Lloyds Metals & Energy Ltd FY26: The Integration Play Scales, the Debt Hops Off

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1. At a Glance

Lloyds Metals shipped FY26 revenues of ₹13,681 crore, up 104% year-on-year, on consolidated numbers that now include the Thriveni MDO acquisition (July 2025). Earnings landed at ₹3,190 crore PAT, a 120% spike. The story pivots on scale: iron ore output raced from 10 MnT to 22 MnT, pellets hit the ground running, a slurry pipeline cut logistics like a hot knife, and the capex beast swallowed ₹8,100 crore in standalone cash last year with ₹15,000 crore projected for FY27. The balance sheet bulked up—net debt climbed to ₹4,600 crore—because the company decided to buy Thriveni on debt, not equity. The EBITDA margin settled at a muscular 34%, but ask whether a ₹5,500 crore debt load will stay “manageable” if the capex dam opens at full flow. The market prices it all at 31x earnings. Here’s the tension: exceptional operations meet exceptional execution risk.

2. Introduction

Lloyds Metals is a Maharashtra-based iron ore miner and downstream integrator, now midway into a ₹42,000 crore build-out to become an integrated steelmaker. The Surjagarh mine in Gadchiroli sits on 157 MnT of direct shipping ore (DSO) and 706 MnT of low-grade banded hematite quartzite (BHQ)—863 MnT total, enough for decades. The company holds allocation-based status, meaning royalties of ~20% of selling price (versus 40%+ at auction-competitive mines). It operationally controls mining through Thriveni Earthmovers, the MDO partner acquired last year. The downstream arm runs a DRI (sponge iron) facility of 700 KTA capacity, a 34 MW waste heat recovery power plant, and—as of May 2026—an 8 MTPA pellet complex (two plants commissioned, second in record time). In March 2026, it entered the global critical minerals space via a copper-cobalt asset in the DRC (Congo). FY26 saw Tata Steel sign an MoU exploring pellet conversion, slurry pipeline optimization, and low-carbon steel. The balance sheet carries ₹5,500 crore debt (incl. acquired liabilities), partly from the TEIPL purchase but also from capex. Net debt is ~1.0x EBITDA—historically tight for a miner, now moderating.

3. Business Model: WTF Do They Even Do?

Lloyds pulls ~22 MnT of DSO from Surjagarh, sells 16 MnT externally (₹5,806/tonne in FY26) and internally consumes ~8 MnT for downstream. The ore margin is razor-sharp—low-cost mining, slurry pipeline dispatch that strips ₹600–₹800 per tonne versus trucking. Second leg: pellets. The company now runs two plants totalling 8 MTPA; in FY26, it produced 3 MnT and sold 2.6 MnT at ₹10,277/tonne. Pellets are higher-margin (₹4,040/tonne EBITDA vs ₹1,894/tonne for merchant ore) because they’re semi-processed, command a premium, and feed the company’s own DRI and future steel. DRI (sponge iron) rounds the picture: 480 KT sold in FY26 at ₹27,009/tonne with ₹7,999/tonne EBITDA. DRI is a shrink-to-fit commodity, but integration into the supply chain hedges price. Power generation (190 Mn units sold) is the afterthought—the waste heat plant captures steam from DRI and pellet operations. Then: the elephant. Thriveni’s MDO business, consolidated since Q2 FY26, now contributes ₹7,000–₹8,000 crore annual revenue and 25% EBITDA margins. MDO is mining operations outsourcing—Thriveni manages the Surjagarh mine, other Lloyds assets, and for external clients too. It’s high-touch, labour-heavy but structured, and it turns Lloyds from a single-mine story into a platform. FY26 breakout: value-added products (pellets + DRI + power) swelled from 20% to 32% of revenue and 11% to 30% of EBIT. The mix is the moat.

4. Financials Overview

Figures are consolidated, in ₹ crore, FY26 and quarterly.

The top line doubled—both volume (production scale) and margin (mix to higher-value pellets, DRI, and MDO). EBITDA grew faster than revenue because operating leverage kicked in: fixed costs spread across 50% more tonnes, and the slurry pipeline’s efficiency gains boosted per-unit profit. The margin expanded from 30.1% (FY25) to 34.2% (FY26). PAT scaling outpaced EBITDA growth because of lower tax (30% vs 24% previous year tax rate quirk). From the concall (May 2026), management stated margins are “not a onetime event… outcome of systems,” citing pellet ramp, slurry benefits, and operating leverage—a signal they expect the 34% corridor to stick.

5. Valuation Discussion: Fair Value Range (Educational Only)

What follows is a walkthrough of how three valuation methods work, using this company’s numbers as the example — not a target, not a forecast, not advice.

Method 1 (P/E Approach): Annualised EPS ₹56.66 × peer band 20–37x = ₹1,133–₹2,096 per share.

The peer median P/E sits at 19.6x (NMDC, GMDC, Gravita, Ashapura Minerals, MOIL, Orissa Minerals dataset); Lloyds trades at 31.4x. The upper band reflects valuations of peers at their best (Gravita 31.8x, Ashapura 16.6x); the lower end is auction-based miners and mature commodity players. The arithmetic covers a wide range because iron ore sentiment is cyclical and margin quality differs vastly. This method’s output: ₹1,133–₹2,096.

Method 2 (EV/EBITDA): Consolidated EBITDA ₹4,673 Cr × peer band 15–25x = EV ₹70,095–₹116,825 Cr. Subtract net debt ₹4,632 Cr = equity value ₹65,463–₹112,193 Cr ÷ 56.3 Cr shares = ₹1,162–₹1,993 per share.

The peer median EV/EBITDA is 11.6x; Lloyds is currently 22.4x (market cap 100,097 + net debt 4,632 = 104,729 / 4,673). Peer range in the dataset spans 10.8x (GMDC) to 35.6x (Gravita); 15–25x reflects a disciplined miner with integration upside (higher than commodity peers, lower than steelmakers). Output: ₹1,162–₹1,993.

Method 3 (Simplified DCF—5-yr horizon): Assume FY27–FY31 EBITDA CAGR of 15% (from 4,673 to ~9,500 Cr by year 5), terminal multiple 12x EBITDA (mature steelmaker). PV of terminal value discounted at 8% WACC ≈ ₹87,000 Cr; add midterm cash flow assumptions, net out net debt, divide by shares: ballpark ₹1,300–₹1,700 per share.

(This is a rough sketch; actual DCF depends on capex absorption, working capital, steel price cycles, and execution risk—all monitorable.)

These figures show how the methods work and are not a valuation, a target, or advice.

6. What’s Cooking

1. Pellet capacity doubling to 8 MTPA (May 2026). Second plant commissioned on schedule; first hit 100% utilization within 4 months. Management targets 7.75–8.0 MnT production in FY27. Q4 realization softened to ₹9,590/tonne (from ₹10,800+ earlier) due to export-heavy mix, but volumes are ramping.
2. Wire rod steel mill—formal downstream entry. Targeted commissioning Q4 FY27 (Jan–Mar 2027); FY27 guidance is conservative at 150 KT production. This is step 1 of the integrated steelmaking blueprint. Capex allocated ₹22,000 crore (from the ₹42,000 total) for the full steel complex (blast furnace, arc furnace, coke oven, hot rolling, flat products).
3. BHQ beneficiation—Phase 1 at 30 MTPA input, Dec 2027 target. The company aims to crush 30 MnT of BHQ and produce ~12 MnT of 66–67% Fe pellet feed. Management expects EBITDA/tonne to rise because: grade uplift commands premium,