Detailed Narrative
Energy Segment Becomes the Primary Earnings Engine
The acquisition of SKS Power (IPP) has fundamentally transformed Sarda Energy's financial profile. In Q1 FY26, the energy segment contributed significantly to the record ₹627 crore EBITDA, with the IPP thermal plant operating at a high PLF of 90.21%. Management expects the power business to generate approximately ₹1,000 crores in EBITDA annually, based on an estimated EBITDA of ₹2.00 per unit across ~450-500 crore units of combined thermal and hydro generation.
Strategic Pivot to Open Market Power Sales
The company strategically terminated its long-term PPA with CSPDCL for the 113-MW hydropower project. This move was driven by declining cost-plus tariffs and high transmission costs borne by the company. By selling 100% of this power in the open market, Sarda aims to capture higher realizations over the long term⏳, despite current realizations being similar to previous PPA levels (~₹5 per unit).
Aggressive Mining Expansion to Support Power Growth
Mining operations are being scaled to ensure fuel security for the expanded power portfolio. The Gare Palma IV/7 mine is expected to receive final approval to increase capacity to 1.8 million tons this quarter, with plans to eventually reach 3 million tons to support SKS Power. Additionally, the Shahpur West mine is on track for production by the end of FY27, and the Indonesian coal mine is targeting 1 million tons in the near future.
Robust Deleveraging and Liquidity Position
Sarda Energy has utilized its strong cash flows to aggressively reduce debt, with net consolidated debt falling to ₹1,000 crores from ₹1,600 crores. With ₹1,700 crores in cash and liquid investments, the company is well-positioned to fund its ₹500-1,000 crore annual capex plan through internal accruals. The net debt-to-EBITDA ratio remains well below 1, providing significant financial flexibility.
Steel Segment Resilience Amidst Sectoral Headwinds
Despite global pressure🌐 from Chinese exports and domestic monsoon seasonality, the steel segment maintained an 18% EBITDA margin in Q1. While realizations were subdued, volume growth of 22% YoY helped offset pricing pressure. Management remains focused on operational efficiencies rather than capacity expansion in steel, prioritizing the higher-margin energy and minerals sectors for future growth.