IMFA takes inorganic path to growth

BHUBANESWAR:Indian Metals & Ferro Alloys (IMFA), which is going through a rough patch for quite some time now, is scouting for acquisitions to cushion against the business vagaries and rev up its bottomline.“The stress in the sector, with several vulnerable units being dealt by NCLT, creates scope for further consolidation in this fragmented sector,” Subhrakant Panda, MD & CEO, IMFA, told Express, adding that IMFA is already on the lookout for these distressed assets.

A strategic buyout of the iron ore mines owned by the company, he said, will also help the company leverage growth amid lower production.The partial shutdown of the Therubali unit coupled with mark to market provision of Rs 35 crore on account of sharp depreciation of the Rupee has dragged the company’s earnings viciously. Net profit nosedived to Rs 28.74 crore in the first quarter ended June 30, declining 71 per cent, against Rs 99.92 crore in the corresponding period the previous year. Revenue also fell to Rs 412.53 crore in the first quarter from Rs 426.31 crore in the corresponding period of the previous fiscal.

During the quarter gone by, production also took a hit by 10 per cent to 46,766 tonnes and the company reported a 3.2 per cent decline in sales. “I think we have structured ourselves well to deal with industry cyclicality. IMFA’s inventories helped it negate the impact of lower production,” he added.The company is hopeful of resuming production at its facility by the end of August.

“We’re looking at FY19 guidance of 2.20-2.25 lakh tonne production,” said Panda, adding that the guidance has been kept low deliberately as it remains to be seen how the ongoing trade war between China and the United States plays out. IMFA’s output was close to 2.35 lakh tonne in FY18.

In terms of performance in the current financial year, Panda said that the pricing environment will decide the fate of the company.In the past four to five quarters, there have been severe fluctuations in chrome prices with market prices currently hovering at around Rs 80,000 a tonne.

While the trade war will have bearings on prices of ferro chrome, the fall in Rupee would be in the favour.
“While exporters are usually a net gainer of Rupee depreciation, the Rupee started falling in the fag end of the quarter (affecting Q1 profits) and the benefits will be reflected in Q2,” Panda said. In FY18, the company had the highest ever foreign exchange earnings of little over Rs 1,500 crore.