Hira Ferro Alloys Ltd. Faces Challenging Year Amid Lower Price Realizations

27 August 2024

Hira Ferro Alloys Ltd. (HFAL), a subsidiary of Godavari Power and Ispat Ltd (91.8% Holding), experienced a tough financial year due to weaker demand in the steel sector and reduced price realizations. The company's gross sales dropped by 23.85% to ₹345.6 crore in FY 2023-24, down from ₹453.8 crore the previous year. This decline was primarily driven by a 19.72% decrease in ferro alloys sales, which totaled ₹301.7 crore compared to ₹375.8 crore in FY 2022-23.

EBITDA also saw a decline to ₹38.5 crore from ₹41.2 crore the previous year, while PAT fell sharply by 62.35% to ₹8.2 crore from ₹21.8 crore. The company attributed the lower profits to the reduction in price realizations and increased depreciation and finance costs.

HFAL's power generation segment also experienced a downturn, with sales decreasing by 9.23% to ₹41.3 crore due to higher captive consumption. The company produced 41,637 MTs of ferro alloys, a slight decrease from 43,156 MTs the previous year.

In a significant development, HFAL successfully commissioned 22 MWp of its planned 60 MWp Captive Solar PV Power Plant, with the total commissioned capacity now at 52 MWp. However, the company faces challenges in acquiring contiguous land for the remaining 8 MWp.

Despite being a reputable company in the industry, HFAL's underperformance this year has led to a steep rise in its P/E ratio to 72, significantly above the industry median of 20. This highlights the need for strategic adjustments to align with market conditions and maintain competitiveness in the coming years.