Detailed Narrative
Q4 & FY25 Financial Performance Overview
Rathi Steel and Power Ltd. reported a robust Q4 FY25, with revenue increasing by 26% year-on-year to ₹149.5 crores, driven by improved realizations from SS/MS billets. EBITDA for the quarter doubled to ₹7.90 crores, and the EBITDA margin expanded by 194 basis points to 5.28%. For the full fiscal year 2025, the company achieved a revenue of ₹503.15 crores, slightly up from ₹493.19 crores in the previous year, despite lower volumes due to planned shutdowns. Full-year EBITDA stood at ₹22.03 crores, with a margin of 4.38%, reflecting a 9 basis point improvement. PAT for Q4 FY25 was ₹3.80 crores, and for FY25 was ₹13.95 crores, with EPS of ₹0.44 for Q4 and ₹1.62 for FY25.
Strategic Initiatives and Capacity Expansion
The company has recommenced commercial operations of its TMT mill division, which had been idle for several years. This strategic move aims to utilize idle assets and complement the stainless-steel portfolio, with a target to achieve 60-70% capacity utilization for the TMT plant within the next two years. The steel melting shop, currently operating at 60% capacity as of FY25, is targeted to reach 75-80% utilization. Modernization initiatives, including a temporary shutdown in April 2025 for revamping critical equipment, have been undertaken to improve efficiency. The company also received BIS licenses for its entire range of stainless steel and mild steel TMT bars, enhancing market reach across North India.
Product Portfolio and Technology Upgrades
Rathi Steel's product portfolio primarily comprises stainless steel billets and long products like wire rods, with over 95% of FY25 sales coming from the stainless steel segment. The company is actively working on rolling out stainless steel rebars in the retail space, a product currently evolving and primarily project-driven in coastal areas. Efforts are underway to either outsource or build in-house the necessary treatment facilities for these rebars. Cost optimization and energy efficiency measures, including a billet charging facility for stainless steel billets to wire rods, have been implemented, contributing to improved margins.
Market Outlook and Industry Challenges
The Indian steel industry faces a dynamic environment, with domestic demand driven by government infrastructure and CAPEX in sectors like roads and urban development. However, global headwinds🌐, including US tariffs against Chinese imports, are leading to an influx of cheaper Chinese steel into India, impacting domestic pricing. Management noted that the current 12% payback duty is insufficient to safeguard the industry, and further trade protection measures are required. Despite these challenges, India remains a growing market for steel, and the company is focused on improving capacity utilization and expanding its value-added stainless steel products.
Clarification on Past Volatility and Shareholdings
Management addressed analyst concerns regarding the volatility in net profit over the past five years, clarifying that it was primarily due to exceptional or extraordinary items📎 related to lender settlements and restructuring, rather than operational performance. They emphasized that EBITDA levels have been relatively range-bound. Regarding shares held by former lenders like Canara Bank and Bank of Baroda, management stated that these entities are no longer lenders and their shareholdings are purely market-driven purchases, not related to debt conversion or company placements.