Semi-integrated nature of operations along with benefits derived from experienced management

The group has long operational track record with experienced management in the iron and steel industry for more than decades. The group's operations are semi-integrated, encompassing the backward integration from sponge iron to rolled products, which enhances operational efficiency and ensures a consistent raw material supply to IIL from ACL. Higher captive consumption requirements of IIL were fulfilled by ACL in FY26 as compared to the previous year. The billets produced by ACL are primarily utilized by IIL for manufacturing rolled products, including TMT bars and wire rods. The proximity of both plants provides a locational advantage, contributing to operational efficiencies and mitigating risks associated with the cyclicality of the steel industry. The group markets its product via 300 dealers network across various states of India including West Bengal, Bihar, Odisha and North Eastern states. However, going forward, upon completion of the ongoing capex in IIL, all materials produced by ACL is expected to be sold in the open market, as IIL will have its own SMS(Steel Melting Shop) production unit. Acuité believes the semi-integrated nature of operations of the group and locational advantage on account of the close proximity of both the plants, provides efficiency in terms of operations and mitigates the risks arising from the cyclical nature of steel industry to some extent.

Moderation in operating income albeit stable profitability margins

The group reported revenue of Rs. 874.34 Cr. in FY26 (Prov.), compared with Rs. 902.46 Cr. in FY25. The decline was primarily attributable to higher captive sales by ACL to IIL during FY26 as compared to FY25, which resulted in increased intra-group eliminations at the consolidated level despite steady underlying demand. Revenue was also impacted by lower realizations in the iron and steel segment despite stable sales volumes, along with the disposal of the wind power plant in FY2026, which had previously contributed additional revenue. At the entity level, IIL's revenue increased to ~Rs. 840.30 crore in FY26 from Rs. 756.14 crore in FY25, while ACL's revenue remained stable at ~Rs. 519.39 crore in FY26 (Prov.).The EBITDA margin improved to 4.04% in FY26 (Prov) from 3.89% in FY25, after moderating from 4.07% in FY24. The margin movement was mainly due to fluctuations in raw material costs such as iron ore, coal, and scrap. The recovery in FY26 was supported by improved operating leverage, led by higher capacity utilisation at IIL, which enabled better absorption of fixed overheads. However, the PAT margin stood at 1.97 % in FY2026(Prov) as against 2.10% in FY2025. Acuité believes that the group's scale of operations and operating profitability are likely to remain stable and witness gradual improvement over the near to medium term, supported by sustained demand, ongoing capacity expansion, and strengthening backward integration initiatives.

Healthy Financial Risk Profile

The group’s financial risk profile is marked by healthy networth, gearing below unity and comfortable debt protection metrics. The tangible networth of the group stood at Rs. 329.70 Cr. as on March 31, 2026(Prov) as against Rs. 312.16 Cr. as on March 31, 2025, due to accretion of reserves. Gearing of the group stood comfortable at 0.17 times as on March 31, 2026(Prov), as against 0.18 times as on March 31, 2025. The debt protection metrics of the group is marked by Interest Coverage Ratio (ICR) at 6.62 times and Debt Service Coverage Ratio (DSCR) at 1.97 times as on March 31, 2026(Prov). Acuite believes that going forward, the financial risk profile of the group will remain moderate backed by steady accruals and debt funded capex plans.

Moderately Intensive Working capital Cycle

The working capital cycle of the group is moderately  intensive marked by Gross Current Assets (GCA) of 128 days as on March 31, 2026(Prov), as against 124 days as on March 31, 2025. The inventory days improved to 38 days as on March 31, 2026(Prov), from 40 days as on March 31, 2025, as the group maintains inventory of raw materials and finished goods to mitigate the risk of price volatility. The group maintains 40-45 SKUs. The debtor days stood at 26 days as on March 31, 2026(Prov), as against 32 days as on March 31, 2025. The credit terms are 10 days to 30 days on an average. The other current assets majorly include advance payment to suppliers, advances recoverable in cash or kind and security deposits. Against this, creditor days stood at 8 days as on March 31, 2026(Prov). the credit terms with suppliers are mostly on advance basis. Acuite believes that the working capital cycle will remain on similar levels over the medium term.

Inherent cyclical nature of the steel industry

The group's performance remains susceptible to cyclicality within the steel industry, due to the strong correlation between demand for steel products and the overall health of the domestic and global economies. End-user sectors such as real estate, civil construction, and engineering also exhibit cyclical patterns. Additionally, operating margins are vulnerable to fluctuations in input costs, particularly iron ore and coal, as well as variations in price realization of finished goods. Changes in the prices and availability of key raw materials like iron ore directly influence the profitability of the group's finished products. Any substantial decline in demand and prices that negatively affect operating margins, and cash flow will continue to be a key monitorable factor.

• ­Sustained increase in scale of operations above Rs 1000 cr along with improvement in EBITDA margins
• Timely capex completion
• Improvement in working capital cycle

• Deterioration in operating margins
• Any significant elongation in working capital cycle with GCA Days above 150 days
• Delays or cost overruns in capex projects