ICRA Rating update 29 Dec ’23:
The ratings derive comfort from the backward integration achieved at KFIL‘s manufacturing plant through coke oven plant and captive power generation, which leads to substantial cost savings. The cost structure would further improve once the captive iron oremines become operational.
ICRA expects ISMT’s healthy credit metrics to sustain in FY2024 on the back of its focus on value added/high margin products, debottlenecking activities and various cost and efficiency optimisation measures to be undertaken by the company (including setting up a solar power plant to reduce power cost). Going forward, the consolidated performance of KFIL is likely to be driven by improving operating and financial parameters of ISMT.
Besides, in September 2023, KFIL acquired a 100% stake in Oliver Engineering Private Limited (OEPL) for ~Rs. 112 crore (debt funded). OEPL manufactures simple castings with a capacity of 28,000 MTPA in Punjab. Being in the similar line of business, OEPL’s acquisition provides KFIL entry into the North India market in the castings segment
KFIL has substantial capex plans (at the consolidated level) of Rs. 600-800 crore per annum over the next two years towards installation of pulverised coal injection, capacity expansion, solar power project, setting up of alloy steel plant, debottlenecking, and other cost saving projects, which would keep its debt levels elevated. Along with high debt repayments of around Rs. 300 crore per annum in FY2024 and FY2025, these would keep its free cash flows under check
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