Detailed Rationale

Crisil Ratings has revised its outlook on the long-term bank facilities of Godawari Power and Ispat Limited (GPIL) to ‘Stable’ from ‘Positive’ while reaffirming the rating at ‘Crisil AA-’. The rating on the short-term bank facilities has been reaffirmed at ‘Crisil A1+’.

 

The revision in outlook reflects the expected increase in project risk owing to changes in the company's capital expenditure (capex) plans. In addition to the Battery Energy Storage System (BESS) and cold-rolled mill (CRM) projects, the company plans to establish a 1 million tonne per annum (MTPA) integrated steel plant (ISP) in Chhattisgarh, which is expected to cost Rs ~7,000 crore, for growing its structural steel business. The company expects to incur this capex over 3.0–3.5 years, with majority of the expenditure for the ISP expected in fiscals 2028 and 2029. The capex is expected to be funded in 1:1 debt to equity ratio, with equity portion to be funded through internal accrual. The company intends to raise Rs 500 crore through the issuance of equity warrants to support the capex. While net cash accrual from existing operations is expected to be healthy at Rs ~1,500 crore, generation of additional revenue from the BESS and CRM projects will be crucial for equity funding of the ISP project and will be a monitorable.

 

Consolidated revenue stood at Rs 5,381 crore in fiscal 2026, as against Rs 5,376 crore in fiscal 2025, and Ebitda (earnings before interest, tax, depreciation and amortisation) at ~Rs 1,253 crore as against Rs 1,194 crore, respectively. Performance was better than in fiscal 2025, supported by increase in pellet capacity despite the accident in the third quarter of fiscal 2026. The plant remained closed for ~34 days with loss of production of 150,000 T of iron ore pellets.

 

Revenue is expected to increase by 15–20% in fiscal 2027 with full year of operations of the pellet plant and healthy domestic steel demand. Stable coal prices, increased captive iron ore sourcing, operationalisation of additional beneficiation capacity and commissioning of captive solar plant will lead to rise in the Ebitda margin to 22–24% in fiscal 2028.

 

Moreover, to expand its core business and new ventures, the company is expected to undertake capex of Rs 3,500–4,000 crore in fiscals 2027 and 2028, wherein it will expand its crushing and beneficiation capacity from 0.6 MTPA to 6 MTPA, set up a CRM complex of 0.7 MTPA, expand solar plant for captive use by 350 megawatt (MW) and enter the BESS segment (20 GWh) as well as set up an ISP. It has incurred capex of ~Rs 700 crore till date. These projects will be funded through internal accrual and debt of Rs 1,000–1,200 crore. Debt is expected to increase, but the debt to Ebitda ratio is expected to remain below 1 time in fiscal 2027. Liquidity is likely to be supported by healthy cash balance.

 

While completion of the ongoing capex will strengthen the business risk profile, driven by increase in scale of operations and integrated operations, larger-than-expected capex plans have increased the project risk.

 

These strengths are partially offset by exposure to cyclicality in the steel industry and project risks in the capex planned over the medium term. Crisil Ratings will monitor any deviation from the expected growth plans and leverage position.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of GPIL and its subsidiaries, associates and joint ventures.

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths

Integrated operations: Operations are backward integrated with two captive iron ore mines, which meet ~85% of the iron ore requirement while the balance ~15% is sourced from the market. With receipt of environmental clearance to expand the captive iron ore mining capacity at the Ari Dongri mines and increase in iron ore pellet capacity, operations are likely to be ~90% integrated in fiscal 2027.

 

The company meets majority of its power requirement through its captive power capacity of 98 MW, including waste heat recovery system of 42 MW, biomass of 20 MW and coal powered plant of 36 MW. Also, GPIL has solar power plants of 70 MW, 22 MW and 18.5 MW, which have been operational since August 2022, March 2024 and July 2024, respectively. The company is setting up a 350-MW captive solar capacity for the recently undertaken capex and upcoming capex.

 

GPIL uses domestic as well as imported coal and has a fuel supply agreement with Coal India Ltd. Forward integration has led to diversified products (wire rods, hard bright [HB] wires, galvanized fabricated products and structural steel products) and revenue streams, allowing for the flexibility to sell products based on realisations. Furthermore, the presence of an iron ore beneficiation plant (improvement in iron content and thus realisation) and a hot rolling mill on the same premises reduces transportation cost and reheating requirement, thereby supporting operating efficiency and profitability. The company is planning an additional beneficiation plant at one of its mines to cater to increased production capacity from its iron ore mines.

 

Established market position: Presence of more than two decades in the steel business and strong expertise of the promoter will continue to support the business risk profile. GPIL manufactures multiple products such as iron ore pellets, sponge iron, steel billets, mild steel (MS) rounds, HB wires and ferroalloys.

 

Healthy financial risk profile: The company was net debt-free as on March 31, 2026 (net cash of ~Rs 700 crore, as against ~Rs 380 crore as on March 31, 2025). Debt protection metrics were strong, as reflected in interest coverage and net cash accrual to total debt (NCATD) ratios of 21.4 times and 2.28 times, respectively, in fiscal 2026, compared with 21.6 times and 2.88 times, respectively, in fiscal 2025. With expected healthy cash accrual from the capex, despite the increase in debt, the debt coverage metrics will likely remain healthy over the medium term. The interest coverage and NCATD ratios are expected to sustain at more than 9 times and 0.5 time, respectively, over fiscals 2027 and 2028. However, any major debt-funded capex plan, significant time or cost overrun, acquisition or higher-than-expected cash outflow towards dividend/share buyback or inter-corporate deposits impacting the financial risk profile will remain monitorable.  

Key Rating Drivers - Weaknesses 

Susceptibility to cyclicality in the steel industry: The steel industry is inherently tied to the performance of both domestic and global economies, with its growth trajectory closely linked to the level of construction and infrastructure activities. Changes in government policies related to import and export can also have a significant impact on the steel industry. In addition to demand risks, profitability is exposed to volatility in raw material prices and realisation, which are influenced by global commodity prices. Integrated operations and ability to adapt the revenue mix between steel and steel intermediates mitigate these risks. Thus, any significant fluctuations in demand and pricing that may impact cash flow will be monitorable.

 

Exposure to project risks: GPIL is undertaking capex for expanding its crushing and beneficiation plant capacity from 0.6 MTPA to 6 MTPA, setting up cold rolled mill complex of 0.7 MTPA and 375 MW solar plant for captive use. Additionally, it plans to manufacture BESS of 20 GWh in phase 1. The total outlay for the projects is expected to be Rs 3,500 crore over fiscals 2026 and 2027. The management has also articulated to establish 1 MTPA ISP of Rs 7,000 crore over the medium term.

 

The recently completed pellet plant has low offtake risk as older pellet plants had utilisation of 90% in fiscal 2025. Although utilisation of the new capacity will be monitorable, the risks remain low owing to robust demand from premium clients, including Jindal Ferrous Ltd, Jindal Steel Ltd, Prakash Industries Ltd and Karnikripa JSPL and Jaiswal Nikko. Additionally, capex for expanding crushing, beneficiation and solar plant capacities is primarily for captive consumption, minimising external demand dependency. The risk associated with the ISP expansion is moderate as the company is already a player in the long steel products segment; competition from large players and establishing market position in the segment will be key monitorables.

 

Furthermore, GPIL is venturing into BESS assembly manufacturing, an industry which is expected to grow rapidly in India. Nevertheless, risks in the project persist from potential delays in commissioning the single-line 20 GWh unit and entry of large conglomerates potentially exerting pressure on projected profitability.

 

The company’s management has articulated that the entire capex will be funded through a prudent mix of internal accrual and debt. Any major debt-funded capex or acquisition will be a key rating sensitivity factor.

Liquidity Strong

Cash and equivalent were over Rs 1,100 crore as on March 31, 2026 (Rs 604 crore as on March 31, 2025). Fund-based bank limit utilisation averaged 58% and non-fund-based bank limit utilisation averaged 33% during the 12 months through October 2025. Liquidity is supported by unutilised fund-based limit of ~Rs 86 crore as on December 31, 2025. The management’s articulation to maintain liquid surplus (in the form of unencumbered cash and equivalent and unutilised fund-based limit) of Rs 500 crore on a sustained basis aids liquidity.

Outlook Stable

Crisil Ratings believes GPIL will benefit from its increased integration of operations, leading to high efficiency, and sustenance of healthy financial risk profile while incurring additional capex.

Rating sensitivity factors

Upward factors

• Higher-than-expected operating performance and significant ramp up in operations with continued volume growth, supporting high capacity utilisation
• Increase in operating margin to 23–25% leading to higher net cash accrual
• Sustenance of strong financial risk profile (net debt-free) with no debt-funded capex or acquisition, maintaining strong liquidity

 

Downward factors

• Weakened operating performance owing to subdued demand and intense competition leading to fall in operating margin to 20–22%, resulting in lower cash accrual
• Larger-than-expected capex or acquisition resulting in increase in leverage (net debt to Ebitda ratio), weakening the financial risk profile
• Stretched working capital cycle affecting the liquidity

About the Company

GPIL was set up as Ispat Godawari Ltd in 1999 by B L Agrawal and got its current name in 2001. The company has two captive iron ore mines (6 MTPA), a pellet plant (4.7 MTPA) and a vertically integrated steel plant in Raipur. The steel plant manufactures sponge iron (6,50,000 TPA), billets (525,000 TPA), MS rounds (400,000 TPA), HB wires (115,000 TPA), ferroalloys (16,500 TPA) and pre-fabricated structures (110,000 TPA).

 

The two main operational subsidiaries of GPIL are Alok Ferro Alloys Ltd (AFAL) and Hira Ferro AIIoys Ltd (HFAL). HFAL manufactures ferroalloys (60,500 TPA) and has 30 MW power capacity (20 MW thermal, 8.5 MW biomass and 1.5 MW windmill) and a 52-MW solar power plant. AFAL has a ferroalloy manufacturing plant with capacity of 14,500 TPA and a captive power plant of 8 MW.

Key Financial Indicators (combined)*

As on / for the period ended March 31		2026**	2025
Operating income	Rs crore	5,381	5,376
Adjusted profit after tax (PAT)	Rs crore	815	808
PAT margin	%	15.1	15
Adjusted debt / adjusted networth*	Times	0.07	0.01
Adjusted interest coverage*	Times	21.4	21.6

* As per analytical adjustments made by Crisil Ratings

**Company reported

Any other information: Not applicable