India Ratings and Research stated that the upgrade reflects Lloyds Metals likely receiving the mining approval by end-FY25, resulting in a significant increase in mining volumes FY26 onwards and higher scale of operations.
The upgrade also reflects India Ratings’ expectation of a low-cost position of LMEL in steel making following the completion of its planned capex, supported by its captive iron ore mine as well as saving on logistic cost.
However, the pace of the ramp-up of operations shall remain a key rating monitorable.
The rating is further supported by India Ratings’ expectation of LMEL’s strong financial profile with a low net leverage ratio and strong liquidity, despite its high capex towards setting up of integrated steel plant as the entire capex will be funded through internal accruals.
The agency said that timely phase-wise completion and the ramp-up of the steel capex along with the ramp-up of the mine production as envisaged, leading to an increase in the proportion of its higher value-added product, and the increased EBITDA per tonne while maintaining the debt-free balance sheet, all on a sustained basis, could lead to a positive rating action.
However, any delay in the ramp-up of the scheduled capex and/or mine production as well as any substantial debt-funded acquisitions/capex/diversion of funds to group entities or any other event, leading to severe depletion of the free cash balances, with the net-adjusted leverage rising above 1.25x and/or any adverse regulatory or legal interventions could lead to a negative rating action.
Lloyds Metals and Energy is engaged in the iron ore mining at Surjagarh village, Gadchiroli district, Maharashtra, and manufacturing of sponge iron. The company’s sponge iron plant is in Chandrapur district of Maharashtra with an installed capacity of 340,000MTPA along with a 34MW captive power plant.