1. At a Glance
KIOCL is the PSU that proves you can have Miniratna status and still be in the red. With a giant pellet plant in Mangalore running at barely 54% capacity, exports making up 89% of revenue (mostly to China), and a cost structure heavier than a blast furnace, the company’s latest quarter saw another net loss. But it’s still pushing ₹2,500+ crore capex for mines, coke ovens, and filters — because if you can’t make money, at least make infrastructure.
2. Introduction
KIOCL — Kudremukh Iron Ore Company Ltd — was once a mining powerhouse in Karnataka. Then the Supreme Court shut its mines in 2005 for environmental reasons, and the company reinvented itself as a merchant pellet maker in Mangalore.
Today it runs India’s second-largest merchant pellet plant, makes DR-grade pellets for steelmakers, and dabbles in mineral exploration projects. It’s also the fourth-largest pellet exporter in India — a title that sounds impressive until you realise margins are thin, global prices are volatile, and Chinese buyers can disappear faster than PSU board appointments get delayed.
While most mining companies dream of owning their ore, KIOCL buys iron ore and pays hefty freight to bring it in. That, plus high fixed employee costs, means profitability is as erratic as iron ore spot prices. Yet the company is in the middle of massive backward integration — a coke oven plant, a DISP plant, a new iron ore mine at Devadari — all in hopes of cutting costs and finally escaping the loss cycle.
3. Business Model (WTF Do They Even Do?)
- Pellet Plant (92% of Q2 FY25 revenue)– 3.5 MTPA capacity in Mangalore, DR-grade pellets, merchant sales to steelmakers. FY24 sales volume: 1.79 MT (54% utilisation).
- Mineral Exploration (8%)– 36 projects handled to date, covering iron ore, manganese, limestone. PSU-for-hire for exploration services.
- Blast Furnace Unit– Pig iron
- facility shut since 2009. Being revived with backward integration (coke oven) to cut dependence on imported coke.
- Markets– 89% exports (down from 98% in FY22), 11% domestic. Strategic goal: reduce reliance on China by diversifying buyers.
4. Financials Overview
Q1 FY26 vs Q1 FY25 vs Q4 FY25
| Metric | Q1 FY26 | Q1 FY25 | Q4 FY25 | YoY % | QoQ % |
|---|---|---|---|---|---|
| Revenue (₹ Cr) | 91 | 147 | 246 | -38.1% | -63.0% |
| EBITDA (₹ Cr) | -42 | -49 | -41 | -14.3% | 2.4% |
| PAT (₹ Cr) | -37.79 | -51 | -37 | -25.9% | 2.1% |
| EPS (₹) | -0.62 | -0.83 | -0.61 | — | — |
Commentary:The company has been consistently loss-making at the operating level for multiple quarters. Revenue collapse is driven by weaker export demand and poor realisations. EBITDA margin at -46% means every pellet sold is a subsidy to the buyer.
5. Valuation (Fair Value RANGE only)
Method 1: Asset-based
- Book Value per share: ₹28.2
- Reasonable PSU metals P/B: 1.5x – 2x
- FV Range: ₹42 – ₹56
Method 2: EV/EBITDA
- EBITDA is negative — so EV/EBITDA isn’t meaningful.
Method 3: Replacement cost of assets
- Pellet plant replacement ~₹5,000 Cr, mines & capex underway ~₹2,500 Cr. Applying a distressed valuation discount: ₹3,000 – ₹4,000 Cr equity value
