Fundamental Stock

INDIAN METALS & FERRO ALLOYS (IMFA) - Equity Research Report
DATE: 24/10/2017
  • BSE CODE: 533047
  • SECTOR: Mining & Minerals Sector
  • BUY: 635 Rs
  • TARGET: 900 Rs
  • FACE VALUE: 10
  • 52 WEEK HIGH/LOW: 148/823
  • BOOK VALUE: 394
  • DIVIDEND YIELD(%): 200%


    Recommendation - Buy

    Hold for 3 years

    Target: 900 Rs.


    Part – 1 Company’s Information:

    • IMFA Established in 1961 in the Eastern State of Odisha, known for its rich natural resources. Company business cyclic in nature.
    • IMFA is India's largest, fully integrated producer of ferro alloys with 187 MVA installed furnace capacity backed up by 258 MW captive power generation and extensive chrome ore mining tracts.
    • IMFA is the largest integrated value-added ferro chrome producer in india with captive chrome ore resources reserve and power generation capacities.
    • A pioneer in producing silicon alloys and company has shifted focus to produce ferro chrome which imparts the non-corrosive property to stainless steel alloys.
    • IMFA is currently focused on production of ferro chrome, a ferro alloy that imparts the non-corrosive property to stainless steel.
    • Today, IMFA has access to over 18 million tonnes of total ore reserves.
    • The Company has mines at Sukinda, Mahagiri and Nuasahi in Odisha.

    Sukinda Jajpur, Odisha - Opencast (OC)

    Mahagiri Jajpur, Odisha - OC and Underground (UG)

    Nuasahi Keonjhar, - Odisha UG

    • Company is having manufacturing assets at

    Therubali, Odisha 3 furnace having Smelting: 82 MVA capacity

    Choudwar, Odisha 3 furnace having Smelting: 105 MVA capacity plus Power: 258 MW

    • Company is having ISO 9001 Quality Management certification,ISO 14001 Environment Management and ISO 18001 Occupational Health & Safety certification
    • Company is having a mix of open cast and underground mining operations in Odisha’s Jajpur and Keonjhar Districts cater to requirement of chrome ore which currently stands at about 0.6 million tonnes per annum.
    • The company has taken mining on lease at Sukinda and Mahagiri which contracts are valid until 2049 & 2055 respectively.
    • The Nuasahi Mine is currently not operating but the extension is under process.
    • Apart from open cast operations, company is focusing more on underground mining which is more eco-friendly and efficient at Sukinda Valley.The total output is slated to go up in phases to 1.2 million tonnes which will cater to enhanced smelting capacity in line with company business plans.



    • Low Density Aggregate (LDA) plant was commissioned in 2014
    • Indian Metals & Ferro Alloys Ltd (IMFA), India’s largest integrated producer of Ferro Alloys is the first in the country to set up a Low Density Aggregate (LDA) plant at Choudwar, Dist. Cuttack, Odisha.
    • The plant has an annual capacity of 1,75,000 MT per annum.
    • The plant has online fly ash feeding system from 120 MW power plant silo.
    • LDA can be used for structural concrete, precast concrete, concrete screeds and all types of masonry work. It is suitable for construction of structural fill, walls, floors, roofs, arrestor beds, bridges and multi-dwelling units.


    LDA & Environment

    • Aggregate is a key component used in concrete as a filler material.
    • Natural aggregate is obtained by quarrying of hills and mountains, resulting in depletion of natural landscape.
    • Use of LDA will save nature and also reduce pollution from crushers- used for production of natural aggregate.



    • 187 MVA furnace capacity for ferro chrome production
    • 258 MW captive power generation plant



    Power Plant

    Captive power generation capacity stands at 261 MW comprising of 108 MW coal-based unit, 30 MW dual-fuel unit which operates on a mixture of coal & furnace gas, 120 MW coal-based unit and 3 MW solar power unit.



    Part – 2 Company’s Subsidiary company

    1 IMFA Alloys Finlease Limited

    2 Indian Metals And Carbides Limited

    3 Utkal Coal Limited

    4 Utkal Green Energy Limited

    5 Utkal Power Limited

    6 Indmet Mining Pte Ltd (Singapore)



    • POSCO of South Korea,
    • Marubeni Corporation
    • Nisshin Steel of Japan leading stainless steel producers in China and Taiwan.
    • Jindal Stainless and Shah Alloys
    • In India company is having relationships with Jindal Stainless, Shah Alloys and other producers.
    • Internationally, company is having partnerership with POSCO of South Korea (taking the lead in a 76:24 joint venture in India to produce ferro chrome with assured off-take commitment in addition to a long term contract) and Nisshin Steel (long term contract) besides supplying on a consistent basis to many large customers in China and Taiwan.




    • Export over 80% of ferro chrome output to multiple customers across six counties.
    • Company is exporting LDA in the Middle East and for sale of LDA, company is having tie up with Euro-Agg exclusive representative



    Part – 3 IMFA – Dividend history:


    Dividend Declared














    Rs.10.0000 per share(100%)Final Dividend.





    Rs.10.0000 per share(100%)Interim Dividend.





    Rs.1.5000 per share(15%)Dividend





    Rs.3.0000 per share(30%)Dividend





    Rs.5.0000 per share(50%)Dividend



























    Part – 4 IMFA - Shareholding Pattern:


    Share holding Pattern


    Percent of Share (%)

    Promoters & Promoters Group


    Public Holding





    Part – 5 Financial Focus:


    Focus on - Financial Results March 2017:

    • During the year (2016-2017) under review, the total revenue increased to 1697.04 Cr. in comparison to the previous year (2015-2016) revenue of 1226.53 Cr. by 38% on YOY basis.
    • The EBITDA has increased from 139.5 Cr to 564.68 Cr. up million up by 305% on YOY basis.
    • Profit after tax increased to 249.83 Cr from 44.73 Cr up by 458%.


    Focus on - Financial Results June quarter 2017:

    • For the quarter ended 30-06-2017, the company has reported a Standalone sales of Rs 426.31 Crore, up 70 % from last year same quarter June 2016 Sales of Rs 250.46 Crore.
    • Company has reported net profit after tax of Rs 99.92 Crore in latest quarter compare to last year June 2016 quarter profit -30.35 up by 429%.



    Part – 6 Company Financial Chart:




    • IMFA is part of a highly cyclical industry where several risks threaten its sustainability.
    • Taking all risks in its stride, the Company operates a proactive risk management process that involves:


    • Regulatory Risk


      • Change in regulations or legislations may cause major hiccups for the Company
      • Delay in regulatory approvals or altered legislations have the potential to affect IMFA’s business. Thus, the Company


    • Operational Risk


    • Inefficient operations could influence production cost and affect competitive edge.
    • IMFA carries out regular maintenance of equipment to avoid breakdowns. The Company also focuses on technology upgradation and process modifications to enhance efficiency. To reduce accidents, the Company employs many safety precautions.


    • Exchange Risk


    • Volatility in currency markets may bring down margins for IMFA


    • Capital Risks


    • Poor allocation of capital may cause the business to miss out opportunities. Moreover, the Company is constantly bringing down debt levels to strengthen balance sheet enabling headroom for future growth.


    • Industry Risk


    • Soft demand by stainless steel industry have the potential to affect sales
    • Stainless steel finds a wide range of applications in construction, automobile, chemical and house hold appliances industries.
    • Increasing population coupled with rising economies is expected to boost the growth of the infrastructure sector.
    • The construction industry alone consumes about 50% of the stainless steel manufactured.
    • Changing lifestyles and increasing purchasing power is expected to boost overall demand for automobiles and white goods driving the demand for stainless steel further.


    • Raw Material Risk


    • Unavailability of raw material can be a major threat to the Company’s production capacity
    • IMFA has mines in Sukinda, Mahagiri that provide an uninterrupted supply of ores for production. Further, the Company has progressed to mining underground which is more eco-friendly and efficient.
    • Besides, the Company has 258 MW of power capacity for in-house consumption. It has long-standing contracts with vendors to supply other raw materials like low ash and low phos coke among others.



    Investment Rational:

    1. Located in Odisha’s chromium reserves belt, which contains 90% of India’s total chrome ore reserves.
    2. Located near major railway hubs and ports
    3. Company has turn in profit
    4. Robust growth in revenue 5 year CAGR – 5.45%
    5. Robust growth in EBITDA 5 year CAGR – 17.24%
    6. Robust growth in Net profit 5 year CAGR – 35.9%
    7. The ferro chrome industry is expected to remain stable in the near future with robust demand. Stability in the Chinese economy and the new US regime proposing massive infrastructure projects are expected to raise demand for stainless steel and, thereby, ferro chrome.
    8. The Government of India’s impetus on infrastructure creation and proposed smart cities will drive demand for stainless steel. Moreover, growing urbanisation and disposable income will enhance demand for white goods which is mostly made of stainless steel.
    9. The Company is a globally recognised brand among ferro chrome producers and primarily exports to the Far East – China, Japan,Taiwan and South Korea. IMFA is trusted by multinationals like POSCO in South Korea, Marubeni Corporation and Nisshin Steel in Japan for its commitment to quality.
    10. The Company’s capital work-in-progress reduced to 56.45 Crore as on 31st March, 2017 from 60.46 Crore as on 31st March, 2016. This was owing to the commissioning of projects and capitalisation of various expansion activities.
    11. At present, most of the output is exported to Far East Asia which is the epicenter of stainless steel production.
    12. Volatile currencies like SA Rand are likely to remain stable keeping ore and ferro chrome prices steady
    13. India’s total chrome ore resources are estimated at 203 million tonnes, with 27% or 54 million tonnes being maintained as reserves. More than 93% of the chromite resources are located in Odisha, mostly in the Sukinda Valley in Cuttack and Jajpur districts.
    14. India’s ferro chrome industry, with 1 million tonnes per annum production, contributes 9% of the 11 million tonnes global ferro chrome output
    15. 80% export to international market
    16. Ferro Chrome (FeCr), an alloy of chrome and iron ore, is a key raw material for stainless steel (SS) production and expecting strong improvement in demand in chines ferro chrome industy from China & South Africa plus change in commodity price.
    17. Strong demand of stainless steel as ferro alloy is the raw materials to produce SS.




    • Stock CMP is 725 Rs. and based on all above investment points, stock may touch 900 Rs. Within 3 years’ time horizon.



    Please note:

    • Note: The articles are not research reports but assimilation of information available on public domain and it should not be treated as a research report. Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations” Disclosure: It is safe to assume that I might have the discussed companies in my portfolio and hence my point of view can be biased. Readers should consult registered consultants before making any investments.