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    Vardhman Special Steels Q1 FY27 earnings call

    VSSL
    Capital Goods·23 Jul 2026
    Management Summary

    Vardhman Special Steels Limited reported a strong Q1 FY27 with a 12% YoY revenue increase to ₹486 crores and PAT more than doubling YoY to ₹41 crores. The company is progressing with its forging unit project with Aichi Steel and is diversifying into non-automotive steel. Despite current capacity constraints and rising input costs, management is optimistic about future profitability driven by cost reductions, higher volumes, and new projects.

    Highlights

    5

    • Revenue at ₹486 crores, up 12% YoY, driven by higher volumes (59,000 tons, up 6.5% YoY) and price revisions.

    • PAT for Q1 FY27 stood at ₹41 crores, significantly higher than ₹34 crores in the preceding quarter and ₹20 crores in the corresponding quarter last year.

    • EBITDA per ton for the quarter was ₹10,700, with management expecting to increase the range to ₹8,000-₹12,000 next year and ₹9,000-₹12,000 the year after.

    • The company signed a Technical Assistance Agreement for its forging unit with Aichi Steel, Japan, with the project cost expected to be lower than initially estimated (over 10% saving from ₹475 crores).

    • Strategic initiatives include stabilizing the new reheating furnace, commissioning new NDT and peeling lines by September/October 2026, and diversifying into non-automotive steel segments like die steels and railway steel.

    Concerns

    4

    • The company is currently capacity-constrained, finding it difficult to meet customer requirements and refusing orders, with current license capacity at 300,000 tons.

    • The new plant project cost is expected to increase due to reconfiguring for better carbon footprint, energy efficiency, and adding more testing lines, despite initial estimates being lower.

    • Raw material prices have increased globally, and the rupee has depreciated, which will impact the cost of specialty products.

    • Savings from the new solar plant will be lower than the first phase due to government rule changes requiring locally made cells, increasing panel costs.

    Key financials

    Single quarter

    05 metrics
    1. 01Sales Volume59,000 tons+6.5%YoY
    2. 02Revenue₹486 Cr+12%YoY
    3. 03EBITDA₹68 Cr
    4. 04EBITDA per ton₹10,700
    5. 05PAT₹41 Cr+105%YoY

    Order Book

    medium confidence

    "Management states they are completely booked out and refusing orders due to strong demand, but they do not have a system for long-term order book visibility as customers do not provide such orders."

    Source:
    Q&A

    Capital allocation

    2
    medium confidence
    CategoryHeadline
    Capex

    Capex disclosed

    Debt

    Debt disclosed

    Guidance & targets

    16
    CategoryTargetPriority
    Profitability
    EBITDA per ton range
    ₹8,000-₹12,000
    		High
    Profitability
    EBITDA per ton range (post new solar plant)
    ₹9,000 to ₹12,000
    		Medium
    Profitability
    Margins improvement
    improve majorly
    		Medium
    Capacity
    Solar plant capacity increase
    50%
    		Medium
    Capacity
    Environment Ministry approval for 360,000 tons melting capacity
    get approval
    		Medium
    Project Commissioning
    New plant commissioning
    on track
    		High
    Project Commissioning
    Forging project commissioning
    commissioned
    		High
    Project Commissioning
    New NDT line and peeling line commissioning
    commissioned
    		High
    Revenue
    Forging project revenue start
    start coming
    		Medium
    Volume
    FY27 sales volume
    255,000 tons
    		High
    Volume
    FY28 sales volume
    cross 270,000 tons
    		High
    Volume
    Sales target if EC approval comes
    290,000 tons
    		Medium
    Production
    Die steels production
    regular thing
    		Medium
    Production
    Ingot casting readiness
    ready
    		High
    Realizations
    Steel realizations
    higher prices
    		High
    Realizations
    Steel realizations
    same or a little bit higher or a little bit lower
    		Medium

    What to watch in Q2 FY27

    5

    Environment Ministry approval for 360,000 tons melting capacity

    next 3-4 months
    CurrentApplication made, awaiting approval
    TargetApproval received

    Why it matters

    Crucial for unlocking existing plant capacity and meeting strong customer demand.

    We have made the application. And so, in all probability in the next 3, 4 months, we should get the approval because the -- but again, you haven't got it until you have got it.

    Risks & concerns

    5
    RiskSeverity

    Capacity constraints limiting growth

    The company is currently operating at full license capacity (300,000 tons) and is unable to meet customer demand, leading to refusal of orders. — Management acknowledged

    high

    Increased project costs for new plant

    While initial estimates were lower, reconfiguring the new plant for enhanced carbon footprint, energy efficiency, and additional testing lines will increase the overall project cost. — Management acknowledged

    medium

    Raw material price volatility and currency depreciation

    Rising metal prices globally and the depreciation of the rupee are impacting the cost of specialty products, potentially affecting margins. — Management acknowledged

    medium

    Regulatory approval for capacity expansion

    The approval from the Environment Ministry to increase melting capacity to 360,000 tons is pending, and its timely receipt is crucial for future growth. — Management acknowledged

    medium

    Lower savings from new solar plant

    Government rule changes requiring locally made solar cells have increased panel costs, leading to lower expected savings from the new solar plant compared to the first phase. — Management acknowledged

    low

    Q&A highlights

    8

    “So, what we are finding is that our estimates of direct exports of steel were off. But more and more customers are wanting to buy from India, but they are wanting to buy components and forged products from India. So, a larger part of our business is -- a lot of our customers are exporting products to Europe and to the U.S. So, what we will start doing, I think, is -- I think a valid point, the question that you raised. From next quarter, we'll try to calculate, it will be an estimate that how much of our product is actually getting indirectly exported out of India as components.”

    Management acknowledged that their initial export estimates were incorrect and committed to tracking indirect exports, indicating a shift in understanding of their international market reach.

    asked by Shivam Singh

    2 min read5 chapters

    Detailed Narrative

    01

    Q1 FY27 Performance Overview

    Vardhman Special Steels Limited reported robust performance in Q1 FY27, with sales volumes reaching 59,000 tons, a 6.5% increase year-on-year. Revenue from operations grew by 12% year-on-year to ₹486 crores. The company achieved an EBITDA of ₹68 crores for the quarter, translating to an EBITDA per ton of ₹10,700. Net profit (PAT) significantly improved to ₹41 crores, up from ₹34 crores in the previous quarter and ₹20 crores in the corresponding quarter of the last year.

    02

    Strategic Capacity Expansion and New Projects

    The company is actively pursuing capacity expansion and new projects. It has applied to the Environment Ministry for approval to increase its melting capacity to 360,000 tons, with approval expected within the next 3-4 months. The new reheating furnace has been stabilized, and new NDT and peeling lines are scheduled for commissioning by September/October 2026, which will remove production bottlenecks. The new steel plant project remains on track for commissioning in FY29-FY30, with initial cost estimates for the forging unit being lower than anticipated, though overall project costs may increase due to scope enhancements.

    03

    Cost Optimization and Margin Improvement

    Management highlighted that cost reductions and increased volumes are contributing to improved profitability. The company's solar plant contributed 2.3 crore units of savings this quarter, covering 43% of total power consumption, with plans to increase solar capacity by 50% in 1-1.5 years. Despite rising metal prices and rupee depreciation, the company expects EBITDA per ton to improve, with a target range of ₹8,000-₹12,000 for next year and ₹9,000-₹12,000 for the year after. Further price revisions are expected in Q2 FY27.

    04

    Product Diversification and Export Strategy

    VSSL is diversifying its product portfolio beyond automotive steel into non-automotive segments such as die steels, railway steel, and windmill shafts, which are seen as a 'second engine of growth'. The company aims to have ingot casting ready by Q3 FY27 to support die steels production. While direct export volumes are currently small (7-8% of sales), the company acknowledges significant indirect exports through customers supplying components to Europe and the U.S. The partnership with Aichi Steel has facilitated global approvals, including for Toyota, and localization of imported steels for Maruti.

    05

    Demand Scenario and Funding Outlook

    Demand for the company's products is strong, with management stating they are 'completely booked out' and 'refusing orders' due to capacity constraints. Funding for the new projects is not a concern, with reasonable funding available, commitments from large shareholders (Vardhman Group and Aichi), and appetite from large institutions for capital raising. The Punjab government is also fully assured in its support for the new plant project.

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