Rhi Magnesita India Limited — Q3 FY26 earnings call

Call held 16 Feb 2026

Management summary

RHI Magnesita delivered a strong Q3 FY26, achieving record revenue and significant profit growth despite industry headwinds. The company's EBITDA margins expanded due to an improved product mix and operational efficiencies, leading to robust cash flow and a strengthened balance sheet with a net cash position. While facing challenges from overcapacity and raw material costs, strategic initiatives and government support for end-user sectors provide a cautiously optimistic outlook.

Highlights

  • Achieved record revenue of ₹1,092 crores in Q3 FY26, reflecting a 5.5% sequential growth over Q2 FY26 and an 8% year-on-year increase versus Q3 FY25.

  • Adjusted EBITDA reached ₹150 crores, marking a 36% improvement over the previous quarter and 14% year-on-year, with EBITDA margins improving to 13.7% from 10.7% in Q2 FY26.

  • Profit after tax for the quarter stood at ₹62 crores, up by 61% quarter-on-quarter and 29% year-on-year.

  • Recorded the highest ever operating cash flow at ₹289 crores in the current quarter, representing a 627% quarter-on-quarter increase, driven by strong EBITDA growth and disciplined working capital management.

  • Net debt reduced from ₹200 crores to a net cash position of ₹35 crores, improving the net debt to EBITDA ratio from 0.5x to minus 0.1x, marking the first time negative leverage post-acquisition.

  • Secured a new 4PRO contract with Tata Steel Ludhiana, expected to contribute ₹50-60 crores additional business in the next fiscal year.

Concerns

  • The refractories industry continues to face structural pressure from domestic overcapacity and oversupply of imported commoditized products.

  • Steel producers faced Chinese steel dumping, and the cement sector's margins were under strain with capacity utilization between 55% and 60%.

  • Margins were pressured by additional employee costs from new wage code implementation and higher costs due to rupee depreciation.

  • The industry is awaiting targeted interventions such as duty relief on key raw materials to enhance cost competitiveness.

Key financials

  1. Revenue ₹1,092 Cr +8%YoY
  2. EBITDA ₹150 Cr +14%YoY
  3. EBITDA Margin 13.7%
  4. Profit After Tax ₹62 Cr +29%YoY
  5. Operating Cash Flow ₹289 Cr +627%QoQ
  6. Average Realization ₹80,410/mt
  7. Capacity Utilization 64%

What they filed

Q1 FY27: revenue up 7.2%, net profit up 66.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue661 774 755 805 862 +30%903 +17%786 +4%863 +7%
EBITDA87 97 73 82 77 −11%114 +18%71 −3%120 +46%
Net profit49 56 36 47 41 −16%69 +23%-624 −1833%78 +66%
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

SegmentRevenue ShareMarket Share
Steel80%32%
Industrial (including Cement)20%—
Cement (specific)10%40%

Order book

medium confidence
Growth was driven by 4PRO wins across steel plants and project deliveries in iron making, with a new 4PRO contract signed for Tata Steel Ludhiana expected to contribute in the next fiscal.

Source: Prepared remarks

Capital allocation

high confidence
  • Debt Net ₹35 Cr · -0.1× EBITDA
    Between Q2 and Q3 FY '26, the net debt reduced from INR 200 crores to a net cash position of INR 35 crores. Hence, net debt to EBITDA ratio improved from 0.5x to minus 0.1x, which is the first time negative leverage post-acquisition.
  • Liquidity Cash ₹35 Cr The company has ample capacity to fund working capital requirements and pursue any growth investment without over-leveraging.
    We now have ample capacity to fund working capital requirements and pursue any growth investment without over-leveraging the company.

Guidance & targets

Profitability

  • Sustainable EBITDA Margin Profitability · Ongoing · Low confidence 14%-15%
    I still say I wanted to have a sustainable margin between 14%- 15%. This is our wishful thinking and not only thinking, we are working towards that with various processes and levers, actions in place.

    — Parmod Sagar, Chairman, MD and CEO

  • Q4 Margin Outlook Profitability · Q4 FY26 · Low confidence Slightly better
    Slightly better.

    — Azim Syed, CFO

Exports

  • Export Revenue Share Exports · Next fiscal · Medium confidence 11%-12%

    From 9%-10% today

    But at the same time, it will not be exponential because the export is only isostatic and slide gate refractory, which we call flow control. So flow control, tonnage-wise or revenue-wise is about 25% of your total revenue. So if it is 25% and if it increases, maybe from 9%, 10%, it will go to 11% or 11.5% or 12%. It will not be from 9%-10% to 20%,

    — Parmod Sagar, Chairman, MD and CEO

Order Inflow

  • Additional Business from Tata Steel Ludhiana 4PRO Order Inflow · Next fiscal · High confidence ₹50-60 crores
    So next fiscal, it will be upside. The business should be on the tune of, say, INR 50 crores to INR 60 crores additional business from that 4PRO business.

    — Parmod Sagar, Chairman, MD and CEO

Sustainability

  • Recycling Rate Sustainability · Coming year · High confidence beyond 20%

    From 19% today

    So our target is to take it beyond 20% in coming year.

    — Parmod Sagar, Chairman, MD and CEO

Product Portfolio

  • Domestic Production of Specialized Products Product Portfolio · Ongoing · Medium confidence Increase quarter-by-quarter
    So yes, our domestic production on this product portfolio will increase quarter-by-quarter. It will be a slow and steady increase because we need to have the product acceptability.

    — Azim Syed, CFO

Revenue Contribution

  • TRM/4PRO Revenue Contribution Revenue Contribution · Next year · Medium confidence 4%-5% upside

    From 40%-41% today

    Ending this year, probably will remain same. Next year, we should have an advantage of 4% to 5% upside, Arora and this Tata and all those things. So it will be up 4%-5%.

    — Parmod Sagar, Chairman, MD and CEO

Raw Material Costs

  • Raw Material Price Stability Raw Material Costs · Next 2-6 months · Medium confidence Status quo
    So I can say it can be a status quo for the next 2-3 months to maybe 4-6 months. There will not be a substantial delta, upside or downside.

    — Parmod Sagar, Chairman, MD and CEO

What to watch in Q4 FY26

4PRO Business Contribution (Tata Steel Ludhiana)

Next fiscal (FY27)
Current Not yet started (commissioning mid-year)
Target INR 50-60 crores additional business

Why it matters

This new contract represents a significant new revenue stream and validates the success of the 4PRO strategy.

So next fiscal, it will be upside. The business should be on the tune of, say, INR 50 crores to INR 60 crores additional business from that 4PRO business.

Risks & concerns

  • Industry overcapacity and oversupply of imported products

    medium

    Refractories sector faces structural pressure from domestic overcapacity and intensified competition from imported commoditized products.

    Management acknowledged

  • Challenges in steel and cement end markets

    medium

    Steel producers faced Chinese steel dumping, and the cement sector experienced margin strain due to low capacity utilization (55-60%).

    Management acknowledged

  • Lack of duty relief on key raw materials

    medium

    The industry is awaiting targeted government interventions like duty relief on raw materials to enhance cost competitiveness.

    Management acknowledged

  • High competitive intensity

    medium

    India remains a key market for global refractory suppliers with high competitive intensity, leading some competitors to grab orders at any price.

    Management acknowledged

  • Margin pressure from wage code and rupee depreciation

    low

    Additional employee costs from new wage code and rupee depreciation pressured margins, though offset by operational excellence.

    Management acknowledged

Q&A highlights

5 direct, 1 evasive
Quantification of one-time bonus received Evasive
We don't give those outlooks for the current performance. We don't separate out that performance purely because it's very difficult even for us also to model this because it has multiple factors.

Analyst sought specific financial detail on a one-time gain, but management declined to disclose, citing complexity and variability.

Asked by Garvita Jain

Sustainable realization per ton and price increase Direct
So I think anything between 76 to 80 should be the numbers are healthy, numbers without any performance bonuses, etc.

Management provided a range for sustainable realization per ton, clarifying the impact of performance bonuses on reported figures.

Asked by Rajesh Majumdar

Q4 margin outlook Partial
We expect, it should be on similar lines, if not better. We have to be a bit cautious because of market conditions.

Analyst inquired about future profitability, and management gave a cautious, directional outlook for Q4 margins.

Asked by Mayank Bhandari

Strategy shift from steel to cement/iron and current market shares Direct
Now coming to the market share, we have about 32% market share in the steel side. And on the cement side, we have close to about 40%-41% of market share in the business to answer your question.

Management clarified the strategic rationale for diversifying into cement and iron, providing specific market share data for key segments.

Asked by Abinash Swamenathan

Drivers of margin improvement (internal efficiencies vs. raw material softening) Direct
in the previous quarter, we had low-margin cement order. So you had a realization impact. This time, you don't have the low-margin cement order. Second, we had more converters, RH degassers that we sold in the current quarter. So you had a product mix improvement as well.

Management detailed the specific factors contributing to margin expansion, emphasizing product mix improvement and operational excellence over raw material benefits.

Asked by Pathanjali Srinivasan

Long-term target for domestic production vs. traded goods Partial
So yes, our domestic production on this product portfolio will increase quarter-by-quarter. It will be a slow and steady increase because we need to have the product acceptability.

Analyst sought a specific long-term target for localization, but management provided a qualitative explanation of the gradual process without a numerical goal.

Asked by Pathanjali Srinivasan

Outlook on raw material cost advantage Direct
We don't see now because alumina prices are at its bottom. So it can go up, it will not go down further. Magnesia, if we talk about, it has a bit of upside, and I don't see it will go further up. So I can say it can be a status quo for the next 2-3 months to maybe 4-6 months.

Management provided a clear short-term outlook on raw material prices, indicating stability rather than further cost advantages.

Asked by Ashish Kejriwal

Promoters buying Dalmia stake or inorganic expansion plans Direct
As of now, nothing is on the table. We have not discussed anything at length whether we want to buy back those shares or not... And about the second part, what we are saying is inorganic that also we don't see in '26.

Management explicitly stated no current plans for M&A or share buybacks, providing clarity on capital allocation strategy for FY26.

Asked by Ashish Kejriwal

3 min read 7 chapters

Detailed narrative

Strong Q3 FY26 Performance Amidst Macroeconomic Headwinds

RHI Magnesita reported a record revenue of ₹1,092 crores in Q3 FY26, demonstrating a 5.5% sequential growth over Q2 FY26 and an 8% year-on-year increase. This performance was achieved despite prevailing macroeconomic challenges, underscoring the company's resilience. EBITDA grew significantly by 36% QoQ and 14% YoY to ₹150 crores, with margins expanding to 13.7% from 10.7% in the previous quarter. Profit after tax also saw a substantial increase of 61% QoQ and 29% YoY, reaching ₹62 crores.

Profitability Boosted by Product Mix and Operational Excellence

The notable improvement in EBITDA margins was primarily attributed to a favorable product mix, shifting away from lower-margin cement orders towards higher-margin OEM orders, including converters and RH degassers. Average realization per metric ton increased to ₹80,410 in Q3 FY26 from ₹73,237 in Q2 FY26, partly due to one-time performance bonuses from guarantee clauses. The company also implemented operational excellence programs focused on better manpower planning, machine-level loading, and tighter control over discretionary spends, further contributing to cost optimization.

Robust Cash Flow Generation and Strengthened Balance Sheet

The quarter saw the highest ever operating cash flow at ₹289 crores, representing an impressive 627% quarter-on-quarter increase. This strong cash generation, combined with disciplined working capital management, particularly tighter inventory control and improved collections, significantly bolstered the company's financial position. Net debt reduced from ₹200 crores in Q2 FY26 to a net cash position of ₹35 crores in Q3 FY26, leading to a net debt to EBITDA ratio improvement from 0.5x to minus 0.1x, a first since the acquisition.

Industry Challenges and Government Support for End Markets

The refractories industry continues to face structural pressures from domestic overcapacity and an oversupply of imported commoditized products. Key end markets like steel and cement are also challenged, with steel producers contending with Chinese steel dumping and the cement sector operating at 55-60% capacity utilization. However, government initiatives such as a 10% capex growth, the Construction and Infrastructure Equipment Scheme, and a ₹20,000 crores carbon capture fund are expected to stimulate demand for steel and cement, creating structural opportunities for refractory suppliers.

Strategic Focus on 4PRO, Iron Making, and HPI Expansion

RHI Magnesita's strategic initiatives are gaining traction, focusing on strengthening the core business and driving sustainable long-term growth. Key areas include expanding the 4PRO (total refractory management with sustainability) footprint across cement, steel, and iron making sectors. The company is also enhancing its presence in coke oven and blast furnace areas with new DRI products and solidifying its Hydrocarbon Processing Industry (HPI) business. A new 4PRO contract with Tata Steel Ludhiana is anticipated to add ₹50-60 crores in additional business in the next fiscal year.

Localization and Recycling Initiatives for Cost Competitiveness

The company is committed to localizing the production of specialized products, particularly for cement and high-end technical solutions, to meet local market demand and reduce reliance on imports. This gradual increase in domestic production is expected to improve margins and reduce transit times. Furthermore, RHI Magnesita aims to increase its recycling rate beyond the current 19% to over 20% in the coming year, aligning with circular economy initiatives and contributing to cost optimization.

Market Leadership and Cautious Optimism for Future

RHI Magnesita maintains its market leadership with approximately 32% share in the steel sector and 40-41% in the cement sector. Despite high competitive intensity and industry challenges, management expressed cautious optimism for the future. The company's outlook is supported by a robust order book, ongoing pricing initiatives, and efforts in input cost optimization. The average realization of ₹76,000-80,000 per ton is considered sustainable in the short term.

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