SG Mart — Q4 FY25 earnings call

Call held 19 May 2025

Management summary

SG Mart reported strong full-year FY25 results, marking its first year of full operations with significant revenue and profitability. The company outlined aggressive growth targets for FY26 and FY27, driven by expansion in B2B metal trading, service centres, solar structures, and distribution businesses. Management emphasized a focus on domestic sourcing, efficient capital allocation, and a robust business model designed to be resilient against market fluctuations.

Highlights

  • Achieved INR 5,800 crores in revenue for FY25, with INR 103 crores in EBITDA and Net Profit.

  • Serviced 2,257 customers and procured from 225 suppliers in FY25.

  • Guided for EBITDA of INR 200 crores in FY26 and INR 400 crores in FY27, targeting a minimum 25% ROCE.

  • Working capital cycle, which stretched to 30 days in March 2025, is expected to normalize to 10-15 days by June 2025.

  • Capex for service centres (INR 30-40 crores per centre) will be 100% funded from internal cash flows.

  • TMT distribution business shifted to a royalty-based model, with royalty at INR 500 per ton, expected to increase to INR 750-1,000 per ton.

Key financials

  1. Revenue ₹5,800 Cr
  2. EBITDA ₹103 Cr
  3. Net Profit ₹103 Cr
  4. Customers 2,257
  5. Suppliers 225

What they filed

Q1 FY27: revenue up 14.4%, net profit up 43.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,793 1,335 1,595 1,144 1,704 −5%1,644 +23%1,823 +14%1,309 +14%
EBITDA15 22 37 36 28 +87%17 −23%56 +51%59 +64%
Net profit16 28 33 32 27 +69%11 −61%41 +24%46 +44%
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

  • B2B Metal Trading
    50,000 tons Monthly Volume
  • Service Centres
    5 Operational Centres8,000 tons Monthly Volume per Centre₹2,000 EBITDA per Ton
  • Solar Structures
    50,000 tons Order Visibility (FY26)
  • Distribution (TMT)
    11,000 tons Monthly Volume33,000 tons Q4 FY25 Volume1,07,000 tons FY25 Volume₹500 Royalty per Ton
  • Distribution (Non-TMT)
    ₹40 Cr Monthly Run Rate₹500 Cr Annual Sales Run Rate₹130 Cr Q4 FY25 Revenue₹380 Cr FY25 Revenue

Capital allocation

high confidence
  • Capex ₹150 Cr 100% funded from operating cash flows
    • Service Centre expansion (per centre) ₹30 Cr
    • Dubai Service Centre (gross block investment) ₹60 Cr
    • Solar capacity (minimal, utilizing existing service centres)
    One thing I can assure you that whatever capex we do every year, that will be fully funded from operating cash flows. We don't need any external capital or even debt or even the fixed deposit, which is lying in the banks. This capex for service centres will be 100% funded from the internal cash flows.
  • Debt Debt disclosed
    We don't need any external capital or even debt or even the fixed deposit, which is lying in the banks. This capex for service centres will be 100% funded from the internal cash flows. (page 5) | Yes, loan will be to fund the working capital in Dubai, right, which is slightly higher than India operations. (page 9) | The interest cost is going up because we are using the funds which are lying in the as the fixed deposit in the balance sheet, right? (page 10)
  • Liquidity Cash ₹110 Cr Includes INR 110 crores cash balance in Dubai entity and INR 250 crores expected from warrant conversion.
    Okay. So, this amount consists of INR110 crores of cash balance in Dubai entity. (page 9) | Plus, there is around INR250 crores, which is coming in the company in the next 10 days on the conversion of warrants. So, the cash position of the company should remain high, what it was in FY '25. (page 16)

Guidance & targets

Profitability

  • EBITDA Profitability · FY26 · High confidence INR 200 crores
    I can tell you with full confidence that this EBITDA of INR100 crores will grow to INR200 crores in FY '26 and INR400 crores in FY '27.

    — Anubhav Gupta

  • EBITDA Profitability · FY27 · High confidence INR 400 crores

    — Anubhav Gupta

  • Return on Capital Employed (ROCE) Profitability · Ongoing · High confidence minimum 25%
    And this will be coupled with minimum threshold of 25% ROCE.

    — Anubhav Gupta

  • TMT Royalty per Ton Profitability · Eventually · Medium confidence INR 750-1,000

    From INR 500 today

    So right now, we are charging around INR500 per ton royalty from these TMT partners. And as the brand gets established, more volumes come into play, this royalty, we expect it to increase to INR750 and INR1,000 per ton eventually.

    — Anubhav Gupta

  • TMT EBITDA Margin Profitability · Eventually · Medium confidence 4-5%
    But once the brand is built, then yes, margins will move towards 4% to 5%.

    — Anubhav Gupta

  • Service Centre EBITDA (from 5 centres) Profitability · FY26 · High confidence INR 100 crores
    So, 40,000-ton monthly volume will come, which means 500,000 tons per year. And on service centre, we do make INR2,000 per ton EBITDA. So INR100 crores EBITDA will come from service centres.

    — Anubhav Gupta

  • Service Centre EBITDA (from additional 5 centres) Profitability · FY27 · High confidence INR 100 crores
    Next year, more 5 service centres will get add up, right? That will bring additional 5 lakh ton of volume and incremental INR100 crores of EBITDA in FY '27.

    — Anubhav Gupta

  • Non-TMT Distribution EBITDA Margin Profitability · Ongoing · High confidence 2-2.5%
    So there, we should make minimum 2%, 2.5% EBITDA margin.

    — Anubhav Gupta

  • B2B Metal Trading EBITDA per Ton Profitability · Ongoing · High confidence INR 750-1,000
    But what I can tell you is that on B2B metal trading, right, we should be doing around INR750 to INR1,000 per ton of EBITDA.

    — Anubhav Gupta

  • Service Centre EBITDA per Ton Profitability · Ongoing · High confidence INR 2,000
    On service centre, we should be doing around INR2,000 per ton EBITDA.

    — Anubhav Gupta

  • Q1 FY26 EBITDA Profitability · Q1 FY26 · High confidence near INR 50 crores
    What I can tell you is that we'll be near about INR50 crores of EBITDA in Q1 of FY '26.

    — Anubhav Gupta

  • PAT Growth Profitability · Ongoing · High confidence Match EBITDA growth
    Yes. Just to end the last one, yes. So PAT growth will match the EBITDA growth.

    — Anubhav Gupta

Volume

  • B2B Metal Trading Volume Growth Volume · Next year (FY26) · High confidence 50%
    Now coming to the vertical-wise B2B business, we are doing around 50,000 tons per month volume and we expect a sharp ramp-up in second half as the more steel comes online. This will grow by 50% next year.

    — Anubhav Gupta

  • Solar Structures Order Visibility Volume · FY26 · High confidence 50,000 tons
    And we already have 50,000 tons worth of order visibility, which will be executed in FY '26, and this will easily double in FY '27.

    — Anubhav Gupta

  • Solar Structures Order Visibility Growth Volume · FY27 · High confidence 100%

    — Anubhav Gupta

  • TMT Distribution Volume Growth Volume · FY26 · High confidence 50%
    If we come to TMT, we are doing a monthly volume of 11,000 tons a month, which will increase by 50% in FY '26.

    — Anubhav Gupta

Capacity

  • Service Centres Operational Capacity · Near term · High confidence 10

    From 5 today

    Now this volume will double as we add five more service centres at the identified locations such as Jaipur, Kanpur, Patna, Siliguri, Ahmedabad, Indore and Bhubaneshwar.

    — Anubhav Gupta

  • Solar Capacity Capacity · Operational · High confidence 200,000 tons/year
    Our capacity for solar will be operational at 15,000 tons a month, which is 200,000 tons a year.

    — Anubhav Gupta

Revenue

  • Non-TMT Distribution Revenue Revenue · FY26 · High confidence INR 1,000 crores

    From INR 500 crores (annual run rate) today

    But in FY '26, we expect this revenue to reach INR1,000 crores, so which is, again, doubling over the current run rate.

    — Anubhav Gupta

Efficiency

  • Working Capital Cycle Efficiency · June quarter · High confidence 10-15 days

    From 30 days today

    So, in the June quarter, we are confident that the working capital will come back to 10 to 15 days, which has always been our target.

    — Anubhav Gupta

Other

  • NSE Listing Other · Ongoing · High confidence Process ongoing
    So that process is already on.

    — Anubhav Gupta

What to watch in Q1 FY26

Working Capital Cycle Normalization

June quarter
Current 30 days (March 2025)
Target 10-15 days

Why it matters

Normalization of working capital is key to improving cash flow and operational efficiency, as it was a point of concern this quarter.

So, in the June quarter, we are confident that the working capital will come back to 10 to 15 days, which has always been our target.

Risks & concerns

  • Working capital stretch

    medium

    Working capital stretched to 30 days in March 2025 due to advance payments to steel mills and high sales, but expected to normalize by June 2025.

    Management acknowledged

  • Reliance on imports

    low

    Imports are considered opportunistic and not a basis for a sustainable business model; focus is on domestic tie-ups.

    Management downplayed

  • Steel price fluctuations

    low

    NSR (Net Sales Realization) keeps changing with steel prices, impacting percentage margins, but EBITDA per ton remains intact.

    Management acknowledged

  • Higher other expenses

    low

    Other expenses are temporarily high due to service centre expansion, expected to be nullified as income from these centres ramps up.

    Management acknowledged

Q&A highlights

8 direct
Impact of 12% import restrictions from China on company portfolio Direct
So as far as SG Mart is concerned, it is not impacting the business model as such because our business model is standing on the thesis that in India itself, the existing six steel mills are increasing capacities a lot. And we want to capture that volume rather than relying on imports where the sustainable supply is always a challenge.

Clarifies that the company's strategy of focusing on domestic sourcing mitigates risks from import tariffs, aligning with India's increasing steel production capacity.

Asked by Rohan Baranwal

Service centre expansion strategy and capacity utilization Direct
But what we have learned by operating 5 service centres is that 1 service centre now can-do business of 8,000 to 10,000 tons. If you look at the capacity, capacity is around 12,000 - 13,000 tons a month. And you can easily get volume of 8,000 to 10,000 tons a month. So that's why if you look at the volume from service centre that we have not reduced. But number of service centres, we have reduced because from one service centre, you are able to capture more volume.

Explains the revised strategy for service centre expansion, indicating higher efficiency and capacity utilization per centre, leading to fewer new centres than initially planned but maintaining volume targets.

Asked by Rohan Baranwal

Shift to royalty-based model for TMT distribution and its impact on margins Direct
In distribution business, okay, which consists of 2 verticals, TMT and non-TMT. So, what we were doing was that like for TMT, we have done tie-ups with the manufacturers who used to sell TMT on our behalf to their clients and to the network of APL Apollo Group distributors. That revenue was flowing through our P&L. But now we have changed it to royalty-based model, wherein the revenue doesn't get booked into my account neither the cost of materials. It is only the royalty, which gets booked into our account.

Details a significant strategic shift in the TMT business model, moving from direct sales to a royalty-based approach, which impacts revenue recognition and margin profile.

Asked by Akshit Gupta

INR 600 crore capex allocation and its purpose Direct
I guess there is some confusion. I said that in my opening highlights that this INR600 crores capex is for next 3 to 5 years, which we took the approval from Board. So, every year is going to be like, say, INR150 crores to INR200 crores. Now this majority of this capex is for service centres. Like I said one service centre cost us around INR30 crores to INR40 crores in terms of fixed assets.

Clarifies that the substantial capex is primarily for service centre expansion over several years, not for solar business, which has minimal capex requirements.

Asked by Shiva

Revision of FY27 revenue target and impact of steel prices Direct
I told you that from INR100 crores EBITDA in FY '25, our EBITDA will be INR200 crores in FY '26 and INR400 crores in FY '27. So, which matches the earlier guidance of INR18,000 crores revenue. So, what has happened is that the steel prices are down by 10% to 15% at the time when we gave the guidance, right? But our EBITDA per ton and EBITDA is intact. So that's why I'm saying that INR400 crores EBITDA in FY '27 is achievable, and we will do it.

Explains that while the revenue target might be delayed due to lower steel prices, the underlying EBITDA per ton and overall EBITDA targets remain achievable, indicating resilience in profitability despite price fluctuations.

Asked by Rohit Singh

Rising interest costs and its impact on EPS growth Direct
The interest cost is going up because we are using the funds which are lying in the as the fixed deposit in the balance sheet, right? That's why the interest cost is going up. With this when we guide for 100% growth in EBITDA, same 100% growth in PAT also you will see.

Addresses concerns about rising interest costs impacting EPS, clarifying that it's due to internal fund utilization and that PAT growth is expected to mirror EBITDA growth.

Asked by Rohit Singh

Confidence in aggressive growth targets and business model resilience Direct
See, I mean, the confidence comes from the two things. One is the number of customers what we are servicing right now and the new customers, what we are adding every day. Now the second part is the products what we are selling and new products what we are adding every day. And if you look at our business model, it's built with the thesis that you have steel as raw material available, then you sell it into like -- sell it through multiple verticals. So, the only risk to this could be non-availability of steel, which we don't see as a challenge. Other risks, we don't have any debt.

Provides a comprehensive rationale for management's confidence in achieving ambitious growth, highlighting customer base, product diversification, and a 'shockproof' business model with minimal debt and inventory risk.

Asked by Riddhesh Gandhi

Discrepancy between gross margin increase and EBITDA margin decrease in Q4 FY25 Direct
So, percentage margin is a bit deceptive in our business, right, because NSR keeps on changing as the steel prices fluctuate, number one. Number two, other expenses are a bit high because of expansion of service centres, which is going on. So, once we get we start getting income from service centres, which we got in Q4. Q1, it will ramp up further. Q2, it will be further ramped up. So that will nullify the higher other expenses.

Explains that fluctuating steel prices affect NSR and that higher 'other expenses' are temporary, linked to service centre expansion, and expected to normalize as these centres become profitable.

Asked by Akshat

2 min read 6 chapters

Detailed narrative

FY25 Performance and Growth Outlook

SG Mart concluded its first full year of operations in FY25, reporting a revenue of INR 5,800 crores, with both EBITDA and Net Profit at INR 103 crores. The company served 2,257 customers and sourced from 225 suppliers. Management expressed confidence in achieving an EBITDA of INR 200 crores in FY26 and INR 400 crores in FY27, targeting a minimum Return on Capital Employed (ROCE) of 25%.

Strategic Vertical Expansion and Volume Targets

The company's growth strategy is built on four verticals. B2B metal trading currently handles 50,000 tons per month and is projected to grow by 50% in FY26. The service centre business, with five operational centres, plans to add five more, with each centre now capable of processing 8,000-10,000 tons monthly. The solar structures vertical has secured 50,000 tons of order visibility for FY26, expected to double in FY27, and the distribution business aims for 50% growth in TMT volume (to 180,000 tons) and INR 1,000 crores in non-TMT revenue for FY26.

Working Capital and Capital Expenditure Management

SG Mart experienced a temporary stretch in its working capital cycle to 30 days in March 2025 due to advance payments to steel mills and high sales volumes, but anticipates normalization to 10-15 days by June 2025. The company has board approval for INR 600 crores in capex over the next 3-5 years, with an annual spend of INR 150-200 crores primarily for service centres. All capex will be 100% funded through internal cash flows, with minimal investment required for the solar business.

Shift to Royalty Model in TMT Distribution

The TMT distribution business has transitioned from a revenue-based model to a royalty-based model. Under this new model, SG Mart charges a royalty of INR 500 per ton, which is expected to increase to INR 750-1,000 per ton as the brand strengthens. This shift aims to improve EBITDA margins, with an eventual target of 4-5% for the TMT segment, by leveraging partners' utilization and brand premium without booking material costs or revenue.

Profitability and Margin Dynamics

While the overall EBITDA for FY25 was INR 103 crores, the company provided specific EBITDA per ton targets for its segments: INR 750-1,000 for B2B metal trading and INR 2,000 for service centres. The non-TMT distribution business is expected to achieve a 2-2.5% EBITDA margin. Management noted that rising interest costs, due to the utilization of fixed deposit funds, impacted Q4 margins, but assured that PAT growth would align with EBITDA growth in the future.

Market Positioning and Future Initiatives

SG Mart positions itself as a major trading house, focusing on long-term tie-ups with domestic steel mills to capitalize on increasing Indian steel capacities. The company is also exploring new innovative products for the solar sector and plans to expand its service centre network to key locations like Jaipur, Kanpur, and Indore. An NSE listing process is currently underway, which is expected to enhance market visibility and investor participation.

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