Detailed Narrative
Q4 & FY25 Performance Overview
Shankara Building Products demonstrated resilience in FY25, achieving a strong 30% volume growth and surpassing its annual target with 8.43 lakh tons, a 29% increase over the previous year. In Q4 FY25, steel volume grew 33% year-on-year to 2.58 lakh tons. Despite an approximate 11% decline in steel HRC prices over the past year, the company's EBITDA margins improved sequentially to 3.2% in Q4 FY25 from 2.84% in Q3 FY25, contributing to a 17% year-on-year growth in net profits to ₹28 crores.
Steel Division Performance and Challenges
The steel division's revenue was up 19% year-on-year in Q4 and 17% for the full year, driven by robust volume growth. However, the steel sector faced significant headwinds throughout FY25, with realizations declining meaningfully, which weighed on top-line growth and margins. The full-year EBITDA margin for FY25 stood at 3.02%, slightly lower than the previous year, primarily due to approximately ₹22 crores in inventory losses incurred up to 9MFY25. Management aims to stabilize steel margins closer to 3.5% for the coming year.
Non-Steel Vertical Expansion and Contribution
The non-steel vertical emerged as a key growth driver, posting a 20% year-on-year sales growth in Q4 and a 26% increase for the full year. For the first time, non-steel contributed over 10% (10.6%) to the total top line in FY25, with plumbing, fittings, and sanitary wear being key growth drivers. The company is targeting 25% plus growth in non-steel overall for the coming year, with plans to add around 4 to 5 new stores, particularly in Andhra Pradesh, Telangana, North Karnataka, Kerala, and Tamil Nadu.
E-commerce Initiative and Digital Growth
Shankara's e-commerce initiative, launched two years ago, is beginning to yield positive results. Sales from platforms like Amazon, Flipkart, and its own buildpro.store grew substantially from ₹5 crores in FY24 to ₹15 crores in FY25. While this figure is a small percentage of the overall business, management sees a huge opportunity in this vertical for future growth.
Demerger Implementation Progress
The demerger implementation achieved a significant milestone with shareholders' approval on February 12, 2025. The next key step is the NCLT meeting scheduled for May 26, 2025. Subject to regulatory approvals, the company anticipates concluding the entire demerger process by the first half of FY26. This development is considered pivotal for unlocking greater value and streamlining operations across both businesses.
Marketplace Model and Geographical Expansion
The company's strategy focuses on an omni-channel approach, aiming for higher volumetric growth across retail, non-retail, steel, and non-steel verticals. Expansion into new geographies, particularly Maharashtra, Gujarat, and Madhya Pradesh, has yielded encouraging results, while leadership in South India (both retail and non-retail) has been maintained. The extensive market presence through 124 stores and fulfillment centers positions Shankara to capture future opportunities.