Odisha-based IMFA or Indian Metal and Ferro Alloys Ltd, which turned debt free recently, had firmed up ₹500 crore cap-ex plan to ramp up ferro chrome production capacity by nearly 35 per cent by FY26.
Investments will be made in its upcoming Kalinganagar unit (in Odisha) which will have around 100,000 tonnes per annum capacity. The cap-ex will include setting up two submerged electric arc furnaces and a off-gas power generation unit of 10 MW capacity.
The funds are to be arranged mostly through internal accruals.
Earlier this month, the company in a notification said, it prepaid long-term debt of ₹127.65 crore (thereby making the total prepayment of ₹308.65 crore). After payment of normal installments for the quarter ending March 31, 2022, it will have miscellaneous loans of ₹14.28 crore that will be paid “as per norms” due to adverse prepayment conditions.
“We have been recently alloted land from the Odisha government and will apply for the necessary clearances. There are some processes to be completed left before actual construction work can start. But by FY26, we will add around 100,000 tonnes per annum capacity to our existing ferro chrome production capacity,” Deepak Kumar Mohanty, Senior Vice President, Head – Ferro Alloys Business Unit, IMFA Ltd, told BusinessLine.
IMFA, which reported a turnover of ₹1,900 crore (approx) for the 9M FY22 (April to December), has manufacturing units Odisha (Therubali and Choudwar) having a total production capacity of 284,000 tonnes per annum and a smelting capacity of 190 MVA. It has two captive chrome ore mines - Sukinda and Mahargiri - with a capacity of 6.51 lakh tonne per annum.
It has captive power generation capacity of 204.55 MW, including a solar power capacity of 4.55 MW.
The company is primarily an exporter of ferro alloys, with nearly 80-90 per cent of its offerings being exported to the Far East It has long-term offtake contracts with large-scale manufacturers such as POSCO(South Korea), Marubeni/NSSSC(Japan), Tsingshan(China/Indonesia), among others. Indian clients include Jindal Stainless – the largest stainless steel producer.
Ferro chrome is a key raw material used in the manufacture of mainly stainless steel with a usage level of around 25 per cent ferro chrome as input.
Business Outlook
According to Mohanty, realisations have improved in FY22 compared to the previous year with improvement in ferro-chrome prices. For the quarter ending March 2022, the European Bench Mark (EBM) price was US$1.80 per pound of chromium, which was rolled over from the previous quarter of Oct–Dec 2021. But higher by 24 cents over the July–Sept 2021 period.
For Q1FY23 (April to June period) , EBM has firmed up further by 36 cents at US$2.16 per pound of chromium.
Strong demand in Europe, the US and Far Eastern markets are driving up prices, followed by supply constraints and cost-push for South Africa (a major producer) where input costs are set to go up because of a near 10 per cent hike in electricity costs.
“Realisations are upon a y-o-y basis primarily because of high price points. And we are looking to end FY22 with a turnover over Rs 2500 crores. Stainless steel demand is high and the outlook for Q1FY23 looks good with there being a 36 cent increase in EBM,” he said.