Skip to content

    Sarthak Metals Limited

    SMLT
    Capital Goods·28 May 2025
    Management Summary

    Sarthak Metals reported a challenging Q4 FY25 with overall revenue and profit declines, largely due to the strategic exit from the unprofitable aluminium flipping coil business. However, the core cored wire business showed robust growth, and the new welding division demonstrated strong quarter-on-quarter expansion with significant new approvals. The company also made strides in its biotechnology venture, launching its pilot facility and achieving promising early results, while maintaining a strong debt-free balance sheet.

    Highlights

    5

    • Cored wire business revenue rose 26% year-on-year to ₹36.5 crore in Q4 FY25, with realizations increasing by 3% and volume growth of 16%.

    • The welding division achieved revenues of ₹2.4 crore in Q4 FY25, with volumes growing an impressive 39% quarter-on-quarter to 201 tonnes.

    • Significant approvals were secured from RDSO, IBR, IRS, Boiler inspectorate, and Thermax, opening up various industrial applications for flux-cored wires.

    • The biotechnology Solid State Fermentation (SSF) pilot facility commenced its first production batch in May 2025, demonstrating a 10-fold activity increase and reduced fermentation cycle from 6 to 4 days.

    • The company maintains a robust financial position with a debt-free balance sheet and a cash reserve of approximately ₹29 crore.

    Concerns

    5

    • Overall revenue declined 32% year-on-year to approximately ₹48 crore in Q4 FY25, primarily due to the strategic exit from the unprofitable aluminium flipping coil business.

    • EBITDA (excluding other income and extraordinary items) declined 48% year-on-year to ₹1.36 crore, with EBITDA margins compressing to 2.84% from 4.67% in the preceding quarter.

    • Profit After Tax (PAT) for the quarter was ₹0.67 crore, representing a 61% decline year-on-year.

    • The aluminium flipping coil business revenue declined by 80% year-on-year to ₹6.4 crore, with volumes falling 84% to 253 tonnes.

    • Management anticipates only single-digit growth for cored wires due to moderate steel production and lack of a rush in production from steel companies.

    What Changed2

    vs Q2 FY26

    Risks discussed3 → 5 (+2)Q&A highlights8 → 6 (-2)

    Key financials

    Single quarter

    04 metrics
    1. 01Revenue₹48 Cr-32%YoY
    2. 02EBITDA₹1.36 Cr-48%YoY
    3. 03EBITDA Margin2.8%-39.2%QoQ
    4. 04PAT₹0.67 Cr-61%YoY

    Segment breakdown

    • Cored Wire Business₹36.5 Cr80.6%
    • Aluminium Flipping Coil Business₹6.4 Cr14.1%
    • Welding Division (Flux Cored Wire)₹2.4 Cr5.3%
    Donut· Share of Revenue

    Order Book

    medium confidence

    "The company is executing some export orders and receiving inquiries, but its primary focus remains on the domestic market. They are well-positioned with continuous reorders from existing dealers and are expanding their dealer network."

    Source:
    Q&A

    Capital allocation

    3
    high confidence
    CategoryHeadline
    Capex

    ₹3 crores

    Debt

    Debt disclosed

    Liquidity

    Cash ₹29 crores

    Guidance & targets

    5
    CategoryTargetPriority
    Sales
    Welding Division Annual Sales
    ₹25 crore
    		High
    Volume
    Welding Division Monthly Sales Volume
    100 tonnes
    		High
    Capacity
    Biotechnology Batch Capacity
    50 kg
    		Medium
    Efficiency
    Biotechnology Fermentation Cycle Duration
    3 days
    		Medium
    Capex
    Flux Cored Wire Production Lines
    ₹3 crore
    		High

    Aluminium Flipping Coil Business Outlook

    by end of June 2025
    CurrentRevenue declined 80% YoY; operations scaled down.
    TargetGreater clarity on business outlook.

    Why it matters

    This will determine the future strategy and potential impact on overall revenue and profitability from a segment that was strategically scaled down.

    We expect greater clarity on the aluminium business outlook by the end of June 2025, and we remain committed to making strategic decisions in the best interest of our long-term growth.

    How to verify

    detailed_narrative[title='Aluminium Flipping Coil Business Challenges']

    Risks & concerns

    5
    RiskSeverity

    Global trade uncertainties and unpredictable tariff policies

    These factors have created challenges for many industries, including Sarthak Metals. — Management acknowledged

    medium

    Slowdown in the steel sector

    The slowdown in the steel sector directly affects the company's sales, impacting its core business. — Management acknowledged

    medium

    Challenges in aluminium flipping coil business

    The business faces major issues with price mismatch, unethical environment, rising imports, and pressure on domestic manufacturers, leading to an 80% revenue decline. — Management acknowledged

    high

    Competition in export markets for cored wires

    While exports offer better pricing power, competition exists, making it a 'wait and watch situation'. — Management acknowledged

    low

    Moderate steel production limiting cored wire growth

    Despite steel companies' CapEx, a lack of rush in production suggests only single-digit growth for cored wires. — Management acknowledged

    medium

    Q&A highlights

    6

    “We are already gaining a lot of traction and having said that, the new approvals that we have just received, we are hoping to gain a lot of traction in this space and this year should be exciting. And as we have set a target of ₹25 crore in 2 years, I think we are very comfortable in achieving that.”

    Provides specific revenue targets and confidence for the new welding business segment.

    3 min read6 chapters

    Detailed Narrative

    01

    Q4 FY25 Financial Performance Overview

    Sarthak Metals reported a revenue of approximately ₹48 crore for Q4 FY25, reflecting a 9% quarter-on-quarter growth but a significant 32% year-on-year decline. This YoY reduction was primarily due to the strategic decision to temporarily exit the unprofitable aluminium flipping coil business. EBITDA, excluding other income and extraordinary items📎, stood at ₹1.36 crore, a 48% YoY decline, resulting in EBITDA margins of 2.84% compared to 4.67% in the preceding quarter. Profit After Tax (PAT) for the quarter was ₹0.67 crore, marking a 61% YoY decline, largely attributed to the fall in revenue and scale of operations.

    02

    Core Cored Wire Business Performance

    The company's core cored wire business demonstrated robust growth in Q4 FY25, with revenue rising 26% year-on-year to ₹36.5 crore. Realizations for cored wire increased by 3% to ₹2.62 lakh per metric tonne, supported by a strong volume growth of 16%. Despite challenges in the broader steel consumables market from 2021-2023, the company's commitment to quality and innovation has led to a recovery in client trust and dependence.

    03

    Aluminium Flipping Coil Business Challenges and Strategic Exit

    The aluminium flipping coil business faced significant challenges in Q4 FY25, with revenue declining by 80% year-on-year to ₹6.4 crore and volumes falling 84% to 253 tonnes. This segment struggled with price mismatches, an unethical business environment, and pressure from rising imports and increased production capacity in the steel industry. The company has chosen to scale down operations to protect profitability and expects to provide greater clarity on the business outlook by the end of June 2025.

    04

    Expansion in Welding Division (Flux Cored Wire)

    Sarthak Metals' welding division, focusing on Flux Cored Wire, achieved revenues of ₹2.4 crore in Q4 FY25, with volumes growing an impressive 39% quarter-on-quarter to 201 tonnes. The company currently sells approximately 70 tonnes per month and plans to scale this to 100 tonnes in the coming months⏳, targeting annual sales of ₹25 crore within two years. Key approvals from RDSO (Indian Railways), IBR, IRS (shipping), Boiler inspectorate, and Thermax have significantly expanded market opportunities for their BIS-certified products.

    05

    New Venture into Biotechnology

    The company has made significant progress in its biotechnology venture, with the Solid State Fermentation (SSF) pilot facility becoming operational and commencing its first production batch in May 2025. Through a partnership with CSIR, Sarthak Metals is developing industrial bio-enzymes, having achieved a 10-fold activity increase and reduced the fermentation cycle from 6 to 4 days, with a goal of 3 days. An investment of ₹50 lakh has been made for the pilot R&D facility in Nagpur, marking a pioneering transition from the metal industry to biotechnology.

    06

    Financial Strength and Diversification Strategy

    Sarthak Metals maintains a robust financial position, characterized by a debt-free balance sheet and a cash reserve of approximately ₹29 crore, providing flexibility to navigate challenges and pursue growth. The company is actively implementing a comprehensive diversification strategy, venturing into flux-cored wire and biotechnology, to mitigate risks associated with the cyclical nature of its core steel-dependent business and achieve greater stability and long-term value creation.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.