next quarter. And considering better prices and all, there is a certain benefit of almost about 2%, 2.5% on the EBITDA from this?

Yes. This differential is about INR 14 crores. INR 2 crores will be the average quarterly expenses on this. So it is around 2.3% is the onetime impact for this quarter.

Our next question comes from the line of Kaushal Kedia from Wallfort PMS.

Congratulations on a fantastic acquisition. Sir, I have a question more of a recommendation and a request as an old shareholder. There hasn't been much institutional participation in the share, and I think you had also done a kind of a roadshow in June to tell our story to the bigger funds. If possible, I know you have said it multiple times that the entire acquisition will be funded internally through internal accruals, and we don't need money. But it would be great if you could consider raising like maybe a primary -- a small token amount for primary share capital maybe to get some institutional interest in the stock. So just a request from a shareholder, if you could consider that and explore that, please.

Thank you, Kaushal. We will certainly take the suggestion on board.

Our next question comes from the line of Aashav Patel from Molecule Ventures PMS.

Many thanks for participating on the con call, Mr. Panda. And many congratulations to the entire team for this truly exemplary achievement. So my first question is, sir, to Mr. Panda that I understand ferrochrome prices are very dynamic, and it's difficult to predict the future as such. But given the massive supply cuts in South Africa now over the last few months, now almost 60% of the smelting capacity is shut down. Further, Samancor, is planning more shutdowns and industry is also expecting an export tariff of 25% on South African chrome ore exports, so which, if implemented, will further lead to cost inflation. So probabilistically speaking, sir, can FY '27 be a year of up cycle for IMFA like FY '22 or like FY '17, wherein we ended up reporting almost 30% kind of operating margins?

Well, I would certainly hope so and pray that it happens. But realistically, as I said, we have learned with the passage of time not to get ahead of ourselves and make any long-term projections. All that I will say is that the fundamentals are such and they are changing in a manner which is indicative that strong competitive producers like ourselves are well placed. But I mean, of course, South African production cut has been quite significant, but that is getting replaced by Chinese production, which is not necessarily a bad thing because that cost of production is noticeably higher than an integrated producer in India like us, right? And in as much as export tax on chrome ore and all from South Africa, there has been quite a bit of back and forth on it, and we will wait and watch how it sees. But fundamentally, while I'm reluctant to make any long-term projections, but I'm confident to say that by the grace of God, we will be competitive and profitable and relatively well placed compared to others. And the fundamentals are shaping up in such a way that things look good at this point in time.

And sir, my second question is on the longeitity of cycle. So historically, what we have seen after such supply cuts, there is improvement in the ferrochrome realization in line with improvement in stainless steel demand or volume growth. But this time around, as you rightly mentioned that the capacity is moving to -- incremental capacity is also moving more towards China, and they have a higher cost of production by say, INR 10,000 to INR 15,000 per tonne compared to us. So how do you see the longeitivity of the up cycle? Because this time around, as of now yet, we don't have support from stainless steel volume growth or stainless steel demand improvement. What really happens when that starts also clicking? Can we expect the cycle to last much longer compared to the historical phase?

So it's again difficult to -- you have asked a very good question, by the way, but it's difficult to predict what the longevity of the cycle will be because, I mean, when I first started out in the business, and I'm talking quite a while ago, the cycles had a certain cadence to it. And that was dictated by the mismatch between consumption, which is stainless steel production increase and supply, which is ferrochrome capacity increase. So those were the original sort of contributors to the cycle. But today, it's a far more complex situation. And therefore, it is a little harder to predict. But again, I think fundamentally, things are changing. because you are seeing across the world an elevated chrome ore costs. So if you're not an integrated producer, that is a huge disadvantage. There are -- besides that, earlier, a lot of capacity which went offline would come back on if markets improved. But today, the expectation is that if South Africa somehow takes itself out of this situation, not all of the capacity which has gone offline will come back online. That's what experts have to say. So fundamentally, I think the markets have changed. And it's -- that is what -- without making specific comments or giving guidance about future prices. All that I'm happy to say is that fundamentally, we are confident about where we are placed.

And based on spot EBITDA cost of around, say, INR 78,000 per metric ton and realizations as we speak are at INR 118,000 per metric tonne. So our current spread is almost INR 40,000 per metric ton, which is historically the highest ever. I understand this flows into numbers with a quarterly lag. So is that correct understanding?

So there and thereabouts. I mean, again, the other reason, of course, you see the ebb and flow in terms of margins is that raw material, you see a lag between stainless steel and ferrochrome and ferrochrome and chrome ore for nonintegrated producers. What is happening with nonintegrated producers right now is that almost in real time, chrome ore prices are moving up in anticipation of higher ferrochrome prices. So that is handy if you are an integrated producer like ourselves. But there are certain other elements which are not in our control, which is metallurgical coke, et cetera. But you asked actually one other question -- your first question, there's one other element with regard to your long-term forecast, which I wanted to speak is with regard to stainless steel demand. Now you're absolutely right that I think currently, the upward movement in prices has more to do with cost pressures and relatively less to do with stainless steel demand. That's not to say stainless steel is not increasing. Stainless steel demand is increasing in India, in China, it is increasing. But if there is a little bit more sort of legs to the demand side, then you'll certainly see that translate very, very noticeably quickly into ferrochrome price.

So even considering, what you mentioned in the press release, almost 4 lakh metric tons of production for next year, even if we consider a slight dip in our EBITDA spreads from current level of 40,000 to say, a more sustainable level of 30,000 and keeping all the stainless steel demand increase as an optionality. So even a sustainable INR 30,000 EBITDA per metric ton for the next year would translate itself to around INR 1,200 crores kind of an EBITDA, right?

So look, I don't want to get ahead of myself in making projections for a year, 1.5 years out. What I have said in interactions is that up till now, we have considered a steady-state EBITDA of about INR 18,000 to INR 20,000 a tonne with peaks and troughs depending upon market situation. But depending on how the fundamentals play out, there is...

I understand. I'm just asking probabilistically speaking. I absolutely agree with you that it is very difficult to predict. But probabilistically speaking, given all the fundamentals, there is more probability of that happening, right? That is my question.

Look, I will leave you to make that conclusion because I wouldn't want to -- it has served us well not to project too far out. So we remain quietly confident, but I wouldn't want to put numbers or probability to that.

Our next question comes from the line of Pranav Jain from [indiscernible] [ Capital and Finance. ]

Congratulations on the great numbers and the acquisition and really happy to see you on the call, Subhrakant. I just had a couple of questions regarding the acquisition. So firstly, can you just give me an idea on why Tata Steel wanted to sell their ferrochrome plant? Was this their only ferrochrome plant? Or like after this, will they not have ferrochrome operations at all? Or was there some other reason?

So Pranav, I can answer the factual part of the question is that they have other ferrochrome facilities. But as regards to why they sold, I don't think it is correct or proper on my part to say anything in that regard.

Got it, sir. And sir, with this new plant, our power requirement will be captive, like do we get power source from the asset transfer agreement?

No, we don't get a power source from the asset transfer agreement. But that is where we have tied up with 110 megawatts of hybrid renewable energy, which, of course, we'll be distributing some to our existing units as well in order to reduce our carbon footprint. But no, we are not up getting any power arrangement from -- through the asset transfer agreement. We will, of course, have -- be connected to the DISCOMs as far as both the units, the greenfield and the acquisition unit as far as both are concerned.

Got it. Sir, the 110 megawatt was I think barely sufficing our existing needs. So how will that translate to the new plant as well then?

No, not sufficing our existing needs. Prior to the acquisition, it was a little bit more than what was there, but that is why we have signed up to for 110, and we will be exploring if we need to increase the quantity in that -- increase more procurement of electricity through hybrid renewable or otherwise.

Got it. And sir, the incremental 50,000 tonnes that is under construction, how much CapEx would have to be incurred for that to go live?

Pranav, thank you for asking that question. Actually, I should have covered it in my remarks. So the INR 610 crores is the base purchase consideration. There is GST being asset transfer, but that is something on which we will get input tax credit. Net working capital to be determined on the day of closure, we expect it to be somewhere around INR 50 crores. And as far as the fifth furnace is concerned, we expect to spend about INR 50 crores to commission that. This is basis due diligence, albeit a very thorough due diligence, but we will be able to get greater certainty about this number once we take control of the unit and do a deeper dive, but we are fairly comfortable projecting about INR 50 crores CapEx to commission the furnace under construction.

So the approximate cost for the entire 150,000 tonnes will be somewhere around INR 700 crores to INR 750 crores then?

Broadly, yes.

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

So congratulations to you and your team for Kalinganagar unit #2. Now please clarify it is the same as the Rohit Ferro plant, which Tata Steel acquired in 2022. This is the same as Rohit Ferro plant?

Yes, that's right.

Okay. And the 33 MVA furnace cost, which you mentioned of INR 50 crores is incredible and very good actually for us because when we look at Kalinganagar number, unit #1, we are spending about INR 550 crores for 100,000 tonne capacity plus other CapEx related CapEx. So that way, this INR 50 crores is very good for IMFA. Now...

That's actually not -- we are not comparing apples-to-apples because I mean, of course, Kalinganagar is a new -- Kalinganagar 1 greenfield is a newer unit being built now. And secondly, there is a substantial work has happened on the 33 MVA furnace. So it's not starting from scratch. Almost a substantial amount of work has been done. It is only to complete that and bring it to commissioning stage. So actually, it's not comparable numbers.

Okay. Now Tata Steel is having another very good unit, Bamnipal plant, which is now idle and not working with capacity of 65,000 tonnes. Now this would be our next target, this Bamnipal unit?

No, it is not proper for me to comment on what assets they have and what they plan to do with -- what TSL plans to do with it. That's not proper for me to comment.

Our next question comes from the line of Saket Kapoor from Kapoor & Co.

Thank you to the team, and thank you, Mr. Panda, for addressing us today, and we hope to hear more from you, sir, going ahead. firstly, with respect to the asset being acquired, since it was an operational asset, can you elaborate who are the customers which Tata Steel was catering to, where the export and the domestic mix, any color you can give?

Saket, I don't know about that. And in any case, it is not relevant for us because being an asset transfer, we are only buying specific assets. So that's it.

Okay. But in terms of continuing with the asset and sweating of the assets, we will be eyeing new customers? Or how are we going to sell the expanded capacity currently?

So there is a fair amount of demand for ferrochrome in the domestic market. And as I have mentioned and as you would be aware, our existing capacity of 260,000 tonnes is primarily directed to export market, and that was because there wasn't that much opportunity. But now there is space which has opened up. And therefore, we will be looking to cater more to the domestic market in terms of the various stainless steel producers there are. And in fact, with some overseas customers as well, there is expectation of more to grow supplies as they grow their size. So we will be balancing that out.

Okay. Just a small point, what is our EC limit for the throughput for ore at the existing -- for the existing mine? As you were mentioning that we will be enhancing the throughput. So what is the environment clearance that we have received? The higher...

It's 12 lakh tonnes. Sandeep, could you confirm that please?

Yes. Yes, it's 12 lakh tonnes from -- together from both the mines.

Okay. And our last year number was, how much have we extracted?

7 lakhs.

7 lakhs. So we have a quite of area to cover. And lastly, we have also seen, as in case of Sukinda mines from the Tata Steel, there were some issues pertaining to the output there. So are we -- that -- what is the story behind this mine output being lower since we are also operating in the same region, not specific to IMFA, but we have seen a lot of stuff regarding the output not being raised from those areas. So are these geographies anyway affecting our thought process of expansion also? There was some lower output, yes.

So Saket, again, 2 different circumstances. And in any case, not correct for me to comment in any way on somebody else's assets and what issues they're facing or not facing. But the one thing I can certainly speak with confidence is that we are on track to expand our own raising from the steady state 6 lakh tonnes where we were and 7 lakh tonnes in FY '25, a little more than 7 lakh tonnes to 8.5 lakh tonnes in FY '26 and eventually scaling up to 12 lakh tonnes. So we are on target on course for that. And I don't see any concerns in that regard.

Okay. And lastly, we will go through the underground mining route also, I think so a lot of CapEx will go there to reach that 1.2 million capacity.

Yes. So our Mahagiri mines from which we are looking at ultimately getting to 4 lakh tonnes, we have in FY '25, raised crossed 4 lakh tonnes for the first time, and we will -- sorry, we will be going up to 6 lakh tonnes. So Mahagiri mine is already underground. As far as our Sukhinda mine is concerned, we will -- we have initiated the underground project, and we are -- we will be transitioning in the next 3-odd years, 3 to 4 years to a fully underground mine, eventually reaching 6 lakh tonnes. So 6 plus 6 is 12 lakh tonnes. And as far as the CapEx for underground is concerned, broadly, it's about INR 1,000 crores, which is what we have briefed earlier as well.

Our next follow-up question comes from the line of Parthiv Jhonsa from Anand Rathi.

I had a very bit of a technical question. Is it possible to quantify our ore grade with the average blended ore grade of India or globally, whatever is comfortable?

So I can -- Sandeep can perhaps give you an answer. But even in our minds, it depends upon which vein you strike. And as we go deeper, we are finding the grade improving actually. Broadly speaking, South Africa is very low-grade ore, but they have humongous quantities, as you know, 8 billion tonnes or whatever it is. And Sandeep, if you want to just shed some light on this?

Mostly right now, we are having medium grade that is ranging from 40% to 51.99%. So in that range, mostly we are getting the ore.