Should you invest in Lloyd Metals and Energy Ltd. for the Long Term? Stock Analysis by Finology

Lloyd Metals and Energy Ltd., one of India's largest iron ore mining companies, grew at an astonishing 190%+ CAGR over the last 5 years.

Finology Research Desk has analysed the company this week, providing a clear verdict on whether Lloyd Metals and Energy Ltd. is a good long-term stock or not. Find out in this article.

What makes the Iron Ore industry special?

The global iron ore market was estimated at $484.3 billion in 2025. It is expected to grow at a 7.4% CAGR to reach $643.9 billion by 2029. Now, the question arises, why are we at Finology interested in studying the global iron ore market? The answer is simple: it's the use case. Iron ore is one of the key raw materials used for making steel. 98% of the iron ore mined globally is used in making steel.

Iron Ore

Source: Economic Times

The steel industry plays a vital role in any country's development. The Indian steel industry plays a key role in India's economic growth, contributing to industrial expansion and infrastructure development. India is the 2nd largest steel producer globally. It faces growing demand from sectors like infrastructure, building and construction, automotive, engineering, fabrication, etc. This demand is expected to continue rising, supported by abundant raw materials and affordable labour.

India is on its way to becoming the 2nd largest steel consumer globally, driven by growth in various economic sectors and increasing domestic steel consumption. India's crude steel capacity was around 180 MTPA in 2023-24 and is expected to grow at a 9% CAGR to reach 300 MTPA capacity by 2030-31.

India’s Steel Capacity (in MTPA)

The Indian iron ore mining industry is set for consistent growth going forward. This growth is expected to be driven by expanding production capacity and increasing demand from the steel sector. Government initiatives, including mining reforms and infrastructure development, are expected to support the industry's expansion. India has 178 operational iron ore mines, with total resources amounting to 10,652.02 MNT, including 7,436.55 MNT of reserves and 3,215.47 MNT of remaining resources, according to the mining ministry. The sector has an annual production capacity of 530.93 MNT. The country's iron ore production, at 274 MNT for FY 2023-24, is expected to grow at 8.6% CAGR over the next 6 years to reach 450 MNT by FY 2029-30.

Clearly, the iron ore mining industry is a proxy for India's steel industry and the country's development. We decided to look for key proxy players in the Indian stock market who could benefit from this theme. Our search led us to an interesting company: Lloyd Metals and Energy Ltd.

Business Model of Llyod Metals and Energy Ltd.

Lloyd Metals and Energy Ltd. is engaged in the business of mining iron ore, manufacturing of sponge iron, generation of power and trading of iron pellets. The company is one of the largest iron ore mining companies in India.

Revenue Mix of Llyod Metals and Energy Ltd.

 

 

Source: Annual Report FY25

1. Mining: For FY25, the company derived the majority 80%+ of its revenues from the mining of Iron ore. The Company is the only iron ore miner in Maharashtra, holding a 50-year mining lease for the Surjagarh village in Gadchiroli district, which has the largest reserve of high-grade iron ore in the state, valid until 2057. The company is permitted to mine up to 10 metric tonnes of iron ore per annum (MTPA), but it plans to increase the iron ore mines' capacity from 10 MTPA to 55 MTPA.

This segment is a highly profitable segment for the company, with the company operating at 25%+ EBIT margins in this segment over the last 3 years. Selling Iron Ore in the open market is a highly profitable business. It just involves digging out the iron ore from the earth and selling it without adding any value. The key driver of higher profit margins in this business is the mining license. Getting a permit for mining Iron Ore is difficult, and at times when the steel industry faces a shortage of Iron Ore, it becomes easier for Iron Ore sellers to generate healthy profit margins.

2. Sponge Iron: This is the 2nd largest revenue-contributing segment for the company, accounting for 13% of the company's total revenues. With a production capacity of 3,40,000 tonnes per annum (TPA) across two districts, the company is one of Maharashtra's largest sponge iron producers.

The company has less control over pricing for its sponge iron business, so profits in this segment have remained volatile over the years. EBIT margins have also been volatile, varying from 6% to 33% over the last four years.

3. Pellet Trading: This is a small segment for the company, contributing only 5% to the revenues. The company is focused on optimising the value of its iron ore reserves and mining operations. It has initiated seed marketing of pellets through a strategic partnership with Mandovi River Pellets Private Limited. (MRPPL) to support this. The company is involved in this collaboration by supplying iron ore from its mines to MRPPL, which processes it into high-grade pellets. MRPPL's annual pellet production capacity of 2 MNT offers significant market potential for the company in this segment.

The segment's EBIT margins are the lowest, accounting for ~1% profits in FY24 and ~1% losses in FY25. Given its thin margins relative to other segments, a faster growth in this segment may negatively impact the company's profit margins.

4. Power: This is the company's least-contributing revenue segment, accounting for only 2% of revenues. Although it contributes least to the overall revenue mix, it is a high-margin segment, with its EBIT margins averaging 45% over the last four years.

Unit Economics of Llyod Metals and Energy Ltd.

 

Source: Company, Finology Research Desk

COGS comprise the majority 63% of the total revenues for the company. Over the years, COGS has decreased for the company. It used to be 75 %+ of the total sales over the last 10 years. Since 2022, when the company started growing its revenues from the Iron Ore mining business, its COGS as % of revenues have declined sharply from 86% in 2021 to 63% in 2025.

Employee and SG&A expenses as a % of revenues have also improved. Employee costs, which used to be ~6% of revenues and SG&A expenses, which used to be ~4% of revenues in 2021, have improved to ~2% and 3% of the total revenues, respectively.

Other expenses have remained stable in the range of 1-2% of revenues over the long term.

Depreciation as a % of revenues have improved from ~3% of revenues to ~1% of revenues.

Improving operating efficiency post increased revenue contributions from the Iron Ore segment has resulted in net profit margins expanding to ~22% for FY25, the highest in last 10 years.

Porter 5 Forces Analysis of Lloyd Metals and Energy

 

 

Source: Finology Research Desk

1. Low Threat of New Entrants: The company has a low threat of new entrants in the business because of the capital-intensive nature of the industry and high barriers to entry. Mining iron ore requires a mining license and various environmental clearances, which is a tedious process for newer players.

2. Low Bargaining Power of Suppliers: The company’s major raw material (iron ore) is extracted from its own mines. Hence, there's no major dependency on supplies of raw materials for the company. For power and other business segments, though, the company depends on raw materials (coal), etc.

3. Moderate Bargaining Power of Buyers: The customers in the Iron ore segment have low to moderate pricing power over the company. In case of shortages of iron ore supplies, the company can command pricing power over its customers. However, if there is a surplus supply of iron ore, steel companies try to negotiate better deals and keep a bulk stock of iron ore for production use.

4. High Threat of Substitutes: The company faces high threats from its substitutes. The rising popularity of alternatives like aluminium, composite materials and other advanced alloys in construction and manufacturing presents a significant challenge to the traditional steel industry.

These substitutes may offer better performance or lower environmental impact, thus reducing the demand for conventional steel, ultimately impacting the demand for Iron ore. Additionally, increased competition from global players, especially in emerging markets with lower production costs, can lead to price pressure and reduced market share for domestic producers.

5. High Competition in the Industry: The competitive intensity is high among players in the mining industry. The company faces price wars from larger players like NMDC, SAIL, etc., especially when demand for Iron ore is not strong.

What led us to reject Lloyd Metals and Energy Ltd. for Finology 30?

1. Highly Risky Business Environment: Lloyd Metals' primary Iron ore mining business operates in a highly unfavourable location. The company was granted the lease for Iron ore mining in 2007 at Surjagarh Village. Despite this, the company could start its operations only in 2012.

Even after starting in 2012, the operations suffered due to various Naxalite attacks, as they opposed mining in that area. This led to another halt in mining operations until 2017. Post-2017, the company was able to start operations only after being backed by police protection, which further added to the costs for the company. Again in 2020, the production was halted as the police could not provide it sufficient protection due to the deployment of police personnel in election duties.

Overall, the mine was operational in less than 50% of the years since 2007-2025. This is a major uncertainty which makes the company vulnerable to steep revenue fluctuations in the future as well.

2. Poor long-term performance track record: The company has a poor long-term business track record. Due to the tough business environment of the steel industry, Lloyds Metals and Energy Ltd started reporting losses in FY1998 and defaulted on debt payments to its lenders. The company had various instances in the past where it had defaulted on its debt payments:

• In 1998, the company had defaulted on ~₹11 cr of interest payments.
• By 2004, the payments due to lenders since 1998 aggregated to ~₹352 cr.
   

Source: drvijaymalik.com, company

Not only this, but recently the company had to pay a large sum of money because it broke its contract with Sunflag Iron & Steel Company Ltd (Sunflag). Sunflag gave it money (₹312 cr) to develop the iron ore mine; however, Lloyds did not supply it to Sunflag. In the arbitration, Lloyds Metals and Energy Ltd was held responsible for breaking the contract and was asked to pay ₹900 cr to Sunflag. As Lloyds Metals and Energy Ltd did not have enough money to pay in cash, it gave 6 cr.  optionally fully convertible debentures (OFCDs) for free to Sunflag, which resulted in Sunflag getting an 11.89% stake in the company.
 

 

Source: Finology Ticker

These cash flow issues and the way in which it were dealt raised concerns for us regarding the long-term sustainability of the business and sustainable value creation for shareholders.

The Bottom Line

Lloyd Metals and Energy Ltd., one of India's largest iron ore mining companies, grew its profits at an astonishing 100 %+ CAGR over the last 5 years.

However, we found concerns about the environment in which the company operates and its poor long-term cash flow management concerns.

For Finology 30, our ideology has been to focus on simple business models which are not highly vulnerable to external uncontrollable forces and has strong fundamentals and cash flow management.

For now, Lloyd Metals and Energy Ltd. failed to pass our investment checklist. So, we decided not to go ahead with Lloyd Metals and Energy Ltd.