Detailed Narrative
Q2 FY26 Financial Performance Highlights
Steelcast reported robust financial performance for Q2 FY26, with revenue from operations growing 42% year-on-year to ₹106.7 crore. EBITDA saw a significant 62% increase to ₹34.2 crore, leading to a 408 basis points expansion in EBITDA margin to 32.0%. Profit Before Tax (PBT) surged by 73% to ₹30.9 crore, and Profit After Tax (PAT) grew 75% to ₹23.2 crore, with PAT margin improving by 413 basis points to 21.8%.
Revised FY26 Outlook and Growth Strategy
The company revised its FY26 revenue growth guidance from an earlier 18-20% to approximately 12%, primarily due to tariff-related challenges between the US and India. Similarly, the capacity utilization guidance for FY26 was adjusted downwards from 53% to 48-49%. Despite these short-term headwinds, Steelcast maintains confidence in achieving a 20% CAGR over the next three years, building on a 24% CAGR achieved in the past four years.
Impact of US Tariffs and Geopolitical Landscape
Management noted that while their products remain competitively priced (5-13% cheaper than Chinese alternatives), US tariffs increase costs for the end customer, leading to short-term demand softness and an expected softer Q3. However, customers have indicated they will not change their supply chains and anticipate the US trade deal to conclude by November 26, which could lead to a stronger Q4 FY26. The company is also exploring opportunities in non-US markets like France and Brazil to bypass tariff issues.
Defense Segment Strategy and Export Update
Steelcast has reduced its active focus on the defense segment due to its bureaucratic and risky nature, opting to pursue only organic opportunities. Regarding defense exports, initial prototypes shipped in June were approved, and an additional 2,000 units were shipped in September, expected to reach customers by mid-November for further testing. The company anticipates reasonable business from this segment in Q4 FY26 or Q1 FY27.
Ground Engaging Tools (GET) Segment Expansion
The Ground Engaging Tools (GET) segment is identified as a key future growth area. Currently, sales in this segment are minuscule, but Steelcast aims for GET to contribute 5% of its total revenue over the next 2-3 years. Over a dozen new components are under development, with initial orders commencing in Q2 FY26, and a steady increase in sales is expected from Q3/Q4 onwards.
Capital Expenditure and Sustainability Initiatives
To support increased volume requirements for FY27, Steelcast plans to commission a 2.4 MW hybrid power project by June 30, 2026. This initiative is projected to generate annual savings of ₹3.5-4 crore, enhancing both cost efficiency and sustainability. The company's 'Other Financial Assets', primarily free reserves in fixed deposits, increased from ₹22.64 crore to ₹42.67 crore during the period.
Margin Outlook and Cost Management
The Q2 FY26 EBITDA margin of 32.0% included a one-time📎 gain of 500 basis points, or ₹5.37 crore, from lower input prices (₹2.86 crore), cost reduction measures (₹53 lakh), and foreign exchange gains (₹1.98 crore). Management expects sustainable EBITDA margins to be in the 25-26% range, with potential to reach 28-29% through ongoing cost savings from exchange rates and productivity improvements.
Long-Term Growth Ambitions and Market Diversification
Steelcast is actively derisking through geographic and sectoral diversification, expanding its footprint beyond the US to regions like Europe and Singapore, and developing new components. The company sees tremendous opportunities globally as OEMs seek to reduce dependence on China, with India becoming a more competitive sourcing destination. Steelcast aspires to cross ₹1,000 crore in turnover by FY29, assuming favorable conditions.