Gallantt Ispat Q1 FY27 earnings call

The domestic steel industry experienced a seasonally softer Q1 FY27 due to the monsoon, leading to slowed construction activity and a correction in long product prices, particularly TMT and rebar. Despite this, Gallantt Ispat Limited reported revenue from operations of ₹1,146 crores, a 1.6% increase year-on-year, though a 5% sequential decline. The company's EBITDA stood at ₹203 crores, down 20.1% YoY but only 2.9% QoQ, with an EBITDA margin of 18%, demonstrating resilience in a challenging environment.

TMT bar sales volumes were approximately 192,000 tonnes in Q1 FY27, remaining broadly flat year-on-year but declining 8% sequentially from a strong Q4 FY26. In contrast, billet volumes showed robust growth, increasing 13% year-on-year and 38% sequentially. The utilization of the rolling mill unit at the Kutch facility was 66%, trailing Gorakhpur's 93%, and is a key focus area for improvement in Q2 FY27.

Raw material costs rose 9% year-on-year, outpacing revenue growth, primarily driven by higher coal prices and geopolitical tensions affecting global freight. The planned annual maintenance shutdown of the pellet plant necessitated procuring iron ore from the open market at higher costs. However, the company's integrated model, from pellet to TMT, provided a structural cushion against these cost pressures, helping sustain margins sequentially. Employee costs increased 24% YoY due to the full-year impact of the DRI plant and strengthening of senior leadership.

EBITDA margin for Q1 FY27 was 18%, broadly in line with Q4 FY26's 17.3%, though lower than Q1 FY26's 23%. EBITDA per ton was ₹8,787. Management expressed confidence in the sustainability of these margins, attributing it to the end-to-end integration and a net debt-free balance sheet, which reduces financial burden. The upcoming operationalization of renewable energy initiatives and captive iron ore mines are expected to further improve margins.

Gallantt Ispat is executing a multi-year ₹3,000 crores capex program, with ₹137 crores spent in Q1 FY27, entirely funded through internal accruals. This program includes capacity expansion from 1 million to 1.23 million tonnes, expected to commission in H2 FY27. Approximately half of the capex is allocated to mining development for three iron ore mines (two in UP, one in Rajasthan), targeting operationalization by FY28. Additionally, 85 MW of solar generation is being installed, with 18 MW in Gujarat expected by Q2 FY27 and 60 MW in Gorakhpur by Q4 FY27.

For its Gorakhpur unit, the company sources iron ore from Odisha Mineral Corporation, Madhya Pradesh, and Lloyds from Maharashtra, focusing on lower phosphorus content. Coal for the power plant is 100% from Coal India linkages, while DRI uses 60-70% Indian coal and the rest from imported South Africa. The Gujarat unit sources Indonesian coal from Mundra and Kandla ports, with local lignite coal blended for cost control. Captive iron ore blocks in UP and Rajasthan are undergoing exploration, with UP expected to complete in 2-3 months, aiming for FY28 operationalization.

Gallantt Ispat maintains a strong market share of over 25% in Uttar Pradesh. The company has invested significantly in marketing and branding initiatives over the past four years, engaging celebrities like Ajay Devgn and recently Janhvi Kapoor. These efforts have contributed to better demand and realization scenarios, supporting capacity enhancements, particularly at the Gorakhpur unit, and are aimed at enhancing brand visibility across India and future market expansion.