Rathi Steel — Q4 FY26 earnings call

Call held 3 Jun 2026

Management summary

Rathi Steel reported a strong Q4 and full year FY26, driven by robust demand and operational efficiencies. The company achieved significant growth in total income and PAT, with improved margins. Key operational highlights include a 117% YoY volume growth in the Rolling Mill division and progress in sustainable manufacturing initiatives like direct charging and GreenPro certification. Management is focused on further capacity utilization and debt optimization.

Highlights

  • Total Income for FY26 grew 41.7% YoY to INR 716 crores.

  • PAT for FY26 increased 39.24% YoY to INR 12.87 crores.

  • Q4 FY26 Total Income surged 63.3% YoY and 52.7% QoQ to INR 244.57 crores.

  • Q4 FY26 PAT margin improved by 185 basis points sequentially to 3%.

  • Rolling Mill division production volumes increased 117% YoY to 1,02,000 tons in FY26.

Concerns

  • Current cost of borrowing is high at 16%.

  • Global steel volatility, elevated fuel costs, and geopolitical uncertainties impacting the industry.

  • Pressure from competitively priced imports and regional supply on margins.

Key financials

2 periods

Q4 FY26

  • Total Income
    ₹244.57 Cr
    YoY +63.3% QoQ +52.7%
  • EBITDA
    ₹9.89 Cr
    YoY +22% QoQ +54%
  • PAT
    ₹7.45 Cr
  • PAT Margin
    3%
    QoQ +1.8%

FY26

  • Total Income
    ₹716 Cr
    YoY +41.7%
  • EBITDA
    ₹28.9 Cr
    YoY +18.8%
  • PAT
    ₹12.87 Cr
    YoY +39.2%

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.

Capital allocation

medium confidence
  • Capex Capex disclosed
    • Replacement and debottlenecking capex (FY25) ₹20 Cr
    • Restart of TMT rebar mill (FY25) ₹5 Cr
    So, last year also we did a capex of INR20 crores plus, which was largely replacement capex and debottlenecking capex. We expect the same run rate to continue for a few years. For the Steel Melting Shop division, we have basically, it is backward integrated to the extent of around 40%, 45%. (Page 9) and I would not have an exact number of what capex was incurred, but we have been -- so this would have been incurred last to last year, I mean, not in the current financial year. So, my capex in FY25 would have captured this amount. It may not have been very substantial, maybe around INR5 crores to INR7 crores is what I believe. (Page 11)
  • Debt Debt disclosed Cost 16%
    • Refinance In talks with present lender and exploring new lenders to refinance at a lower cost.
    My current cost of borrowing is 16%, from only one of the lenders -- there is only one lender that we have presently. We are in talks with the present lender and exploring new sort of lenders also, who are able to refinance this and give us need-based additional facilities at a reasonably lower cost than what we are currently availing at. (Page 10)

Guidance & targets

Growth

  • Average Growth Momentum Growth · on an average · Medium confidence 20% to 25%
    So, we've already mentioned earlier that we aspire to maintain a growth momentum of 20% to 25% on an average. So, this we spoke about it, considering the FY25 as the base. So, we did give a guidance of an average CAGR of 20% over three years considering a base of FY25. So yes, we've done reasonably well in '26, and we definitely want to maintain the growth momentum. (Page 12)

    — Management

  • CAGR Growth · over three years · Medium confidence 20%

    — Management

Capacity Utilization

  • Rolling Mill Utilization Capacity Utilization · this year · High confidence 65% to 70%

    From 51-52% today

    And now we are so this 51% with the current run rate, I think we are hoping to improve this utilization to close to 65% to 70% in this year. (Page 9)

    — Management

  • Steel Melting Shop Utilization Capacity Utilization · going forward · Medium confidence nearly 80%

    From 50-52% today

    We are actively working towards ramping up utilization of our steel melting shop, which is currently operating at about 50% to 52% towards nearly 80% going forward. (Page 5)

    — Management

Cost Savings

  • Direct Charging Savings (Rolling Division) Cost Savings · ongoing · High confidence INR 3,000 to INR 4,000 per ton
    But whatever we are able to cater through the direct charging route, I'm expecting close to approximately on, if I look at the selling price, approximately INR4,000 per ton saving in the rolling INR3,000 to INR4,000 per ton saving in the Rolling division. (Page 10)

    — Management

  • Direct Charging Savings (% of TMT selling price) Cost Savings · ongoing · High confidence 6% to 7%
    So, whatever I am able to roll directly, there should be a saving of close to 6% to 7% including the yield benefits. 6% to 7% is on the selling price of TMT bars. (Page 10)

    — Management

Capacity

  • Rooftop Solar Capacity Capacity · future · Low confidence 1 to 2 megawatts
    Initial numbers suggest that we can probably go up to around1 to 2 megawatts, which is more of an exercise to optimize the available rooftop sort of space available to us. (Page 8)

    — Management

What to watch in Q1 FY27

Rolling Mill Utilization

this year
Current 51-52%
Target 65-70%

Why it matters

Increased utilization is key to improving operational efficiencies and overall margins.

And now we are so this 51% with the current run rate, I think we are hoping to improve this utilization to close to 65% to 70% in this year. (Page 9)

Risks & concerns

  • Global steel volatility and elevated fuel costs

    medium

    Industry experiencing global steel volatility, elevated fuel costs, geopolitical uncertainties, and increasing pressure from competitively priced imports. Iran war problem causing hike in fuel costs.

    Management acknowledged

  • Competitively priced imports

    medium

    India temporarily transitioned into a net importer in certain steel categories due to influx of competitively priced imports. While direct impact on their specific region/products is less, indirect industry-wide pressure exists.

    Management acknowledged

  • High cost of borrowing

    medium

    Current cost of borrowing is 16% from a single lender, which management is actively trying to refinance at a lower rate.

    Management acknowledged

  • GST department disputes

    low

    Disputes relate to alleged issues with input ITC; management believes they are not sustainable and are at various stages of adjudication, with some stays from higher courts.

    Management downplayed

Q&A highlights

5 direct
Volume growth in TMT bars and stainless steel products and spread movement Partial
So, I don't have a specific number for the separate volumes for TMT and stainless steel, but there was an overall growth of almost 117% in the overall production volumes of the TMT bar of the Rolling Mill division.

Analyst sought specific volume and spread data for key product segments, but management provided only overall rolling mill volume growth.

Asked by Raj Shah

EBITDA margin range at higher utilization Partial
So, it's kind of difficult to sort of predict the future numbers as such, but obviously with increasing capacity utilizations due to advantages of economies of scale, the margin spreads are expected to improve.

Analyst asked for a specific margin range, but management gave a qualitative answer, citing market conditions and fuel costs as variables.

Asked by Raj Shah

Percentage of FY26 revenue from real estate, infrastructure, dealer/distributor, and industrial B2B customers Direct
So basically, my B2B segment, larger part is being catered from the Stainless-Steel division and some TMT bars also go they are largely for projects. So, I would say out of INR716 crores approximately, it's just an approximate number, around 40% odd should be coming in from 60% should be coming in from the B2B. Yes. And remaining around 40% would be coming from basically the TMT bar segment, roughly.

Provides a high-level breakdown of revenue contribution by customer type, indicating a significant B2B focus.

Asked by Raj Shah

Main reason for TMT rolling mill shutdown and confidence in sustainable operation after restart Direct
So basically, the idle capacity was remaining idle. We ran we used to run it earlier on sort of a conversion model. But we realized that the conversion model was not very margin accretive always going for reasons that the prices of major inputs were fluctuating. And that point of time, if you look at the company's history last four, five years, we have evolved also as an organization with respect to our financial stability also.

Explains the historical context of the shutdown (margin accretive issues, financial stability) and the current rationale for restart (stabilized position, banking space access, brand equity rejuvenation).

Asked by Sakshi Shinde

Savings per ton from direct charging in TMT mill Direct
But whatever we are able to cater through the direct charging route, I'm expecting close to approximately on, if I look at the selling price, approximately INR4,000 per ton saving in the rolling INR3,000 to INR4,000 per ton saving in the Rolling division. So, whatever I am able to roll directly, there should be a saving of close to 6% to 7% including the yield benefits. 6% to 7% is on the selling price of TMT bars.

Quantifies the significant cost savings expected from the direct charging technology, highlighting its impact on profitability.

Asked by Maya Nambiar

Current cost of borrowing and target for reduction in FY27 Direct
My current cost of borrowing is 16%, from only one of the lenders -- there is only one lender that we have presently. We are in talks with the present lender and exploring new sort of lenders also, who are able to refinance this and give us need-based additional facilities at a reasonably lower cost than what we are currently availing at.

Reveals a high cost of debt and management's active efforts to refinance, which could significantly improve finance costs.

Asked by Vidhi Purohit

Main challenges to reaching 75-80% utilization Direct
We seem to be having all the parameters in place now slowly, gradually. So, it takes of course establishment of acceptance of our products to in various product categories. That is because we just restarted a shut plant, sort of a closed TMT mill, that is there. In the stainless-steel space, I have mentioned earlier that there were few acquisitions which happened under the IBC space two years back. So that has sort of put some pressure on the supply.

Management indicates that product acceptance and past supply pressures in stainless steel are the main factors, rather than external constraints like raw materials or power.

Asked by Vidhi Purohit

Impact of cheaper imports or regional supply on margins Partial
That is always a story with any large commodity business, particularly steel. Imports keep happening and they do put a pressure overall. But in the region that we operate and the product category that we operate, there aren't a lot of imports which directly impact us.

Management acknowledges the general industry risk from imports but believes their specific region and product category are less directly impacted, though indirect effects exist.

Asked by Vidhi Purohit

2 min read 5 chapters

Detailed narrative

Strong Financial Performance in FY26

Rathi Steel reported a robust financial performance for FY26, with Total Income reaching INR 716 crores, marking a significant year-on-year growth of 41.7%. EBITDA stood at INR 28.9 crores, growing by 18.8%, and PAT increased by 39.24% to INR 12.87 crores. The fourth quarter of FY26 was particularly strong, with Total Income rising to INR 244.57 crores (63.3% YoY, 52.7% QoQ) and PAT margin improving by 185 basis points sequentially to 3%.

Operational Excellence and Capacity Utilization

The company achieved a 117% year-on-year volume growth in its Rolling Mill division, reaching 1,02,000 tons in FY26. Current utilization for the Rolling Mill is 51-52%, with a target to increase it to 65-70% this year. The Steel Melting Shop is operating at 50-52% utilization, with plans to ramp it up to nearly 80%. Management highlighted significant headroom for further capacity utilization without major capex.

Focus on Sustainable Manufacturing and Green Steel

Rathi Steel is actively pursuing sustainable manufacturing initiatives. Green power sourced through open access contributed to over one-fourth of the company's total power consumption. The company also received the prestigious GreenPro Type-1 Ecolabel certification for its Rathi Powertech branded 550 grade TMT bars, reinforcing its commitment to environmentally responsible steel production. Implementation of direct charging technology for the TMT division is underway, expected to yield 6-7% savings on the selling price of TMT bars.

Market Dynamics and Product Strategy

India's steel demand remains healthy, driven by government spending on infrastructure and urban development. The domestic market has shown resilience despite global volatility and import pressures. Rathi Steel is focusing on increasing the share of high-margin stainless steel products and strengthening its presence in premium 550D grade TMT bars, catering to premium residential and infrastructure projects. The company's TMT bars are primarily sold in the NCR region, while stainless steel products are supplied across multiple states.

Capital Structure and Debt Management

The company's current cost of borrowing stands at 16% from a single lender. Management is actively engaged in discussions with the existing lender and exploring new lenders to refinance this debt at a lower cost and secure additional facilities. This initiative aims to improve the overall financial health and reduce finance costs. Capex incurred for restarting the TMT rebar mill in FY25 was approximately INR 5-7 crores, with an additional INR 20 crores for replacement and debottlenecking.

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