Steelcast Ltd Q1 FY27 Earnings Call Summary

Event Participants

Executives

4 Chetan M. Tamboli (Chairman & Managing Director), Rushil Tamboli (Full Time Director), Subhash Sharma (Executive Director & CFO), Umesh Bhatt (Company Secretary)

Analysts

12 Aman Srivastav (Bellwether Capital), Amitabh Vatsya (Southern Ventures LLP), Ankur Kumar (Alpha Capital), Dhiral Shah (Phillip Capital India), Harshil Solanki (Equitree Capital Advisors), K. Manjunath (Individual Investor), Krishna Appala (Electrum Portfolio Managers), Manish Goyal (Thinqwise Wealth Managers LLP), Mosam Shah (Wealth Guardian), Saket Saurabh (Sagari Capital), Shubham Tamrakar (Alturas Investment Management), Shubi Gupta (Trinetra Asset Managers)

Financials & KPIs

Geographic & Segment Commentary

Segment Mix (FY27 current year): Mining ~27% of sales, Earth Moving ~43%, Construction ~15%; the three major sectors together account for ~85% of revenue. Management has deliberately de-risked concentration over the past decade — mining was 84% of sales ten years ago, earth moving was near zero, and the company has expanded from 2 export geographies to 16 countries.

Export Geographies: US and Germany together form ~70% of export revenue; the balance 30% spans 14 other countries. Ten years ago, the company exported only to US and Germany. Management continues to diversify export destinations to reduce dependence on these two markets.

Defense & GET (Ground Engaging Tools): Defense is ~1% of revenue and de-prioritized due to better-priced opportunities elsewhere; Israel defense trials ongoing with results expected in coming months. GET is <1% of FY26 revenue, expected to reach ~3.5% in FY27 and ~6% in FY29 as new parts get approved and move to serial supply.

Company-Specific & Strategic Commentary

Greenfield Expansion: Board approved a new 8,500-ton foundry for steel castings in the 5 kg to 1,000 kg range with an investment of ~₹120 crores over two years. Land (100,000 sq meters) was already allotted by Gujarat government, located 12 km from the existing facility. Commissioning targeted for 31 March FY28, with revenue contribution expected in FY29. The expansion is funded entirely through internal accruals — company maintains debt-free status and has ₹120 crores of reserves.

Renewable Energy Transition: Two renewable projects under implementation — a 2.4 MW hybrid (wind + solar) plant and a 1.4 MW solar plant — both expected to commission before 31 December 2026. Management is also evaluating transitioning furnace fuel from natural gas to electricity over the next 2-3 years, driven by natural gas prices currently ~50-55% higher than February-end levels.

New Parts Development: More than 100 new parts developed in the last 18-24 months, now entering serial supply. Over the next 2-3 years, ~20% of revenue is expected to come from new parts with 80% from existing part demand growth.

De-prioritized Verticals: US railroad opportunity and defense have been consciously deferred; management cited better pricing and demand in mining, earth moving, and construction sectors as the reason for reallocating focus.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Price Pass-Through & Margins

• Question: How much of the fuel and raw material cost increase will be passed on, and has it started? (Shubi Gupta, Trinetra)
• Answer: All major raw materials are covered under the sales price variation formula with customers. The price increase effective 1 April was minimal; the major pass-through is effective 1 July. (Chetan Tamboli)
• Question: Can margins go up by 150-200 bps given operating leverage and price hikes? (Manish Goyal, Thinqwise)
• Answer: Theoretically yes — this is what the company will strive to achieve. Margin improvement in Q1 was driven by higher scale/volumes, not price increases. (Chetan Tamboli)

Growth Trajectory & Volume

• Question: Is the 25% growth target volume or value? (Ankur Kumar, Alpha Capital)
• Answer: It is volume growth of 25%; on top of that, price effects will be passed through. For FY27, 30% volume growth is a "distinct possibility" — management said 25% was conservative given strong customer indications. (Chetan Tamboli)

Greenfield Expansion

• Question: When will the new capex start contributing revenues, and what is the peak revenue potential? (Ankur Kumar, Alpha Capital; Harshil Solanki, Equitree)
• Answer: Commissioning target is 31 March FY28; the team is confident of achieving this with additional volumes visible in FY29. Revenue potential of the new facility is ~₹300 crores. Land (100,000 sq meters) was already allotted by Gujarat government. (Chetan Tamboli)

Segment Mix De-Risking

• Question: What is the segmental contribution and how has it trended over 5-10 years? (Saket Saurabh, Sagari Capital)
• Answer: Current year mix: mining ~27%, earth moving ~43%, construction ~15%. Ten years back, mining was 84%, earth moving near zero, construction 15-16%. Exports were only to US and Germany a decade ago; now 16 countries. Steelcast is a tier-1 supplier in ~98-99% of sales. (Chetan Tamboli)

Order Book & Demand Visibility

• Question: What is the order book and what drives the confidence in volume growth? (Dhiral Shah, Phillip Capital; Manish Goyal, Thinqwise)
• Answer: Order book is ₹140 crores (~3-4 months forward). Confidence comes from strong domestic infrastructure spending, elevated commodity prices, railway investments, and indications from customers across all nine sectors. India is relatively insulated from geopolitical issues due to large domestic consumption. (Chetan Tamboli)

Inventory Pile-Up

• Question: Inventories have risen without corresponding sales — is there a dispatch issue? (Shubham Tamrakar, Alturas)
• Answer: During production ramp-up, WIP piles up with a 1-2 month time lag before conversion to sales. Elevated inventory is temporary; it will normalize as volumes stabilize at higher levels. (Chetan Tamboli)

Raw Material Sourcing & Ship Breaking

• Question: Does the new facility benefit from the ship breaking ecosystem (Alang)? (Amitabh Vatsya, Southern Ventures)
• Answer: Steelcast does not use ship breaking scrap directly — it needs cleaner scrap with low sulfur/phosphorus for high-strength steels. However, the company buys from downstream industries (rolling mills, etc.) located near the ship breaking cluster, which is a locational advantage. (Chetan Tamboli)

Defense & US Railroad De-prioritization

• Question: When will US railroad supply start? What about defense? (Ankur Kumar, Alpha Capital; Manish Goyal, Thinqwise)
• Answer: US railroad has been put on hold — management sees better opportunities in other industrial sectors with better pricing. Defense is ~1% of revenue and de-prioritized; Israel trials are ongoing with results expected in coming months. Defense was described as "one of the riskiest businesses" due to single-customer dependence. (Chetan Tamboli)

Funding & Capital Structure

• Question: Should the company consider a rights issue to fund capex instead of internal accruals? (K. Manjunath, Individual Investor)
• Answer: The company has ₹120 crores of reserves (as of March 2026 balance sheet) and prefers to remain debt-free. A rights issue would dilute EPS. The suggestion for a bonus issue will be taken to the board. (Chetan Tamboli)

Price & Currency Pass-Through Mechanism

• Question: Does the pass-through vary between domestic and export customers, and is currency fluctuation hedged? (Saket Saurabh, Sagari Capital)
• Answer: Pass-through follows a one-quarter lag for both increases and decreases, consistent across customers. For currency, rupee depreciation and appreciation are shared with customers. (Chetan Tamboli)

Key Takeaway

Steelcast delivered a strong Q1 FY27 with revenue of ₹124.82 crores (+17% YoY), EBITDA margin of 28.23%, and PAT of ₹23.71 crores (+19.3% YoY), driven by higher volumes (4,700 tons at 66% utilization). Management raised the growth trajectory — conservatively guiding 25% volume growth for FY27 (30% "a distinct possibility") and 20% CAGR over coming years, backed by a ₹140 crore order book, 100+ new parts in commercialization, and strong demand across all nine sectors. Strategic expansion includes a ₹120 crore greenfield foundry (8,500 tons) targeting March FY28 commissioning with ~₹300 crore revenue potential, funded entirely from internal accruals, plus renewable energy plants (3.8 MW) expected by December 2026. Input cost inflation — natural gas up 50-55% — is fully pass-through via SPV formula effective July 1, with margins expected to improve 150-200 bps from operating leverage. Segment mix continues de-risking with earth moving now 43% and mining reduced to 27%, while GET traction (3.5% FY27, 6% FY29) adds a growth pillar. Key watch points include execution of greenfield commissioning, input cost pass-through timing, and export mix normalization to ~50% after a Q1 spike to 62%.