Event Participants
Executives
3 Amit Jalan, Dindayal Jalan, Mayank Agrawal
Analysts
8 Anirudh Sharma, Divy Agrawal, Mayuresh, Nayan Gala, Neha Dalal, Paresh Desai, Presha Shah, Vignesh Iyer
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue from Operations | ₹1,146 crores | +2% YoY from ₹1,128 crores; -5% QoQ from ₹1,205 crores due to lower external pellet/sponge sales and slightly lower TMT volumes |
| EBITDA | ₹203 crores | -24% YoY from ₹254 crores; -3% QoQ from ₹209 crores; impacted by 9% YoY raw material cost increase and pellet plant shutdown |
| EBITDA Margin | 18% | Stable QoQ vs 17.3%; down from 23% in Q1 FY26 due to input cost inflation and temporary pellet plant shutdown |
| EBITDA per Tonne | ₹8,787 | Flat QoQ vs ₹8,882; -21% YoY vs ₹11,068; sustained despite raw material pressure |
| Profit Before Tax | ₹165 crores | +2% QoQ from ₹162 crores; -24% YoY from ₹216 crores; supported by lower finance costs and higher interest income |
| Profit After Tax | ₹124 crores | Flat QoQ vs ₹123 crores; -29% YoY vs ₹174 crores |
| PAT Margin | 11% | Improved QoQ from 10%; down from 15% in Q1 FY26 |
| TMT Bar Sales Volume | ~192,000 tonnes | Flat YoY; -8% QoQ vs strong Q4 FY26; seasonal monsoon impact |
| Billet Sales Volume | Not disclosed | +13% YoY; +38% QoQ; running well ahead of internal plans |
| Pellet & Sponge Iron Sales | Not disclosed | Lower both YoY and QoQ due to higher captive consumption and pellet plant maintenance shutdown |
| Kutch Rolling Mill Utilization | 66% | Trails Gorakhpur's 93%; specific focus area for improvement in Q2 |
| Gorakhpur Capacity Utilization | 93% | High utilization at primary facility |
| Raw Material Cost Increase | +9% YoY | Outpaced revenue growth of 3%; driven by coal prices, geopolitical freight impact, and pellet plant shutdown |
| Employee Cost Increase | +24% YoY | Driven by full-year impact of DRI plant commissioned last year, senior leadership strengthening, and annual salary revision |
| Capex Incurred in Quarter | ₹137 crores | Part of ₹3,000 crores total program; ~₹800 crores spent to date |
| Cash Balance Change | -20% QoQ | Decline alongside receivables/inventory buildup consistent with production/billing profile |
| Net Debt Position | Net cash surplus | Zero term loans; borrowings limited to working capital facilities |
Geographic & Segment Commentary
Gorakhpur Unit (Uttar Pradesh): Inland facility operating at 93% capacity utilization; pellet plant annual maintenance shutdown reduced captive pellet availability, necessitating open market procurement at higher cost; iron ore sourced from Odisha Mineral Corporation, Madhya Pradesh concentrate, and Lloyds (Maharashtra); coal 100% Coal India linkage for power, 60-70% Indian coal for DRI with balance South African via Itochu.
Gujarat Unit (Kutch): Port-based facility with rolling mill at 66% utilization vs 93% at Gorakhpur; improving Kutch utilization is a specific Q2 focus; sources Indonesian coal via Mundra/Kandla ports blended with local lignite for power; 100% South African coal for process via foreign traders; 18 MW solar commissioning in Q2 FY27.
UP Market Position: >25% market share in addressable UP market; brand building with celebrity endorsements (Ajay Devgn since 4 years, Janhvi Kapoor recently added) supporting demand and realization strength; capacity expansion concentrated at Gorakhpur unit.
Company-Specific & Strategic Commentary
Capacity Expansion: ₹3,000 crores capex program on track; capacity increase from 1.0 to 1.23 million tonnes (23% growth) targeting H2 FY27 commissioning; ~₹800 crores spent to date; funded entirely through internal accruals with no term debt.
Renewable Energy Program: 85 MW total solar capacity (18 MW Gujarat, 67 MW Gorakhpur); 7 MW trial plant already commissioned; Gujarat 18 MW commissioning in Q2 FY27 (August 2026); Gorakhpur 67 MW targeting Q4 FY27; expected structural cost reduction lever once operational.
Captive Iron Ore Security: Three iron ore blocks acquired (two in UP, one in Rajasthan); exploration and geological work progressing in parallel; UP clearances expected in 2-3 months, Rajasthan in 6 months; aggressive internal target of FY28 operationalization for all three mines with beneficiation plants; would eliminate market dependence for iron ore.
Capital Discipline: Net cash surplus company with zero term loans; all capex funded through internal accruals; will evaluate debt/equity only when firming up medium-term growth plan to be shared next quarter.
Integration Depth: End-to-end integration from pellet to sponge iron to billet to TMT provides structural margin cushion vs non-integrated players; debottlenecking at Gujarat unit on track for completion within FY27.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Domestic Steel Demand Growth | 8-9% in FY27 | Government infrastructure spending, urbanization, and construction cycle remain multi-year drivers; India targeting 300 MT capacity by 2030 vs ~160 MT currently |
| Capacity Expansion Commissioning | H2 FY27 | 1.23 MT capacity (from 1.0 MT) on track; benefits to flow through from second half post-commissioning |
| Gujarat Solar (18 MW) | Q2 FY27 (August 2026) | Commissioning imminent; will provide cost-side leverage |
| Gorakhpur Solar (67 MW) | Q4 FY27 | On schedule per current timeline |
| Captive Iron Ore Mines | FY28 | All three mines (2 UP, 1 Rajasthan) targeting FY28 operationalization; exploration progressing, regulatory clearances underway |
| EBITDA Margin Trajectory | Improvement expected | Solar commissioning and captive mines to structurally improve margins beyond current 17-18% range |
| TMT Pricing Outlook | Q2 muted, pickup Q3 onwards | Seasonal monsoon impact in Q2; historical recovery pattern expected from September/October as activity resumes |
| Medium-term Growth Plan | Next quarter disclosure | Management to share detailed medium-term growth plan and capital allocation framework in Q2 FY27 call |
Risks & Constraints
| Risk | Context |
|---|---|
| Geopolitical Input Cost Pressure | Middle East conflict driving up global freight, shipping, and energy-linked costs; coal prices up significantly; sea freight impacting iron ore logistics; management notes 4-5% raw material cost impact from pricing (ex-pellet shutdown) |
| Steel Import Surge | India turned net steel importer in Q1; imports rising via free trade routes and cargo diversion; industry seeking anti-dumping measures alongside existing safeguard duties; could pressure long product pricing if sustained |
| Seasonal Monsoon Demand Weakness | Q1 and Q2 structurally softer for long products; construction/infrastructure activity slows; TMT prices corrected meaningfully through Q1; recovery dependent on post-monsoon pickup |
| Kutch Rolling Mill Underutilization | 66% capacity utilization vs 93% at Gorakhpur; represents stranded capacity and lower return on Gujarat assets; improvement targeted in Q2 but execution risk remains |
| Captive Mine Regulatory Timeline | FY28 target aggressive given government regulatory involvement in mining sector; forest/environment clearances required; delays would extend market dependence for iron ore and delay margin improvement |
| Pellet Plant Shutdown Impact | Planned annual maintenance reduced captive pellet availability; forced open market procurement at premium; pressure expected to ease in Q2 but highlights concentration risk in captive supply chain |
Q&A Highlights
Raw Material Sourcing & Cost Structure
- Question: What is the iron ore and pellet sourcing strategy, top suppliers, and contribution? (Divy Agrawal)
- Answer: Gorakhpur sources iron ore fines from Odisha Mineral Corporation, Madhya Pradesh concentrate (multiple suppliers), and Lloyds Maharashtra (15-20% of mix, low phosphorus only); coal 100% Coal India linkage for power, 60-70% Indian/30-40% South African (via Itochu) for DRI. Gujarat sources Indonesian coal via Mundra/Kandla blended with local lignite for power; 100% South African coal for process via foreign traders. (Mayank Agrawal)
Phosphorus Management in Iron Ore
- Question: How is high phosphorus iron ore from Maharashtra/Lloyds managed? (Divy Agrawal)
- Answer: Lloyds supplies low phosphorus ore only (15-20% of ~9-9.5 lakh tonne annual requirement = ~15,000 tonnes/month); high phosphorus can be blended with low phosphorus or refined during steelmaking via ladle refining furnace - choice driven by commercial economics. (Mayank Agrawal)
Capex Plan & Funding
- Question: What is FY27+ capex plan and funding strategy? (Vignesh Iyer)
- Answer: ₹3,000 crores total across three buckets: ~50% for three iron ore mines (2 UP, 1 Rajasthan) with beneficiation plants targeting FY28; 85 MW solar (18 MW Gujarat Q2 FY27, 67 MW Gorakhpur Q4 FY27); capacity expansion to 1.23 MT in H2 FY27. Fully funded by internal accruals, no term loans planned. (Mayank Agrawal)
Market Position & Expansion Strategy
- Question: Initiatives to strengthen UP position and expand to adjacent markets? (Vignesh Iyer)
- Answer: >25% market share in UP addressable market; brand building with Ajay Devgn (4 years) and recently Janhvi Kapoor; continuous promotional activities driving demand/realization; capacity expansion focused at Gorakhpur; gradual expansion to other markets as capacity grows. (Mayank Agrawal)
Export Market Outlook
- Question: Plans to enter export market? (Anirudh Sharma)
- Answer: Construction steel exports logistically difficult, especially from inland Gorakhpur; Gujarat unit occasionally exports billets opportunistically but not a regular focus or strategic priority. (Mayank Agrawal)
Margin Sustainability & Drivers
- Question: Key margin drivers and sustainability? (Anirudh Sharma)
- Answer: End-to-end integration (pellet-to-TMT at Gorakhpur, sponge-to-TMT at Gujarat) with negligible semi-finished sales; zero term debt eliminates financial burden; margins stable at 17-18% despite headwinds; solar (FY27) and captive mines (FY28) expected to structurally improve margins beyond maintenance. (Mayank Agrawal)
Industry Outlook & Import Pressure
- Question: Competitive pressure from steel imports in UP/Gujarat rebar market? (Neha Dalal)
- Answer: Flat product weakness transmits partially to long products; but domestic demand strong at 8-9% growth projection; UP and Gujarat among India's most progressive states; no major long-term demand concern despite short-term monsoon impact. (May