Detailed Rationale

Crisil Ratings has assigned its ‘Crisil AA/Stable’ rating to the bank facilities and non-convertible debentures (NCDs) of Lloyds Metals and Energy Ltd (LMEL).

 

The rating reflects LMEL’s strong and improving business risk profile, supported by its leading position in the iron ore mining industry, significant cost advantages due to its allocation-based mine resulting in lower royalty payments and forward integration into downstream products. The rating also factors in strong financial risk profile, aided by prudent capital structure, healthy cash accrual and limited reliance on debt. These strengths are partially offset by concentration of the mining operations in a single region, project risks associated with large capital expenditure (capex) and inherent risks associated with the cyclical nature of the steel industry.

 

LMEL has undergone a significant transformation in its core mining operations following the onboarding of Thriveni Earthmovers Pvt Ltd (TEMPL) as mine developer and operator (MDO) in fiscal 2022. The Surjagarh iron ore mine, located in Gadchiroli, Maharashtra, ramped up to full capacity of 10 million tonne per annum (MTPA) in fiscal 2025. LMEL has benefited from TEMPL’s operational expertise, large-scale mechanisation and targeted corporate social responsibility (CSR) efforts that helped stabilise operations in an area affected by sociopolitical unrest. Thereafter, the company received environmental clearance for expanding mining capacity to 55 MTPA (including banded hematite quartzite [BHQ]) in June 2025, positioning it as the largest single-location iron ore mine in India. The approval from Maharashtra Pollution Control Board is expected to be received shortly, post which company can commence it’s expanded mining operations.

 

LMEL’s allocation-based mine model ensures substantial cost advantage, with royalty payments at ~20% of average selling price (ASP), significantly lower than auctioned mines (~150%+). The company holds Joint Ore Reserves Committee (JORC)-compliant reserve of 863 million tonne (MT) (157 MT of direct shipping ore and 706 MT BHQ), providing long-term resource visibility. Furthermore, LMEL setting up a BHQ beneficiation facility through a strategic joint venture (JV) with Sinosteel Equipment and Engineering Co Ltd (Sinosteel) and has demonstrated commercially viable outcomes with >66% iron concentrates, though the pilot operations. In fiscal 2025, the company registered revenue of Rs 6,721 crore with earnings before interest taxes depreciation and amortisation (Ebitda) margin of 29.1%. With the pellet plant commencing operations within the expected timelines, expanded mining operations and consolidation of Thriveni’s MDO revenue, revenue is likely to exceed Rs 13,000 crore in fiscal 2026 with operating margin expansion of 35-40%.

 

Over the medium term, LMEL is expected to witness strong revenue growth, supported by capex of Rs 32,700 crore (fiscals 2024-2029; ~Rs 5,400 crore already completed till fiscal 2025), to be undertaken in a phased manner, toward building an integrated steel plant. This includes investments across direct reduced iron (DRI), sinter, coke ovens, hot metal and flat steel products. Of the total outlay, Rs 16,000 crore is earmarked for the integrated steel plant, which will be undertaken only after successful commercialisation of the preceding phases, thereby resulting in a gradual execution pace. As a core philosophy, 60-70% of internal cash accrual will be consistently earmarked for capex, which will limit incremental debt requirements for funding the capex. Timely commissioning of the pellet capacity of 4 MTPA and a slurry pipeline of 85 kilometre (km) reflects the project execution capabilities of the company and provides comfort. Crisil Ratings believes the company’s phased execution strategy, low debt funding, available cost efficiency and state incentives provide visibility into long-term profitability and return metrics.

 

LMEL has recently completed acquisition of ~80% stake in Thriveni Earthmovers Infra Pvt Ltd (TEIPL, which has the MDO business demerged from TEMPL). TEMPL is one of India’s leading MDO companies with a proven track record across India and Indonesia. Founded and promoted by Mr B Prabhakaran, the group has a strong track record in scaling operations across 4-5 projects (including LMEL, wherein they have achieved full or near-to-full ramp up of capacities from under utilisation). The MDO operations are expected to result in additional revenue of over Rs 4,000 crore annually to LMEL’s consolidated financials over the medium term, at an Ebitda margin of ~25%, in addition to the cost savings (Rs 400-500/tonne) stemming from direct control over MDO operations at Surjagarh mines. The acquisition of the MDO business was done at an enterprise value of ~Rs 4,900 crore, comprising a Rs 70 crore equity investment by LMEL, with the rest as debt and preference shares in the acquired entity.

 

LMEL’s financial risk profile remains strong, aided by prudent capital structure, healthy internal cash accrual and limited reliance on debt. The company maintains a conservative financial strategy, despite its high capex growth plans. Consolidated debt stood at Rs 1,004 crore as on March 31, 2025 (Rs 162 crore a year ago). While the recent acquisition of ~80% stake in TEIPL is expected to increase consolidated debt in the near term to over Rs 7,000 crore, Crisil Ratings expects LMEL to maintain conservative leverage metrics, supported by strong cash generation and disciplined capital spending. The company has raised Rs 1,218 crore via qualified institutional placement in July 2024 and Rs 2,723 crore through a preferential issue (of which Rs 1,770 crore is expected in fiscal 2026), reflecting a strong equity buffer.

 

Debt protection metrics are expected to remain healthy, with interest coverage ratio above 8 times and net cash accrual to adjusted debt ratio above 0.5 time over the medium term. Gearing is expected to remain under 0.7 time. Net cash accrual shall comfortably cover annual debt repayment of Rs 2,000-2,500 crore and capex. The company has stated a financial policy to maintain steady-state net debt/Ebitda below 0.5 time (excluding debt and preference shares coming in from consolidation of TEIPL) and net leverage may revert to low levels post ramp-up of operations as well as a potential initial public offering at TEIPL. This would remain monitorable and any significant increase in the debt levels, thereby increasing leverage metrics, will remain a key rating sensitivity factor.

 

LMEL operates under a dual-promoter structure involving Mr B Prabhakaran of the Thriveni group and the Gupta family. While the group under the Gupta family has experienced financial distress in the past—particularly in its steel and finance entities—there are no liabilities outstanding currently. The company has transitioned to a more conservative approach, with clear strategic focus and defined functional responsibilities. Nonetheless, legacy promoter-related litigations and concerns arising therefrom remain monitorable with active legal cases involving the company or its promoters; however, no significant liabilities are expected to arise from these proceedings.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of LMEL and its various subsidiaries and step-down subsidiaries. All these companies are collectively referred to as the LMEL group. The associates and JVs have been moderately consolidated to the extent of shareholding.

 

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

Key Rating Drivers & Detailed Description

Strengths:

• Largest private iron ore mine with rapid ramp-up and cost efficiency: LMEL operates the largest single-location private iron ore mine in India, with mining capacity of 10 MTPA in fiscal 2025. The sharp turnaround followed the entry of TEMPL as MDO and strategic partner. Environmental clearance for 55 MTPA was received in June 2025 (including 45 MTPA BHQ), making Surjagarh India’s largest iron ore mine by permitted capacity. The consent to operate from Maharashtra Pollution Control Board is expected to be received shortly, post which company can commence its expanded mining operations.

 

Surjagarh is an allocated mine under government schemes, exempting LMEL from paying a revenue share or auction premium. This results in royalty costs of ~20% of ASP, versus ~40% for public sector undertakings mines and 150%+ for auctioned mines, giving LMEL a sustainable cost advantage. Direct control over MDO operations post acquisition would also reduce iron ore mining costs by ₹400-500/tonne, further aiding cost efficiency.

 

• First-mover in BHQ beneficiation: India faces increasing scarcity of high-grade hematite ores and LMEL is pioneering large-scale beneficiation of BHQ—a historically underutilised resource. With ~706 MT of BHQ reserves and strong pilot outcomes (iron >66%, yield 38-40%), the company is setting up 45 MTPA of beneficiation capacity through a JV with Sinosteel. This will ensure feedstock continuity for its future steelmaking facilities while maximising ore utilisation.

 

• Strategic acquisition of Thriveni’s MDO business (TEIPL): LMEL has recently completed acquisition of ~80% stake in TEIPL from TEMPL. TEMPL was one of India’s leading MDO companies with a proven track record across India and Indonesia. Founded and promoted by Mr B Prabhakaran, a veteran of the Indian mining industry, the group has a strong track-record in scaling operations across 4-5 projects (including LMEL, wherein they have achieved full or near-to-full ramp up of capacities from under utilisation). TEMPL manages operations for 15 mines, covering iron ore, coal and barytes.

 

The acquisition of TEIPL will augment LEML’s revenue by ~Rs 4,000 crore besides diversifying revenue and providing scale benefits. It gives LMEL operational control, margin uplift and cost efficiency (Rs 400-500/tonne reduction in mining cost). Further, it facilitates backward integration, mitigates related-party concerns and opens avenues for future MDO projects, especially for captive power and steel plants.

 

With the overall enterprise value of the transaction is approximately Rs 4,900 crore, it comprises ~80% equity stake for Rs 70 crore, while the balance is a mix of existing debt in books of TEIPL and redeemable preference shares (RPS; for which LMEL shall provide irrevocable and unconditional guarantee up to Rs 2,500 crore) to be raised in TEIPL. Both TEIPL and RPS holders retain early redemption rights. As part of the overall guarantee of Rs 2,500 crore, in the interim while preference shares are yet to be issued, LMEL has also extended its guarantee to NCDs of Rs 1,745 crore raised at Mahaprabhu Projects Pvt Ltd (Thriveni group company) to ensure timely completion of the transaction. This guarantee shall be released only post full repayment of the debt facility.

 

Post the National Company Law Tribunal approval, which was received in May, 2025, the demerged MDO business, including all assets and liabilities, stand transferred under the demerger scheme effective April 1, 2025.

 

• Strong financial risk profile; likely to sustain despite sizeable capex: LMEL’s financial risk profile remains strong, underpinned by a robust balance sheet, healthy cash flow and conservative leverage. As on March 31, 2025, consolidated networth stood at Rs 6,402 crore, while total debt remained modest at Rs 1,004 crore. The capital structure was robust, with gearing of 0.16 time and gross debt-to-Ebitda of 0.51 time as on March 31, 2025.

 

The company has estimated capex spending needs of Rs 32,700 crore between fiscals 2024 and 2029, of which ~Rs 5400 crore was spent until fiscal 2025 and Rs 10,000-12,000 crore is expected to be spent across fiscals 2026-2027, primarily towards downstream steel capacities and integrated infrastructure. LMEL is expected to fund these investments largely through annual cash accrual and balance proceeds from equity warrants. This will ensure continued strength in debt protection metrics and sustenance of the company’s conservative capital structure.

 

While net debt/Ebitda will exceed 1.5 times in fiscal 2026 due to debt-funded acquisition of stake in TEIPL, the management has articulated a clear financial policy framework to maintain steady-state net debt/Ebitda below 0.5 time, even throughout the ongoing expansion phase. While any sharp increase in debt-funded capex or acquisition spend could impact leverage, the same is expected to be judiciously planned and executed. Nevertheless, material deviation from the guided financial discipline will remain a key monitorable.

 

Weaknesses:

• Susceptibility to geographic concentration, regulatory and legal risks: Mining and plant operations are concentrated in the Gadchiroli and Chandrapur districts of Maharashtra, which witnessed sociopolitical unrest in the past. While full-scale operations began only in 2021, post TEMPL’s entry as MDO operator, and the region has seen improvement due to extensive CSR, law enforcement coordination and community support, sociopolitical risk persists. Any disruptions stemming from the said issues or otherwise may adversely impact LMEL’s operations. Any change in the iron ore royalty structure will also remain a key monitorable, given its potential impact on cost dynamics and profitability.

 

Further, LMEL and its promoters are party to various litigations covering environmental, land and other issues. While no material financial liability is expected, regulatory compliance and any adverse outcome involving these proceedings, which may have a bearing on LMEL’s business or financial risk profile, shall be a monitorable.

 

• High capex intensity and execution risk: LMEL is undertaking a large Rs 32,700 crore capex till fiscal 2029 (~Rs 5,400 crore already completed till fiscal 2025), which exposes it to execution and stabilisation risks associated with the capex planned over the medium term. The capex is planned across product segments, including beneficiation, pelletisation, DRI, wire rods, hot metals, blast furnace etc. Though this capex is expected to improve the product profile while sustaining cost efficiency, its timely completion without material cost overrun will be monitorable. While LMEL plans to maintain leverage prudently through phased investments and Ebitda-linked funding discipline, execution delays, cost overruns, or adverse commodity cycles may impact returns and cash flow and remain monitorable.

 

• Susceptibility to steel price cycles: With its transition into an integrated steel player, LMEL will face increased exposure to cyclicality in the steel sector, given the close linkage between demand for steel products and the domestic and global economies. End-user segments such as real estate, civil construction and engineering are also cyclical. Any significant reduction in demand and prices adversely impacting operating margin and cash accrual will remain monitorable. Nonetheless, its cost-efficient structure, captive ore and downstream focus help cushion operating margin.

Liquidity: Strong

LMEL is expected to generate net cash accrual of Rs 9,000-10,000 crore cumulatively over the next two fiscals and further receive balance equity warrant money of Rs 1,770 crore in the fourth quarter of fiscal 2026, against which the company has repayment obligation of Rs 4,000 crore over the next two fiscals, including the debt at TEIPL. Further, LMEL is expected to incur capex of Rs 10,000 crore over the next two fiscals towards its downstream projects, for which company would avail limited debt, given its philosophy of adjusting pace of capex in line with cash accrual generated. Liquidity is also supported by cash balances exceeding Rs 50 crore and unutilised fund-based working capital lines of Rs 400 crore as of May 2025.

Outlook: Stable

LMEL’s credit risk profile will remain stable over the medium term, supported by the successful ramp-up of its mining operations with environmental clearance up to 55 MTPA, cost-efficient backward-integrated business model and strong cash accrual. While the company is undertaking a large capex, prudent financial planning—along with phased investments and expected ramp-up of high-margin downstream operations—will support the company’s financial risk profile.

Rating sensitivity factors

Upward factors:

• Considerable ramp-up in revenue with compound annual growth rate of more than 20% over the medium term, along with diversification of the revenue profile with successful ramp up of projects, while benefitting from strong operating margin of over 35% on a sustained basis
• Sustenance of healthy financial risk profile and debt protection metrics while pursuing growth opportunities

 

Downward factors:

• Sluggish revenue growth and operating margin declining to below 20% due to slower-than-expected in ramp up of projects, leading to lower-than-expected cash accrual
• Any change in the capex funding philosophy, weakening the debt protection metrics on sustained basis, with net debt/Ebitda exceeding 1.0-1.2 times
• Any adverse regulatory events or legal challenges, adversely impacting the business or financial risk profiles

About the Company

Incorporated in 1977, LMEL is a Maharashtra-based integrated metal and mining company and India’s largest private merchant miner of iron ore in terms of current production run rate. The company operates the Surjagarh iron ore mine, with a permitted environmental clearance capacity of 55 MTPA, including beneficiation of low-grade BHQ ore.

 

The company also operates DRI plants with capacity of 340,000 TPA, a 34-megawatt captive waste heat recovery boiler power plant and an 85 km slurry pipeline from Hedri to Konsari (both in Maharashtra). It has commissioned a 4-MTPA pellet plant at Konsari, marking the first step towards becoming a fully integrated iron ore player. With over 863 MT of JORC-compliant iron ore reserve, LMEL is now transitioning into an integrated steel producer with an estimated Rs 32,700 crore capex rollout through fiscal 2029.

 

In fiscal 2025, LMEL announced acquisition of 79.82% stake in TEIPL — the MDO business arm of TEMPL—strengthening its mining integration and diversifying revenue base. The acqusition was completed in July 2025.

Key Financial Indicators

As on/for the period ended March 31	Unit	2025	2024
Operating income	Rs crore	6,721	6,525
Reported profit after tax (PAT)	Rs crore	1,450	1,243
PAT margin	%	21.6	19.1
Adjusted debt/adjusted networth	Times	0.16	0.06
Interest coverage	Times	71.76	304.86

Note: Debt includes lease liabilities. Numbers mentioned in rationale are adjusted by Crisil Ratings.

Any other information: Not applicable