S A I L Q1 FY27 earnings call

SAIL reported a strong Q1 FY27 with EBITDA growing over 50% to INR4,356 crores and PAT increasing by approximately 150% to INR1,636 crores compared to the previous year. The EBITDA margin stood at 16.7%, marking it as the best since FY22, and EBITDA per tonne crossed INR10,000, reaching INR10,464. This robust performance was achieved despite a slight decline in crude steel production and sales volume due to advanced capital repairs.

Crude steel production for Q1 FY27 was 4.8 million tonnes, a slight reduction from 4.9 million tonnes CPLY, and sales volume fell by 7-8% to 4.2 million tonnes. This was attributed to the company strategically advancing major capital repairs at IISCO, Durgapur, and Bokaro Steel Plants during the quarter. These repairs, while impacting Q1 volumes, are expected to free up capacity for better production in subsequent quarters and contribute to future profitability.

Despite rising input costs, particularly a INR3,100 per tonne increase in imported coking coal prices (INR21,300 in Q1 FY27 vs INR18,100 in Q4 FY26), SAIL improved profitability through operational efficiencies and financial management. The cost of debt was reduced to 6.24% from 6.8% CPLY, saving INR100 crores. Management expects a further INR1,000-2,000 per tonne reduction in imported coal costs from August onwards and aims for a INR2,000 per tonne cost reduction from current operations in FY27.

SAIL spent INR2,575 crores on capex in Q1 FY27 and plans to invest INR15,000 crores for the full FY27. The company projects increasing capex to over INR20,000 crores next year and INR25,000-26,000 crores over the next 4-5 years for ongoing expansion. A TMT bar mill at Durgapur is expected to produce 0.8-0.9 million tonnes by Sep-Dec 2027, enhancing value-added product capabilities.

The company's coking coal mix consists of 85% imported and 15% indigenous, with about 5% from its own mines. Indigenous coal, priced at INR13,100 per tonne in Q1 FY27, offers a significant cost advantage over imported coal (INR21,300 per tonne). Production from Tasra mines is expected to commence by December, further increasing the share of cost-effective indigenous coal. Efforts are also underway to sell 32 million tonnes of sub-grade ore fines inventory, with a target of 3 million tonnes for FY27.

SAIL's debt management efforts led to a reduction in its debt-equity ratio to 0.36 by June 30, 2026, from 0.38-0.39 at the start of the year. Gross debt stood at INR21,729 crores on June 30, 2026, and has further reduced to INR21,400 crores subsequently. The company is committed to reducing working capital borrowings and inventory to improve cash flows.

The company is actively working to improve its product mix, with finished steel increasing from 86% to 89% of total sales. The share of semis in the product mix decreased from 14% to 11% in Q1 FY27, as more semis are being converted into finished goods. This strategy aims to enhance profitability by focusing on higher-value products.