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According to ratings agency Icra, the demand for non-ferrous metals, such as copper and aluminum, is expected to increase substantially faster than the projected 2% global growth in the current fiscal year, likely staying strong at about 10%.
Furthermore, the moderated price of coal is expected to relieve input cost constraints to some extent. "On the domestic front, the demand for non-ferrous metals is expected to remain healthy at around 10% in FY2025, significantly outpacing the expected growth of around 2% in global demand.
"The domestic e-auction premia on coal had eased in recent months to around 50% in April 2024 from the exorbitant levels of around 150% seen in the corresponding period of the previous year," the ratings agency said in a statement. The rating agency said it foresees firm metal prices and benign input costs to increase the profitability of the domestic non-ferrous metal entities in FY25.
"With input costs remaining largely under check along with healthy growth in realisation, the operating margins of the domestic entities are estimated to rise considerably to around 23% in FY2025 compared to around 17% in FY2024.
"The credit metrics are also expected to improve with a projected total debt/OPBDITA (operating profit before depreciation, interest tax and amortization) of 1.8 times and an interest cover of 6.0 times in FY2025 compared to a total debt/ OPBDITA of 2.0 times and an interest cover of 4.5 times in FY2024," Girishkumar Kadam, Senior Vice-President and Group Head, Corporate Sector Ratings at Icra, said.
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