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SG Mart Limited — Q1 FY26 earnings call

Call held 28 Jul 2025

Company page: SG Mart share price, financials & guidance record

Management summary

SG Mart reported a challenging Q1 FY26 primarily due to steel supply shortages and seasonal slowdowns, leading to a 55% QoQ decline in B2B trading volumes. Despite this, the company improved its EBITDA margin to over 3% and achieved an annualized ROCE of 21% by focusing on value-added products and efficient working capital management. The renewable business shows strong potential with a ₹285 crore order book, and the company maintains its FY26 EBITDA guidance of ₹200 crores, anticipating a ramp-up from Q2 onwards.

Highlights

EBITDA margin increased to over 3% despite volume decline (Page 5).
Working capital days reduced to 15 days, improving capital efficiency (Page 5).
Annualized ROCE of 21%, with a target to improve to over 25% (Page 5).
Renewable business secured an order book of ₹285 crores, with full-year business expected at ₹400-500 crores (Page 5).
Service Center business achieved a monthly run rate of 40,000 tons from 5 operational centers (Page 4).

Concerns

B2B trading volume missed due to poor steel availability, with top 3 producers' Q1 volumes down 11% QoQ (Page 4).
B2B trading segment volumes degrew by 55% QoQ (Page 13).
Analyst concern regarding consistent reduction in promoter holdings (Page 6).
Increasing finance costs are impacting PAT growth (Page 7).

Key financials

2 periods

Headline

EBITDA Margin
3%
ROCE (annualized)
21%
Working Capital Days
15 days
Cash on Balance Sheet
₹1,000 Cr

Q1

EBITDA
₹35 Cr

What they filed

Q1 FY27: revenue up 14.4%, net profit up 43.8% against the same quarter last year.

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	1,793	1,335	1,595	1,144	1,704 −5%	1,644 +23%	1,823 +14%	1,309 +14%
Expenses	1,778	1,313	1,558	1,108	1,676	1,628	1,767	1,250
EBITDA	15	22	37	36	28 +87%	17 −23%	56 +51%	59 +64%
Margin	1%	2%	2%	3%	2%	1%	3%	5%
Other income	20	26	20	20	19	18	12	10
Interest	13	10	14	12	12	17	10	6
Depreciation	0	0	1	2	2	4	4	4
Profit before tax	22	37	42	43	33 +50%	14 −62%	54 +29%	58 +35%
Tax rate	26%	25%	21%	24%	20%	21%	23%	22%
Net profit	16	28	33	32	27 +69%	11 −61%	41 +24%	46 +44%
EPS	1.42	2.50	2.95	2.56	2.11	0.85	3.29	3.62

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

Service Center
50% Revenue Contribution60% EBITDA Contribution40,000 tons Monthly Run Rate3.5% EBITDA Margin
TMT Business
39,000 tons Q1 Volume33,000 tons Q4 Volume
Distribution (non-TMT)
₹196 Cr Q1 Revenue₹125 Cr Q4 Revenue
Renewable Business
₹285 Cr Order Book
B2B Metal Trading
-55% Volume Decline

Capital allocation

high confidence

Capex ₹150 Cr generating similar cash flows also on an annual basis
- opening of warehouses and service centers
We now have almost Rs. 1,000 crores worth of cash on our balance sheet, for which we believe that the mainly deployment will be for opening of warehouses and service centers. This will only be like Rs. 150 crores, Rs. 200 crores worth of annual CAPEX. We don't anticipate more than that. And the good part is that we are generating similar cash flows also on an annual basis.
Debt Debt disclosed

So, like last year, we did around Rs. 100 Cr PAT, right? So, we will be doing Rs. 200 Cr PAT this year? Yes, you can do the math, right? Again, I am saying that the EBITDA growth will flow down to the PAT growth. The next question is from the line of Dev Jatia from Seven Rivers Holding. Please proceed. As there was no response from the participant, we would like to move to the next participant. The next question is from the line of Aryamaan Agarwal from Money Stories Asset Management. So, you had given a long-term guidance of Rs. 18,000 crores in 2027. So, one, are we still intact with that guidance? And also what sort of guidance are we looking at for this year? So, Aryamaan, see, in terms of value, right, it also depends on how the steel prices are behaving, which no one knows, right? Steel was like Rs. 48,000 per ton 6 months back. It went up to Rs. 52,000, Rs. 53,000 per ton. And now again, it may go back, it may go up, right? So, 5% to 10% price variation is a very normal thing in steel business, right?
Liquidity Cash ₹1,000 Cr Mainly deployment will be for opening of warehouses and service centers and to fund working capital as business scales up quickly.

We now have almost Rs. 1,000 crores worth of cash on our balance sheet, for which we believe that the mainly deployment will be for opening of warehouses and service centers. This will only be like Rs. 150 crores, Rs. 200 crores worth of annual CAPEX. We don't anticipate more than that. And the good part is that we are generating similar cash flows also on an annual basis. So, mainly the cash will be used to fund the working capital as we scale up our business quickly.

Guidance & targets

Profitability

EBITDA Profitability · FY26 · High confidence ₹200 crores

So, there is no risk to our FY '26 guidance of Rs. 200 crores worth of EBITDA. We are 100% maintaining this guidance.

— Anubhav Gupta
EBITDA Profitability · FY27 · High confidence ₹400 crores

So, that is why we are saying that FY '26, we shall do Rs. 200 crore EBITDA, which shall go up to Rs. 400 crores EBITDA in FY '27.

— Anubhav Gupta
ROCE Profitability · Full year (FY26) · High confidence Upward of 25%

This ROCE will improve further as our profits improve from Q2 onwards. So, full year ROCE shall be upward of 25%.

— Anubhav Gupta
PAT Growth Profitability · Full year (FY26) · High confidence Match EBITDA growth

So, that is why we believe that PAT growth will match EBITDA growth.

— Anubhav Gupta

Working Capital

Working Capital Days Working Capital · Ongoing · High confidence 15 days

Our working capital days came down to 15 days, which was always the sustainable case... and our working capital days is 15, which will remain at similar levels.

— Anubhav Gupta

Renewable Business

Business Volume Renewable Business · Full year (FY26) · High confidence ₹400-500 crores

So, for the full year, we shall be doing around Rs. 400 crores to Rs. 500 crores worth of business from renewable business.

— Anubhav Gupta
Order Booking Renewable Business · Next 1-2 months · Medium confidence Similar worth of orders

we expect similar worth of orders to book in next 1 to 2 months.

— Anubhav Gupta

TMT Business

Franchisee Partners TMT Business · Next 9 months · High confidence Add 3-4 more

And in next 9 months, we are going to add 3 more, maybe 4, one in West Bengal, second in Andhra Pradesh, third in Gujarat and fourth one to cater to the East market.

— Anubhav Gupta

Service Centers

New Owned Service Centers Service Centers · Every year · High confidence 5

We want to keep on adding 5 new service centers on our own, which will be owned by SG Mart, right, every year.

— Anubhav Gupta
New Leased Service Centers Service Centers · Ongoing · High confidence 2-4

And 2, 3, 4 service centers, we may add on lease basically as well, right, which will further improve our ROCE and it will help us with faster scalability

— Anubhav Gupta

Distribution Business (non-steel)

Business Volume Distribution Business (non-steel) · Full year (FY26) · High confidence ₹1,000 crore+

And yes, I think for full year, this should be like Rs. 1,000 crore plus business.

— Anubhav Gupta

What to watch in Q2 FY26

Overall business ramp-up

Q2 FY26 onwards

Current Q1 was slow with volume miss

Target Ramp-up from Q2 onwards, quarter-on-quarter improvement in revenue and EBITDA

Why it matters

Verifies management's confidence in overcoming Q1 challenges and achieving full-year guidance.

You shall see the ramp up from Q2 onward itself. And quarter-on-quarter, you will see improvement in the revenue and absolute EBITDA.

Risks & concerns

Poor steel availability
medium

There was a miss on B2B trading volume due to poor steel availability in India in the first 3 months of the current financial year.

Management acknowledged
Volatility in steel prices and business
medium

Steel is a volatile business, and trading is even more volatile, leading to quarter-on-quarter variations.

Management acknowledged
Increasing finance costs
medium

Analyst noted that finance cost is increasing significantly, which is hampering PAT growth, though management expects it to be offset by other income.

Analyst acknowledged
Competition from B2B digitalization startups and direct sales by steel mills
low

Management believes their business model and relationships with steel mills provide a unique competitive advantage.

Analyst downplayed
Seasonal slowdowns (pre-monsoon)
low

Q1 business was slow due to pre-monsoon period and halted construction activity.

Management acknowledged

Q&A highlights

6 direct

Consistency of guidance, missed targets, and promoter shareholding reduction. Partial

So, my question is, like, I want to understand from you, why are we giving so much aggressive targets every time to the investors and falling away behind of them if the environment is so much out of our control, particularly into the B2B metal trading side?

Directly challenges management's track record and the reliability of their guidance, also raises concern about promoter actions.

Asked by CA Garvit Goyal

Impact of increasing finance costs on PAT growth. Direct

So, see, the interest cost shall be also offset by the other income which comes, right? So, that is why we believe that PAT growth will match EBITDA growth.

Highlights a specific financial pressure point and management's strategy to mitigate it.

Asked by CA Garvit Goyal

Long-term revenue guidance and current year outlook. Partial

So, Aryamaan, see, in terms of value, right, it also depends on how the steel prices are behaving, which no one knows, right? Steel was like Rs. 48,000 per ton 6 months back. It went up to Rs. 52,000, Rs. 53,000 per ton. And now again, it may go back, it may go up, right? So, 5% to 10% price variation is a very normal thing in steel business, right?

Seeks clarity on long-term vision and current year's revenue outlook, revealing management's view on steel price volatility.

Asked by Aryamaan Agarwal

Increase in employee costs and headcount strategy. Direct

Second, in Quarter 1, we hired a team for renewable business, right? The benefits will start flowing in terms of revenue, EBITDA from Q2 onwards, as you would see. And of course, TMT business also got scaled up, so some addition to sales team there. So, this employee cost increase is in line with the scalability of these business verticals over the next 2 to 3 quarters.

Explains the rationale behind rising employee costs and links it to future growth in new business verticals.

Asked by Rajeev Thakkar

Impact of safeguard duty and steel availability. Direct

So, see, such incidents or such situations are always short-term basis, right? Yes, there was a safeguard duty which came in and imports stopped in the country. Then the steel mills went for maintenance shutdowns, right? That is why in Quarter 1, the sales volume of the top 3 steel producers was down 11%.

Addresses a macro factor that significantly impacted Q1 performance and management's view on its short-term nature.

Asked by Rajeev Thakkar

Logistics costs and efficiency of reduced service center count. Direct

It is there, but it is manageable. Customer is ready to pay that, right? So, just to conclude this, that we may have reduced the guidance to open a number of service centers, but the revenue, the volume from service centers will be similar, right?

Questions the cost structure and efficiency of the revised service center strategy, confirming manageable logistics costs.

Asked by Akshit Gupta

Discrepancy between B2B volume decline (55%) and overall steel supply reduction (10%). Direct

Number one is overall steel supply shortage. Like I said, Indian steel mills produced 11% lower steel what they produced in Q4 FY '25, right? So, this is the macro thing. Second is when there is short supply, right, when there is limited steel, we want to use that steel to do value addition, do some processing and sell it with higher profits, right? So, we diverted all the steel to our service centers, and we generated more profits on that.

Challenges management's explanation for the sharp volume decline in B2B, revealing a strategic shift to higher-margin service center business during supply crunch.

Asked by Dharmil Shah

Overall disappointment in Q1 performance and consistency of growth narrative. Direct

So, Chirag, let me be very, very clear. There is no reversal of thesis, okay? There is no change of the business model what we thought while starting SG Mart 2 years ago. The disappointment in volumes, right, and obviously, eventually it flows down to the profits as well, is only because of the short steel supply in Quarter 1, right?

Directly challenges the company's growth narrative and consistency, prompting management to reiterate their core strategy and explain the Q1 miss.

Asked by Chirag Shah

2 min read 5 chapters

Detailed narrative

Q1 FY26 Performance Impacted by Steel Supply Shortages

SG Mart experienced a challenging Q1 FY26, with B2B trading volumes significantly impacted by poor steel availability in India. The sales volume data for the top 3 steel producers declined by 11% quarter-on-quarter, leading to a 55% degrowth in SG Mart's B2B trading segment. Despite this, the company managed to increase its EBITDA margin to over 3% by strategically diverting available steel to higher-margin service centers and value-added processing, resulting in a Q1 EBITDA of ₹35 crores.

Strategic Focus on Service Centers and Renewable Business

The Service Center business demonstrated resilience, contributing 50% to revenue and 60% to EBITDA in Q1, with a monthly run rate of 40,000 tons and an EBITDA margin of 3.5-4%. SG Mart plans to add 5 new owned service centers annually and 2-4 leased centers for faster scalability, with two leased centers in Indore and Ahmedabad expected to contribute from Q2. The newly launched renewable business started strong with an order book of ₹285 crores, projecting ₹400-500 crores in business for FY26.

Financial Health and Capital Allocation

The company improved its working capital days to 15, contributing to an annualized ROCE of 21%, with a target to exceed 25% for the full year. SG Mart holds approximately ₹1,000 crores in cash on its balance sheet, which will primarily be deployed to fund working capital requirements and an annual CAPEX of ₹150-200 crores for new warehouses and service centers. Management expects PAT growth to match EBITDA growth, despite increasing finance costs, by leveraging other income.

Outlook and Confidence in FY26 Guidance

Despite the Q1 slowdown, management expressed high confidence in achieving its FY26 EBITDA guidance of ₹200 crores, projecting a ramp-up from Q2 onwards. This optimism is driven by the expected addition of 7 million tons of new steel capacity in H2 FY26 from major players like Jindal Steel and Power, which will alleviate supply constraints. The company also aims to add 3-4 more TMT franchisee partners in the next nine months and grow its non-steel distribution business to over ₹1,000 crores for the full year.

Addressing Analyst Concerns on Consistency and Competition

Management addressed analyst concerns regarding past guidance misses and promoter shareholding, attributing Q1's underperformance solely to short-term steel supply issues and seasonal factors, not a change in business model. They clarified that the B2B metal trading segment's higher volume decline was due to a strategic shift to higher-margin service center business during the supply crunch. They also downplayed competitive threats from B2B digitalization startups and direct sales by steel mills, emphasizing SG Mart's unique strengths in steel mill relationships and diverse business verticals.

This is an AI-generated summary of a publicly available earnings call transcript.

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