KIOCL Ltd Q2 FY26 – The Steel Ministry’s Favorite Loss-Making Exporter Is Back (Again!) With -₹17 Cr PAT, -22% OPM & Zero Chill

1. At a Glance

KIOCL Ltd — the Miniratna that acts like a Minidrama. Sitting under the Ministry of Steel, this ₹21,391 crore PSU has everything you’d expect from a government-backed metal story: massive plants, even bigger losses, and occasional operational meltdowns. In Q2 FY26, KIOCL posted sales of ₹143 crore, down 77% YoY, and a loss of ₹17.2 crore. The Operating Profit Margin? A stunning-22.4%, proving once again that not all iron can be forged into profits.

The stock trades at ₹353, down 18% in 3 months, but still flaunts a Price-to-Book of12.9x, because — PSU premium. ROE stands at-11.3%, ROCE-9.48%, and Debt-to-Equity at 0.11, which sounds conservative until you realize the only thing lighter than their leverage is their order book.

Despite being India’s4th largest pellet exporter, the company hasn’t figured out how to make consistent money even when iron ore prices were soaring. Exports form89% of FY24 revenue, mostly to China — and even China seems to have said, “Bhai, bas karo.”

But hold up — there’s drama brewing. From suspended blast furnaces to capex commitments worth ₹2,500+ crore, and a new CMD trying to revive a plant that’s been “temporarily” shut down more times than your internet router — KIOCL is the PSU soap opera you didn’t know you needed.

2. Introduction

Imagine a company that mines, filters, processes, exports, and still manages to lose money — welcome to KIOCL Ltd, the pride of Karnataka and the pain of accountants.

Once known as Kudremukh Iron Ore Company Limited, this 1976-born PSU was supposed to be India’s answer to efficient resource utilization. Instead, it became a masterclass in how to turn government subsidies into stress. With Miniratna status (because “Maharatna” was too ambitious), KIOCL operates a3.5 MTPA pellet plantin Mangalore, which it frequently shuts down “temporarily” — sort of like how we all take “short breaks” from our gym resolutions.

Its business model revolves around converting iron ore into DR-grade pellets, selling them globally, and occasionally pretending it’s profitable. Over FY22–FY24, revenue fell38%, volumes fell14%, and realization tanked28%. If that’s not diversification in the wrong direction, what is?

The PSU now wants to backward integrate — adding acoke oven,disp plant, and reviving ablast furnacethat’s been dead since 2009. Because when you can’t make money with one unit, why not build three more?

As of FY24, KIOCL controlled2% of India’s pellet productionand a14% export share. Sounds impressive till you realize most of it sails straight to China, a market that’s moving away from imported pellets. Their plan to diversify customers by adding 26 new buyers in FY24 is noble — but it’s like saying you have more people watching your movie on OTT after it bombed in theatres.

3. Business Model – WTF Do They Even Do?

KIOCL’s business has two legs — one strong, one fractured.

A) Pellet Plant (92% of revenue)This is the company’s bread, butter, and occasional burnt toast. The 3.5 MTPA iron-oxide pellet plant at Mangalore produces Direct Reduction (DR) grade pellets, mainly exported. The plant’s utilization has dropped from 58% (FY22) to 54% (FY24), which might not sound bad till you realize it runs at half-capacity in a country screaming for steel.

Fun fact: The plant has stopped operations multiple times since FY23 — officially for “raw material unavailability,” unofficially because the economics don’t make sense when iron ore costs more than the pellets they sell.

B) Mineral Exploration Works (8% of revenue)In a plot twist, the PSU also does exploration for iron ore, manganese, limestone, and other minerals. They’ve handled36 projectsso far, 27 completed and 9 ongoing. It’s their small but profitable cousin — except it’s not profitable either.

C) Blast FurnaceThe infamous Mangalore Blast Furnace unit has been out of action sinceAugust 2009due to uneconomic pig iron prices and high coke costs. The management, ever optimistic, now plans a₹837 crorecoke oven plant anddisp unitto “revive operations.” We’ll believe it when we see smoke coming out — literal and financial.

In short, KIOCL makes pellets, loses money, explores minerals, loses less money, and spends on capex that may or