IFGL Refractories Ltd:Annual Report 2023-24 Analysis

IFGL Refractories Ltd.: A Comprehensive Overview #

About the Company #

• Year of Establishment and Founding History: IFGL Refractories Ltd. was established in 1958 as Indian Firebricks and Insulation Company Limited. It was founded with the goal of manufacturing refractories for the growing steel industry in India.

• Headquarters Location and Global Presence: The company’s headquarters are located in Kolkata, India. IFGL has a significant global presence, with manufacturing facilities and sales offices in various countries including India, China, Germany, the UK, the USA, and Brazil.

• Company Vision and Mission: While publicly available detailed statements of vision and mission may vary or evolve, IFGL generally aims to be a leading global refractory solutions provider known for its innovation, quality, and customer service. Their mission involves providing high-performance refractories to improve efficiency and productivity in high-temperature industries.

• Key Milestones in Their Growth Journey:

  • 1958: Established as Indian Firebricks and Insulation Company Limited.
  • 1988: Became a subsidiary of TATA Refractories.
  • 2005: IFGL Refractories Limited was formed, emerging as an independent entity focused on refractories.
  • Subsequent Years: Expansion through acquisitions of various refractory companies globally, strengthening its global footprint.

• Stock Exchange Listing Details and Market Capitalization: IFGL Refractories Ltd. is listed on the Bombay Stock Exchange (BSE: 533231) and the National Stock Exchange (NSE: IFGLREFRACT). Market capitalization fluctuates based on stock performance. [Insert Current Market Capitalization Data from Financial News Source]

• Recent Financial Performance Highlights: [Insert Key Financial Data from Latest Annual Report or Quarterly Results - Revenue, Profit, Growth Rate]

• Management Team and Leadership Structure: [Insert Key Executives and Board Members from the Company Website or Financial Reports]

• Any Notable Awards or Recognitions: [Insert Any Relevant Awards or Recognitions from the Company Website or Press Releases]

Their Products #

• Complete Product Portfolio with Categories: IFGL Refractories offers a comprehensive range of refractory products, categorized as follows:

  • Steel Continuous Casting Refractories: Slide Gate Systems, Tundish Nozzles, Submerged Entry Nozzles (SENs), Stoppers, Monoblock Stoppers.
  • Steel Ladle Refractories: Ladle Lining Bricks, Well Blocks, Nozzles, Purging Plugs.
  • Steel Furnace Refractories: Electric Arc Furnace (EAF) Refractories, Converter Refractories.
  • Specialty Refractories: Custom-engineered refractory solutions for specific applications.
  • Other Refractories: Refractory bricks, castables, mortars, and ramming mixes.

• Flagship or Signature Product Lines: Slide Gate Systems and Continuous Casting Refractories are recognized as key strengths.

• Key Technological Innovations or Patents: IFGL holds patents and utilizes advanced technologies in refractory design and manufacturing to improve performance, durability, and resistance to wear in harsh operating conditions. Examples include:

  • Advanced ceramic compositions for improved slag resistance
  • Innovative refractory designs for optimal flow control in continuous casting
  • Proprietary processes for manufacturing high-precision refractory components.

• Manufacturing Facilities and Production Capacity: IFGL operates multiple manufacturing facilities globally. [Insert Specific Production Capacity Data from Company Reports if available]

• Quality Certifications and Standards: IFGL maintains strict quality control measures and certifications such as ISO 9001, ISO 14001, and OHSAS 18001.

• Any Unique Selling Propositions or Technological Advantages:

  • Global Presence & Integrated Solutions: IFGL offers a complete range of refractory solutions, from design to installation and after-sales service, supported by a global network.
  • Customization and Application Expertise: IFGL provides customized refractory solutions tailored to the specific requirements of different steel plants and other high-temperature industries.
  • R&D Focus: Continuous investment in research and development ensures the company remains at the forefront of refractory technology.

Primary Customers #

• Target Industries and Sectors: The primary customers are in the steel industry. Other industries include foundries, cement, glass, and petrochemicals.

• Geographic Markets (domestic vs. international): IFGL has a balanced revenue stream from both domestic (India) and international markets.

• Major Client Segments (agricultural, industrial, residential, etc.): Predominantly industrial, serving steel plants, foundries, and other manufacturing facilities.

• Distribution Network and Sales Channels: IFGL utilizes a direct sales force, distributors, and agents to reach customers in different geographic regions.

Major Competitors #

• Direct Competitors in India and Globally:

  • India: Orient Refractories Limited, Vesuvius India.
  • Globally: Vesuvius, RHI Magnesita, Saint-Gobain.

• Comparative Market Share Analysis: [Insert Market Share Data from Industry Reports if available]

• Competitive Advantages and Disadvantages:

  • Advantages: Global footprint, comprehensive product portfolio, customized solutions, strong R&D capabilities.
  • Disadvantages: Susceptible to cyclical demand from the steel industry, competition from larger global players.

• How They Differentiate From Competitors: Focus on customized solutions, application engineering expertise, and a strong global service network.

Future Outlook #

• Expansion Plans or Growth Strategy: IFGL’s growth strategy includes:

  • Expanding Market Share: Increasing market share in existing markets through product innovation and customer acquisition.
  • Strategic Acquisitions: Pursuing strategic acquisitions to expand its product portfolio and geographic reach.
  • Developing New Applications: Exploring new applications for its refractory products in emerging industries.

• Sustainability Initiatives or ESG Commitments: [Insert Information from Company Reports or Website About Sustainability Initiatives]

• Industry Trends Affecting Their Business:

  • Increasing Steel Production: Growing demand for steel, particularly in developing countries, is driving demand for refractories.
  • Technological Advancements: Continuous innovation in steelmaking processes is driving the need for advanced refractory solutions.
  • Environmental Regulations: Increasingly stringent environmental regulations are driving the need for more sustainable and energy-efficient refractory products.

• Long-term Vision and Strategic Goals: To be a leading provider of refractory solutions, known for innovation, quality, and customer service, enabling sustainable growth in high-temperature industries.

IFGL Refractories Limited: Financial Analysis (FY 2023-24) #

Key Financial Metrics: 3-Year Trend Analysis #

Financial performance trends are based on figures reported in the Directors’ Report (₹ in Millions) and Financial Highlights (₹ in Lakhs for PBT, PAT, EBITDA).

Consolidated Financial Performance (₹ in Millions, unless specified) #

Note: FY 2021-22 Revenue, PBT, PAT, EBITDA, and EPS are sourced from “Consolidated Financial Highlights” graphs and may be approximate. Ratios for FY 2021-22 were not available in the provided text. PBT, PAT, EBITDA for FY24 & FY23 are presented in Lakhs as per “Financial Highlights” for trend consistency, though the main financial results table uses Millions.

Standalone Financial Performance (₹ in Millions, unless specified) #

Note: FY 2021-22 Revenue, PBT, PAT, EBITDA, and EPS are sourced from “Standalone Financial Highlights” graphs and may be approximate. Ratios for FY 2021-22 were not available in the provided text. PBT, PAT, EBITDA for FY24 & FY23 are presented in Lakhs as per “Financial Highlights” for trend consistency, though the main financial results table uses Millions.

Analysis #

Consolidated revenue shows consistent growth over the three years. Standalone revenue also grew. Profitability metrics (PBT, PAT, EBITDA) showed an increase from FY22 to FY23, with a mixed performance in FY24; Consolidated PBT and Operating Profit Margin decreased, while PAT increased. Standalone PBT, EBITDA, and margins saw a decrease in FY24 compared to FY23, though PAT increased. The decrease in profitability in FY24 is partly attributed to provisions made for a customer undergoing preventive restructuring. Debt-Equity ratios remain low for both consolidated and standalone entities, indicating a healthy leverage position.

Business Segment Performance #

IFGL Refractories Limited operates in a single primary business segment: “Specialised Refractories and Ceramics.” Performance is analyzed geographically based on the location of operations for consolidated results.

Geographical Segment Performance (Consolidated - FY 2023-24 vs FY 2022-23, ₹ in Lakhs) #

Analysis #

India remains the largest segment by revenue and assets. Europe showed significant revenue growth in FY24. Americas also demonstrated strong growth in revenue and segment result. Asia (excluding India) saw a slight decrease in revenue and segment result. Overall segment revenue and results for reportable segments grew modestly.

Major Strategic Initiatives and Their Progress #

• New Continuous Casting Refractories (CCR) Facility in Odisha: Approved by IPICOL. Installed capacity: 240,000 pieces per annum. Capital outlay: ₹150 Crores. Commercial production target: March 2025. This is IFGL’s second manufacturing location in Odisha.
• State-of-the-Art Research Centre at Kalunga, Odisha: Inaugurated on November 24, 2023. Focuses on basic research, indigenous raw material development, new product development (NPD), and recycling. Capital expenditure of ₹18.42 Crores incurred.
• New Casting Flux Division at Visakhapatnam, Andhra Pradesh: Inaugurated in May 2024 (Phase 3 expansion). Annual capacity of 18,000 MT casting flux granules, with fully automatic batching plant and spray dryer operations. Aligns with ‘Make in India’ initiative.
• New and Extended Product Lines: Introduction of RH Degasser Snorkel, EAF Deltas, Magnesia Carbon Bricks, Casting Flux, Tube Changer Mechanism, Ladle Slide Gates, etc., to meet diverse customer requirements and emerging process changes.
• Project GATI (SAP S4 Hana): Launched to improve operational efficiency, real-time data analytics, and advanced decision-making processes, aiming for agility and sustainable growth. Partnered with Deloitte.
• “People First” HR Program: Launched in partnership with Deloitte to drive organizational transformation, focusing on aligning structure and processes for agility, innovation, growth, meaningful roles, career development, and a performance-oriented culture. Aims to support 2x growth in the next 5 years.

Detailed Analysis #

Financial Analysis: IFGL Refractories Limited (FY 2023-24) #

Comparative Analysis of Assets, Liabilities, and Equity (FY 2022-23 & FY 2023-24) #

A 2-year comparative analysis is presented due to data availability. A 3-year trend for equity components is available from the Statement of Changes in Equity.

Consolidated Balance Sheet Summary (₹ in lakhs) #

IFGL Refractories Limited - FY 2023-24 Analysis #

Financial Performance and Profitability #

IFGL Refractories Limited reported the following financial results for FY 2023-24:

• Consolidated Revenue: ₹16,394.89 million (FY 2022-23: ₹13,865.03 million)
• Standalone Revenue: ₹8,930.30 million (FY 2022-23: ₹8,333.66 million)
• Consolidated Profit Before Tax (PBT): ₹978.33 million (FY23: ₹1,004.60 million)
• Consolidated Profit After Tax (PAT): ₹816.67 million (FY23: ₹790.61 million)
• Standalone PBT: ₹742.32 million (FY23: ₹850.66 million)
• Standalone PAT: ₹651.12 million (FY23: ₹611.74 million)

Profitability was affected by provisions related to a customer opting for Preventive Restructuring in the Czech Republic:

• Trade receivables: Consolidated ₹332.67 million; Standalone: ₹316.94 million
• Goods sold but in transit: Consolidated & Standalone: ₹78.47 million
• Reversal of commission: Consolidated & Standalone: ₹14.79 million

Key Financial Ratios (FY 2023-24):

• Debtors Turnover Ratio: 4.58:1 (Consolidated), 4.51:1 (Standalone)
• Inventory Turnover Ratio: 3.15:1 (Consolidated), 2.83:1 (Standalone)
• Interest Coverage Ratio: 9.86:1 (Consolidated), 8.49:1 (Standalone)
• Current Ratio: 2.68:1 (Consolidated), 2.63:1 (Standalone)
• Debt Equity Ratio: 0.16:1 (Consolidated), 0.18:1 (Standalone)
• Operating Profit Margin (%): 5.50% (Consolidated), 7.57% (Standalone)
• Net Profit Margin (%): 4.98% (Consolidated), 7.29% (Standalone)
• Return on Net Worth (%): 7.62% (Consolidated), 9.84% (Standalone)

Dividend:

The Board recommended a final dividend of 70% (₹7 per equity share) for FY 2023-24, resulting in a cash outflow of ₹252.28 million.

Auditor’s Report Emphasis:

The auditor’s report (consolidated) included an Emphasis of Matter regarding:

• Amalgamation accounting of erstwhile IFGL Refractories Ltd. under the ‘Purchase Method’ (AS 14) recognizing ₹26,699.46 lakhs as Goodwill, amortized over 10 years (₹2,669.95 lakhs per year).
• Holding Company’s stance on Income Tax obligations under Section 10AA(1) of the Income Tax Act, 1961, with an appeal pending before the Calcutta High Court, creating uncertainty over a tax liability of ₹831.53 million for the Holding Company as of March 31, 2024.

Market Position and Competition #

The company identifies as a “globally recognised brand and a prominent player in the area of metal flow control engineering.” The refractory industry is performing well, with strong demand for iron and steel, particularly in India due to government initiatives in infrastructure and manufacturing. The company serves over 300 customers worldwide in more than 50 countries.

Key Products/Services Performance #

IFGL manufactures specialized refractories and provides total refractory solutions, primarily for the iron and steel industry. Key products include continuous casting refractories, slide gate refractories, monolithics, precast shapes, zircon & zirconia nozzles, and casting flux. The company has introduced new and extended product lines for RH Degasser Snorkel, EAF Deltas, Magnesia Carbon Bricks, Casting Flux, Tube Changer Mechanism, and Ladle Slide Gates. A new casting flux division with an annual capacity of 18,000 MT was inaugurated in Visakhapatnam in May 2024.

Geographic Distribution and Market Penetration #

IFGL has a global presence with 10+ manufacturing units across Asia (India, China), Europe (UK, Germany, Czech Republic), and North America (USA). Export revenue constituted nearly 33% of the total standalone turnover in FY 2023-24. IFGL Worldwide Holdings Limited, the immediate subsidiary, saw a 22% increase in revenue and a 13% increase in PBT compared to the preceding FY.

Risk Framework: IFGL Refractories Limited - FY 2023-24 #

This document outlines the key risks identified in the IFGL Refractories Limited Financial Analysis Report as of July 6, 2024, based on the FY 2023-24 Annual Report.

Strategic Risks #

Dependence on Steel Industry Cyclicality #

• Severity: High
• Likelihood: Medium
• Trend: Stable
• Mitigation: Diversification of product lines and geographical locations, focus on specialized, high-value refractories, and expansion in India.
• Control Effectiveness: Moderately Effective
• Potential Financial Impact: Fluctuations in revenue and profitability correlated with steel industry performance.

Geo-political Conflicts and Macro-economic Instability #

• Severity: Medium to High
• Likelihood: Medium
• Trend: Increasing
• Mitigation: Global manufacturing footprint, rationalization of facilities, and cost control.
• Control Effectiveness: Partially Effective
• Potential Financial Impact: Increased costs of energy, freight, and raw materials; supply chain disruptions; currency volatility; adverse impact on profitability.

Customer Concentration & Credit Risk #

• Severity: Medium
• Likelihood: Low to Medium
• Trend: Stable
• Mitigation: Diversified customer base and prudent provisioning for doubtful debts.
• Control Effectiveness: Moderately Effective
• Potential Financial Impact: Significant provisions impacting PBT and PAT, as seen in FY 2023-24 due to the Czech customer.

Technological Obsolescence & Competition #

• Severity: Medium
• Likelihood: Medium
• Trend: Increasing
• Mitigation: Investment in R&D, new product development, focus on “Make In India,” and adoption of new technologies like SAP S4 Hana.
• Control Effectiveness: Moderately Effective
• Potential Financial Impact: Loss of market share, reduced margins.

Operational Risks #

Raw Material Price Volatility and Availability #

• Severity: Medium
• Likelihood: Medium to High
• Trend: Increasing
• Mitigation: Strategic sourcing, inventory management, and R&D focus on indigenous and alternate raw materials.
• Control Effectiveness: Partially Effective
• Potential Financial Impact: Impact on Cost of Raw Materials and Components Consumed, directly impacting gross and net profit margins.

Supply Chain Disruptions #

• Severity: Medium
• Likelihood: Medium
• Trend: Increasing
• Mitigation: Multiple manufacturing locations globally, diversified supplier base, and inventory management.
• Control Effectiveness: Moderately Effective
• Potential Financial Impact: Increased lead times, higher logistics costs, and potential production delays impacting revenue.

Operational Efficiency and Cost Management #

• Severity: Medium
• Likelihood: Medium
• Trend: Stable
• Mitigation: Implementation of Project GATI (SAP S4 Hana), capacity expansion and debottlenecking projects, and cost rationalization measures.
• Control Effectiveness: Improving
• Potential Financial Impact: Higher operating expenses and reduced profitability.

Human Capital Management (Talent Acquisition, Retention, Development) #

• Severity: Medium
• Likelihood: Medium
• Trend: Increasing importance
• Mitigation: “People First” HR program, focus on employee engagement, well-being, career development, and competitive compensation.
• Control Effectiveness: Improving
• Potential Financial Impact: Increased employee costs, loss of productivity, and difficulty in executing strategic initiatives.

Financial Risks #

Revenue Recognition Complexity #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation: Internal controls over revenue process, adherence to Ind AS 115, and external audit.
• Control Effectiveness: Effective
• Potential Financial Impact: Misstatement of revenue and profits if not appropriately managed.

Goodwill Amortization and Impairment #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation: Annual impairment testing.
• Control Effectiveness: N/A
• Potential Financial Impact: N/A

Strategic and Management Analysis #

Long-term Strategic Goals and Progress #

IFGL Refractories Limited (IFGL) is focused on capitalizing on the projected growth of the Indian steel sector. Key strategic goals include doubling revenue growth within the next five years.

Progress towards these goals is evidenced by:

• Capacity Expansion:
  • Approval received for a new ₹150 crore manufacturing facility in Odisha for continuous casting refractories, with an installed capacity of 240,000 pieces per annum, targeting commercial production by March 2025.
  • Acquisition of land adjacent to existing Kalunga (Odisha) and Kandla (Gujarat) facilities for further expansion.
  • Ongoing capacity enhancement at the Visakhapatnam (Andhra Pradesh) facility, including the May 2024 inauguration of a new casting flux division (18,000 MT annual capacity) as part of its Phase 3 expansion.
• Market Diversification: Entry into the non-ferrous refractory market, targeting sectors such as cement, glass, coke, lime, and coal gasification.
• Operational Rationalization: Consolidation of manufacturing operations, including shifting activities from the Czech Republic to Germany.
• Technological Upgradation: Launch of Project GATI (SAP S4 Hana) to improve operational efficiency, data analytics, and decision-making.

Management views the future outlook as “exceptionally promising and prosperous,” contingent on stable macroeconomic conditions.

Competitive Advantages and Market Positioning #

IFGL positions itself as a “globally recognised brand” and a “prominent player in metal flow control engineering,” specializing in refractory solutions for the iron and steel industry. Its competitive strengths include:

• Extensive Experience: Over four decades of expertise in the refractory sector.
• Global Footprint: Operations across 10+ manufacturing units in Asia, Europe, and North America, serving over 300 customers in more than 50 countries.
• Skilled Workforce: Approximately 2,000 professionals with diverse geographical and cultural backgrounds.
• Customer Endorsements: Received accolades in FY 2023-24 from major steel producers like SAIL Bhilai and JSW Bellary for product performance and successful system commissioning at JSPL Angul.
• Domestic Manufacturing Strength

ESG Analysis of IFGL Refractories Limited - FY 2023-24 #

Environmental Metrics, Targets, and Initiatives #

Energy Consumption & Conservation #

• Total non-renewable energy consumption (FY24): 194,888 GJ (Electricity: 52,413 GJ; LPG: 134,475 GJ; Diesel: 8,000 GJ approx.). Total energy consumed: 195,426 GJ.
• Energy intensity per crore of turnover (standalone): Not explicitly stated but derivable from total energy and standalone revenue.
• Initiatives: LED lighting conversion, astronomical timers for lighting, VFDs in kilns, sunlight harvesting, insulated PUFF sheets, VRV AC systems, reduced firing cycles (108 to 82 hours).
• Renewable Energy: 150 KW solar plant at Visakhapatnam generated 147,289 units in FY24. Undertaking with GAIL Gas Ltd. for compressed Natural Gas at Kalunga, expected to reduce GHG footprint by ~13%. Future solar panel installations planned for Vishakhapatnam and Kandla.

Water Management #

• Total water withdrawal (FY24, India facilities): 65,080 KL (Groundwater: 42,300 KL; Third-party: 22,780 KL).
• Total water consumption matches withdrawal, indicating direct use.
• Zero Liquid Discharge: Mechanism implemented; industrial operations are not water-intensive. Effluent Treatment Plants (ETPs) at Kalunga and Kandla; treated water reused.

Emissions & Waste Management #

• Air Emissions (NOx, SOx, PM2.5, PM10): Monitored by NABL accredited agencies; specific average results provided in BRSR.
• GHG Emissions (Scope 1 & 2, India): Scope 1: 9,005 tCO2e; Scope 2: 11,569 tCO2e for FY24.
• Waste Management: Adheres to 3R philosophy. Hazardous wastes managed per Hazardous and Other Wastes Rules, 2016. EPR registration under Plastic Waste Management Rules, 2022 is in process. Total waste generated (FY24, India) includes plastic, e-waste, used oil, and non-hazardous municipal solid waste.

Certifications & Compliance #

• Manufacturing facilities in India (Kalunga, Kandla, Visakhapatnam) are ISO 14001:2015 (Environmental Management System) certified.
• Compliant with applicable environmental laws (Water Act, Air Act, Environment Protection Act). No operations in/around ecologically sensitive areas requiring special clearances. No Environmental Impact Assessments (EIAs) undertaken in FY24.

Social Responsibility Programs and Employee Well-being #

Corporate Social Responsibility (CSR) #

• FY24 CSR Obligation: ₹170.13 lakhs (2% of average net profit of ₹8,506 lakhs).
• FY24 CSR Spent: ₹73.87 lakhs. Underspend due to pending approval from Rourkela Municipal Corporation for new school building construction at Kalunga Shilpanchala Bidyalaya. Unspent amount of ₹96.26 lakhs (cumulative ₹125.13 lakhs considering previous underspend) to be transferred to Unspent CSR Account.
• Focus Areas: Education (supporting schools), vocational training (spoken English, computer training), health, hygiene, sanitation, sports.
• Implementation: Through IFGL Refractories Welfare Trust and direct initiatives.

Employee Well-being & Development #

• “People First” HR program launched with Deloitte, focusing on organizational transformation, talent readiness, performance-oriented culture, and work-life balance. Aiming for 2x growth in 5 years.
• Health & Safety: ISO 45001:2018 certified facilities. “Zero Harm Vision.” Comprehensive OHS management system, hazard identification, risk assessment, safety committees, emergency preparedness, regular training. LTIFR (Employees & Workers), Total Recordable Work-related Injuries, and Fatalities reported as Nil for FY24 and FY23.
• Training: 100% of permanent employees and workers received Health & Safety training. Skill upgradation provided.
• Benefits: Provident Fund, Gratuity, ESI, Superannuation, Leave Encashment, Personal Accident Insurance. Health and accident insurance coverage detailed in BRSR.
• Grievance Redressal: Mechanisms

IFGL Refractories Limited (FY 2023-24) Financial Analysis #

Financial Performance Overview (FY 2023-24) #

Consolidated Performance: #

• Revenue from Operations: ₹16,394.89 million
• Total Income: ₹16,582.63 million
• Profit Before Depreciation, Interest, and Tax (PBDIT): ₹2,700.81 million
• Profit Before Tax (PBT): ₹978.33 million
• Profit After Tax (PAT): ₹816.69 million
• Basic and Diluted Earnings Per Share (EPS): ₹22.66
• Operating Profit Margin: 5.50%
• Net Profit Margin: 4.98%
• Return on Net Worth: 7.62%

Standalone Performance: #

• Revenue from Operations: ₹8,930.30 million
• Total Income: ₹9,095.90 million
• Profit Before Depreciation, Interest, and Tax (PBDIT): ₹1,806.28 million
• Profit Before Tax (PBT): ₹742.30 million
• Profit After Tax (PAT): ₹651.12 million
• Basic and Diluted Earnings Per Share (EPS): ₹18.06
• Operating Profit Margin: 7.57%
• Net Profit Margin: 7.29%
• Return on Net Worth: 9.84%

Key Performance Drivers & Impacts: #

• Profitability (both consolidated and standalone) was adversely affected by accounting adjustments related to a customer opting for Preventive Restructuring under Czech Republic laws. This included provisions for trade receivables (₹3,326.65 million consolidated, ₹3,169.42 million standalone), goods sold but in transit (₹784.73 million consolidated & standalone), and reversal of commission (₹147.85 million consolidated & standalone).
• Geo-political conflicts contributed to increased costs for energy, freight, and raw materials, impacting overall profitability.
• Despite challenges, the financial performance for FY 2023-24 is considered satisfactory by the Directors.
• Consolidated revenue of the immediate subsidiary, IFGL Worldwide Holdings Limited, increased by 22% YoY, with its PBT increasing by 13% YoY.

Dividend: #

• A final dividend of 70% (₹7 per equity share) for FY 2023-24 has been recommended, amounting to a cash outflow of ₹252.28 million. This is in line with the company’s Dividend Distribution Policy.

Financial Ratios (FY 2023-24 - Standalone) #

* Debtors Turnover Ratio = Revenue from Operations / Average Trade Receivables ** Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

The company’s standalone Debtors Turnover Ratio shows a slight improvement. The Inventory Turnover Ratio has decreased, suggesting slower inventory movement. Interest Coverage remains robust despite a decrease. The Debt Equity ratio indicates a slight increase in leverage but remains conservative. Operating and Net Profit Margins have shown significant improvement on a standalone basis.

Management Guidance, Assumptions, and Strategic Initiatives #

Market Outlook: #

• The Refractory Industry is generally performing well, though Europe and Americas face weakness due to geo-political conflicts.
• Overall demand for Iron and Steel remains positive.
• The Indian Steel Industry is in an expansion phase, driven by government initiatives in infrastructure and capital goods manufacturing.
• India’s projected economic growth (to a $20 trillion economy by 2047) and favorable demographics are expected to drive demand.

Key Strategic Developments & Initiatives (FY 2023-24 and ongoing): #

• Shareholding Change: Re-classification of Krosaki Harima Corporation, Japan (foreign promoter) to public category after its ~15.51% stake was acquired by the Indian Promoter Group (Bajoria Financial Services Pvt Ltd).
• Research & Development: Inauguration of a State-of-the-Art Research Centre at Kalunga (Odisha) facility, with a capital expenditure of ₹18.42 Crores. Focus on indigenous raw materials, new product development, and recycling.
• Capacity Expansion:
  • A new manufacturing facility for Continuous Casting Refractories is being set up in Odisha with an installed capacity of 240,000 pcs/annum (capital outlay: ₹150 Crores, commercial production target: March 2025). This will be IFGL’s second facility in Odisha.
  • Land acquired near Kalunga (Odisha) and Kandla (Gujarat) facilities for expansion.
  • Capacity enhancement at Visakhapatnam (Andhra Pradesh) facility.
  • Inauguration of a new casting flux division (18,000 MT annual capacity for granules) at Visakhapatnam in May 2024 (Phase 3 expansion).
• Product Line Expansion: Introduction of new/extended products including RH Degasser Snorkel, EAF Deltas, Magnesia Carbon Bricks, Casting Flux, Tube Changer Mechanism, Ladle Slide Gates.
• Technological Upgrades:
  • Launch of Project GATI (SAP S4 Hana) for improved operational efficiency, real-time data analytics, and decision-making.
  • “People First” HR program launched with Deloitte to support 2x growth within the next 5 years, focusing on organizational transformation, talent readiness, and performance-oriented culture.
• New Business Vertical: Commencement of a new business vertical in the non-ferrous refractory market (cement, glass, coke, lime, coal gasification).
• Operational Rationalization: Shifting and consolidation of manufacturing from the People’s Republic of Czechoslovakia (likely Czech Republic as per other mentions) to Germany.

Management’s Assumptions & Forward-Looking View: #

• Management believes the future is “exceptionally promising and prosperous, barring unforeseen events.”
• Assumptions are based on continued growth in the Indian steel sector, driven by infrastructure development and government initiatives.
• The “Forward Looking Statement” section cautions that achievement of results is subject to risks, uncertainties, and potentially inaccurate assumptions. The company undertakes no obligation to publicly update these statements.
• The company anticipates significantly improved financial and operational performance going forward, including for FY 2024-25, expecting adequate profits for managerial remuneration.

Capital Expenditure & Investment #

• ₹150 Crores for the new Odisha facility (Continuous Casting Refractories).
• Capacity expansion at Kalunga, Kandla, and Visakhapatnam.
• Capital expenditure of ₹18.42 Crores incurred for the new Research Centre at Kalunga.
• Standalone Capital Work-in-Progress as of March 31, 2024: ₹771.95 million (previous year ₹298.33 million).
• Consolidated Capital Work-in-Progress as of March 31, 2024: ₹1,040.96 million (previous year ₹456.15 million).
• Standalone borrowing costs capitalized during FY24: ₹16.66 million. Consolidated: ₹19.17 million.

Scenario Analysis & Sensitivity #

Financial Risk Sensitivity (Consolidated): #

• Foreign Currency Risk: A 5% USD appreciation against INR would negatively impact PBT by ₹(29.81) million, while a 5% EUR appreciation would positively impact PBT by ₹28.29 million (based on FY24 exposures).
• Interest Rate Risk: A 50 bps increase in interest rates would negatively impact PBT by ₹(4.08) million for INR borrowings, ₹(2.37) million for USD, and ₹(0.01) million for EUR (based on FY24 exposures).
• Price Risk: A 0.5% decrease in price would negatively impact PBT by ₹(6.32) million (based on FY24 portfolio).

Auditor’s Observations #

Consolidated Financial Statements: #

• Emphasis of Matter:
  1. Accounting for the amalgamation of erstwhile IFGL Refractories Limited under the ‘Purchase Method’ (AS 14), resulting in Goodwill of ₹26,699.46 lakhs being amortized over 10 years.
  2. The Holding Company’s determination of Income Tax obligations based on pre-amendment provisions of Section 10AA(1) of the Income Tax Act, 1961 (amount involved ₹831.53 million as of March 31, 2024).
• Key Audit Matter: Revenue Recognition.
• Other Matter: Reliance on audits of subsidiaries conducted by other auditors and unaudited financial information for some subsidiaries.

Financial Analysis Report: IFGL Refractories Limited (FY 2023-24) #

Auditor’s Opinion and Qualifications #

Standalone Financial Statements #

• Auditor: S.R. Batliboi & Co. LLP, Chartered Accountants
• Opinion: Unmodified, stating the standalone financial statements give a true and fair view in conformity with Indian Accounting Standards (Ind AS).

Emphasis of Matter (EOM): #

1. Accounting for the amalgamation of erstwhile IFGL Refractories Limited under the ‘Purchase Method’ (AS 14), resulting in Goodwill of ₹26,699.46 lakhs amortized over 10 years. Auditors note that under Ind AS 103, this common control combination should have been recognized under ‘Pooling of Interest Method’.
2. The Company’s position on Income Tax obligations under Section 10AA(1) of the Income Tax Act, 1961, prior to the introduction of the ‘Explanation’, with an appeal pending. Uncertainty exists regarding the underlying tax liability.

Key Audit Matter (KAM): #

• Revenue Recognition due to the variety of contractual terms and judgment in determining the timing of control transfer.

Consolidated Financial Statements #

• Auditor: S.R. Batliboi & Co. LLP
• Opinion: Unmodified, stating the consolidated financial statements give a true and fair view.

Emphasis of Matter (EOM): #

• Similar EOMs as in the Standalone report regarding amalgamation accounting and Income Tax Section 10AA(1).

Key Audit Matter (KAM): #

• Revenue Recognition.

Other Matter: #

• Auditors did not audit the financial statements of 8 subsidiaries (total assets ₹82,001.08 lakhs, revenues ₹81,877.22 lakhs) and relied on other auditors’ reports.
• Unaudited financial statements of 6 subsidiaries (total assets ₹20,653.84 lakhs, revenues ₹500.05 lakhs) were included, which management certified and auditors deemed not material to the Group.

Key Accounting Policies #

• Compliance: Financial statements are prepared in accordance with Ind AS.
• Basis: Historical cost basis, except for certain financial assets and liabilities measured at fair value.

Key Policies: #

• Revenue Recognition (Ind AS 115): Recognized when control of goods/services is transferred to the customer. Performance obligations are generally satisfied at a point in time.
• Property, Plant & Equipment (PPE): Stated at cost less accumulated depreciation and impairment. Depreciation is on a Straight Line Method (SLM) as per Schedule II useful lives, except for certain machinery spares (1-5 years).
• Intangible Assets (including Goodwill):
  • Goodwill from the 2016 amalgamation (₹26,699.46 lakhs) is amortized over 10 years (₹2,669.95 lakhs p.a.). This is based on the NCLT approved scheme under previous GAAP (AS 14).
  • Other intangible assets (e.g., software) are amortized over their useful lives (e.g., software over 2 years).
• Impairment of Non-Financial Assets: Assessed at each reporting date.
• Inventories: Valued at the lower of cost (weighted average) and net realizable value.