S A I L

SAIL delivered a robust H1 FY26, with sales volume growing 17% YoY to 9.46 million tons and revenue from operations increasing 8% YoY to Rs.52,625 crores. This strong performance translated into a 32% YoY rise in PAT to Rs.1,112 crores, and PBT increased 28% YoY to Rs.1,443 crores. The company also significantly reduced its borrowings by over Rs.3,000 crores during the half-year, with total borrowings on September 30, 2025, down by Rs.3,384 crores YoY, leading to a significant reduction in interest burden.

The Indian steel industry experienced robust demand in H1 FY26, with consumption growing over 8% YoY. However, crude steel production outpaced demand, growing over 12% YoY, leading to an oversupply situation and pressure on pricing. While imports declined and exports increased, India remained a net importer in H1 FY26. Management anticipates an improvement in demand and pricing in Q3 and Q4 as the monsoon season ends and festive demand picks up, which should ease^📎 the pressure on the price front.

Q2 FY26 saw a QoQ reduction in OPM due to lower sales realizations and capital repairs, including issues at the Bokaro steel melting shop. However, management confirmed that all capital repairs are now complete and the Bokaro issues are resolved. This is expected to lead to improved production volumes and cost reduction in Q3 and Q4, contributing to better profitability. The company is also aggressively liquidating by-products and scrap through frequent auctions, which contributed to better realizations in Q2, with Rs.1,140 crores generated from scrap and by-products in Q2, up from Rs.869 crores in Q1.

SAIL is embarking on significant CAPEX plans, with an FY26 target of over Rs.7,500 crores, increasing to over Rs.10,000 crores from FY26-27 onwards. A major part of this is the 4.5 million tons expansion at IISCO, costing approximately Rs.36,000 crores, with order placements largely on track for major packages. Additionally, de-bottlenecking projects are underway at Durgapur, Bhilai, and RSP. The company plans to fund this CAPEX with a 50-50 mix of debt and internal accruals, while aiming to reduce its non-IndAS debt-equity ratio from ~0.46 to 0.3-0.35 or 0.4 by year-end to create headroom for future borrowings.

The value-added product mix improved from 55% in Q1 to 57% in Q2, with a target to reach over 60% in Q3 and Q4. Management noted that while average Net Sales Realization (NSR) declined by Rs.2,700 between Q1 (Rs.51,700) and Q2 (Rs.49,000), this was partly offset by higher sales of by-products and scrap. The company expects realizations to improve from November/December, driven by market recovery and continued aggressive liquidation of non-core inventory, with current October long product prices at Rs.49,900 and flat products at Rs.46,600.

Imported coal prices are expected to be higher in Q3, potentially reaching Rs.18,000-18,100 per ton from Rs.17,300 in October, primarily due to rupee depreciation against the USD and an increase in indices from 187 to 194. This implies an expected $6-8 increase in coal cost. However, management believes that if coal prices rise, steel prices will also likely increase, balancing the impact on margins and contributing to overall profitability.