Rathi Steel — Q2 FY26 earnings call

Call held 19 Nov 2025

Management summary

Rathi Steel reported a modest Q2 and H1 FY26 performance influenced by industry-wide pricing pressure and rising imports, yet demonstrated strong Q-on-Q sales growth. The company is actively ramping up capacity utilization, improving margins through product mix optimization, and strengthening its distribution network. Strategic focus includes expanding into green steel products and reducing its high cost of debt, while maintaining a cautious approach to large-scale capex.

Highlights

  • Q2 FY26 Total Income reached approximately INR 156.4 crores.

  • EBITDA margin for Q2 FY26 stood at around 4%, with an EBITDA of INR 6.37 crores.

  • H1 FY26 Total Revenue was approximately INR 311 crores, generating an EBITDA of INR 12.6 crores.

  • Q2 sales improved by 27-28% Q-on-Q, reaching INR 156 crores compared to INR 121 crores in the corresponding quarter last year.

  • Stainless steel products contributed 60-65% to H1 FY26 sales, while TMT business contributed approximately 30%.

  • Current steel melting capacity is 85,000 tons per annum, and rolling capacity is 2 lakh tons per annum.

  • The cost of debt is currently around 18%, with ongoing negotiations to reduce it to about 16%.

  • Management is focused on ramping up capacity utilization from current 55-60% (melting) and 40-50% (rolling) towards 80%.

Key financials

3 periods

Q2

  • Sales Growth YoY
    27.5%

Q2 FY26

  • Total Income
    ₹156.4 Cr
  • EBITDA
    ₹6.37 Cr
  • EBITDA Margin
    4%

H1

  • FY26 Total Revenue
    ₹311 Cr
  • FY26 EBITDA
    ₹12.6 Cr

What they filed

Q4 FY26: revenue up 63.4%, net profit up 96.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ1 FY25Q2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26
Revenue128 121 104 150 155 +22%156 +29%160 +53%244 +63%
EBITDA6 5 3 8 6 +3%6 +21%6 +110%10 +24%
Net profit3 7 1 4 2 −30%2 −77%2 +260%7 +96%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • H1 FY26 Sales Contribution
    62.5% Stainless Steel Products30% TMT Business

Order book

low confidence
The business remains stable, supported by steady demand from stainless steel B2B customers and ongoing ramp-up of TMT production. The company has a strong distribution network across North India for TMT bars.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex Capex disclosed internal approvals
    • Balancing capex for regular upgrades and replacements
    No, no, no. So, those alignments, whatever capex, whatever balancing capex we are doing currently are being met through internal approvals. Because, if you look at our sort of, the kind of capex we have done over the last three years is close to around INR40 crores. So, larger part was done from internal approvals.
  • Debt Debt disclosed Cost 18%
    • Rate reset Negotiating with existing lender to reduce cost of debt from ~18% to ~16%
    But it was a conscious call that we took to re-enter the banking relationship. It is still being a very, very capital-intensive industry. So, the cost of borrowing is high. It's close to around 18% right now.
  • Liquidity Liquidity disclosed Working capital cycle is comfortable but expensive due to buying material on credit.
    But, you know, so there is a working capital cycle, which is comfortable, but it is expensive, because the company buys a lot of material on credit.

Guidance & targets

Revenue

  • CAGR Growth Revenue · next two years · Medium confidence 20%
    But I did give a guidance of around, we would strive to maintain a CAGR growth of 20 odd percent. I did give this guidance last year, at least for the next two years. So, we seem to be on track for that.

    — Udit Rathi

Capacity

  • Capacity Utilization Capacity · going forward · High confidence 80%
    The capacity utilization right now is about 55%-60%... So, of course, going forward, we want to ramp it up to 80%.

    — Udit Rathi

Debt

  • Cost of Debt Debt · ongoing · High confidence 16%

    Previously 18% → 16%

    the cost of debt right now is high. It's close to around 18% right now... They have accorded us a sanction now at a reduced rate of about 16%.

    — Udit Rathi

Margin

  • EBITDA Margins Margin · going forward · Medium confidence Improvement

    From 4% today

    So, that is where the margins have been under pressure. But, going forward, we are working on various options to improve the operating margins

    — Udit Rathi

What to watch in Q3 FY26

Capacity Utilization (Melting Shop)

Next quarter / ongoing
Current 55-60%
Target Towards 80%

Why it matters

Direct impact on operational efficiency and revenue growth.

my melting shop is operating at about 55%-60%... So, of course, going forward, we want to ramp it up to 80%.

Risks & concerns

  • Industry-wide pricing pressure and rising imports

    medium

    Modest performance influenced by industry-wide pricing pressure and rising imports, particularly in the flat product space.

    Management acknowledged

  • Soft industry scenario due to excess supply

    medium

    Industry scenario is soft with reasoning steel prices due to excess supply in the domestic market.

    Management acknowledged

  • High cost of debt

    medium

    Current cost of debt is high at ~18%, but negotiations are ongoing to reduce it to ~16%.

    Management acknowledged

  • Q3 seasonality and construction restrictions in NCR

    low

    Q3 typically remains weak in NCR due to high pollution and construction restrictions, for which pre-emptive steps like annual maintenance are taken.

    Management acknowledged

Q&A highlights

7 direct
Q2 FY26 Sales Performance Direct
Q-on-Q, actually if you see, the sales have actually improved. There has been almost an improvement of, I would say, around 27%-28%. So, going forward, if we are able to maintain a guidance around that range, I think right now we are doing pretty well on that account. So, the sales numbers on a Q-on-Q basis have increased. We touched a sales of around INR156 crores in Q2, vis-à-vis around INR121 crores in the corresponding quarter last year.

Clarifies sales growth, correcting initial analyst perception of flat sales, and provides specific Q-on-Q growth figures.

Asked by Aditi Roy

Current Capacity Utilization and Improvement Plans Direct
my melting shop is operating at about 55%-60%. And the rolling mill... has been quite low in the previous years on account of one of my mills not being operational, the TMT bar mill, which we recommenced sometime in April this year. So, that facility is gradually being ramped up continuously... we have almost reached a level of close to about 40% to 50% in the TMT, in the total rolling capacity space as well... So, going forward, things are looking encouraging as far as capacity utilization is concerned. And we are very focused on improving that.

Provides current utilization rates and outlines the strategy for operational improvement and volume growth.

Asked by Aditi Roy

Stagnant OPM and Improvement Strategy Direct
Yes, so that is what the focus is... before this last 2-3 years, we were operating mainly in the stainless-steel space... stainless steel space, last couple of years, there has been, two large acquisitions of plants operating in similar space under IBC... that has had an impact on the margins for sure. But we believe that those excess supplies also are slowly getting absorbed in the market... going forward, we are working on various options to improve the operating margins, including the TMT mill allows us to sort of run the idle assets, which obviously has sort of divides our overheads.

Addresses a key financial concern (stagnant OPM) and explains the market dynamics and internal strategies for margin improvement.

Asked by Arth Jain

Cost of Debt and Refinancing Direct
the cost of debt right now is high. It's close to around 18% right now. But we don't have a lot of debt on our books... we are in talks with the existing lender to bring it down. They have accorded us a sanction now at a reduced rate of about 16%.

Highlights a significant cost component and ongoing efforts to reduce it, which could positively impact profitability.

Asked by Arth Jain

Green Steel Initiatives and Market Demand Direct
So, that is one area which we are now aggressively moving towards. We have been able to sort of identify that the steel, the route of steel making that we have adopted, it is more of a sustainable model using scrap as a material. So, it is, it is a sort of a circular economy thing which, which adds to the green points... Even the large builders and the, my real estate customers also are preferring, are showing an inclination going forward to buy, give preference to green steel.

Reveals a strategic pivot towards green steel, aligning with market trends and potential for new revenue streams and competitive advantage.

Asked by Ishita Sen

Fixed Cost Trap and Capex Strategy Direct
No, it will not be a fixed cost trap because we already have a plant in an ideal situation which we have restarted. So, we don't plan to incur a significant capital expenditure... We want to sweat out the existing assets first. And only then we will take any major step towards expansion.

Clarifies the company's cautious approach to capex and expansion, focusing on optimizing existing assets to avoid over-leveraging.

Asked by Prashant Shah

Inventory Days Increase Partial
So, inventory days also have gone up from 29 to 48 odd days... So, as I said, I'm not very sure about the number of days. But yes, the level that you spoke about INR61 crores INR62 crores is, as I said, is on account of recommencement of the TMT mill also.

Addresses a working capital concern, attributing the increase to the recommencement of the TMT mill and the need to maintain stock for various sizes.

Asked by Arth Jain

Land Value and Leasehold vs Freehold Direct
So, firstly I clarify it is not a freehold land. It is a leasehold land from the UP SIDA, the body here. But irrespective of that, yes, land prices have gone up substantially. It is kind of difficult to address, you know, a certain value and tell you offhand.

Clarifies the nature of the company's land ownership and acknowledges significant appreciation in land prices, which could be a hidden asset value.

Asked by Nishant Gupta

2 min read 6 chapters

Detailed narrative

Q2 & H1 FY26 Financial Performance

Rathi Steel and Power Ltd reported a total income of approximately INR 156.4 crores for Q2 FY26, achieving an EBITDA margin of around 4% and an EBITDA of INR 6.37 crores. For the first half of FY26, the company recorded a total revenue of approximately INR 311 crores with an EBITDA of INR 12.6 crores. Sales in Q2 FY26 showed a significant Q-on-Q improvement of 27-28% compared to INR 121 crores in the corresponding quarter last year, indicating a positive trend despite industry challenges.

Operational Focus & Capacity Utilization

The company's manufacturing operations include an 85,000 tons per annum steel melting capacity and a 2 lakh tons per annum rolling capacity. The melting shop is currently operating at 55-60% utilization. The TMT bar mill, which recommenced in April, is gradually ramping up and has reached 40-50% of its total rolling capacity. Management is actively focused on improving overall capacity utilization to 80% to enhance operational efficiency and leverage existing assets.

Product Mix & Market Strategy

Rathi Steel's strategy is centered on value-added stainless steel products and TMT bars, with stainless steel contributing 60-65% and TMT around 30% to H1 FY26 sales. The company aims to diversify its portfolio and improve margins by integrating backward for TMT production, similar to its end-to-end stainless steel operations. A strong distribution network across North India is a key asset, supporting efficient product reach and the rollout of 550 and 500 grades of TMT bars.

Financial Health & Debt Management

The company's cost of debt is currently high, around 18%, a legacy from past challenges. However, management is actively negotiating with existing lenders and has received a sanction for a reduced rate of approximately 16%. While the working capital cycle is comfortable, it is noted as expensive due to the practice of buying material on credit. Inventory levels have seen an absolute increase, primarily attributed to the recommencement of the TMT mill and the need to maintain stock for various sizes.

Green Steel Initiative & Sustainability

Rathi Steel is strategically pivoting towards a sustainable business model focused on recycling-based circular economy steelmaking, aiming for minimal fossil fuel consumption and a lower carbon footprint. The company is exploring green certifications and notes a growing preference for green steel from real estate developers and government tenders. This initiative is seen as a competitive advantage, and plans are underway to integrate the steel metal shop with the TMT mill to produce green products.

Industry Outlook & Challenges

The industry faces a soft scenario with pricing pressure and rising imports, particularly impacting the flat product space. Despite this, domestic consumption and demand for steel products continue to grow at a decent pace, providing headroom for all steel players. Management acknowledges the typical Q3 weakness in the NCR region due to pollution and construction restrictions, for which they take pre-emptive steps like annual plant maintenance.

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