Vardhman Special Steels Limited — Q3 FY26 earnings call

Call held 21 Jan 2026

Management summary

Vardhman Special Steels Limited reported a strong Q3 FY26 with a 33.33% YoY increase in EBITDA to INR 56 crores, driven by higher volumes and operational efficiencies, despite marginal revenue growth due to price declines. The company announced a significant INR 475 crore forging project and renewed its technical partnership with Aichi. Strategic capex for a new steel plant and operational improvements are underway, with the solar power project set for imminent commissioning, though rising raw material prices pose a near-term concern.

Highlights

  • Sales volume (rolled vs rolled) increased to 55,000 tons in Q3 FY26, up 4.56% YoY from 52,600 tons.

  • EBITDA for Q3 FY26 grew significantly by 33.33% YoY to INR 56 crores, compared to INR 42 crores in the corresponding quarter last year.

  • The company achieved its highest ever PAT for the 9-month period, reaching INR 88 crores, a 20.55% increase from INR 73 crores in 9M FY25.

  • Renewed technical assistance agreement with Aichi for another 3 years, and announced a new forging project with an investment of INR 475 crores.

  • Solar power project is nearing commissioning, expected to reduce carbon footprint and lead to cost savings.

Concerns

  • Revenue growth was marginal at 0.94% YoY, reaching INR 430 crores, primarily due to a decline in prices mitigating volume growth.

  • Raw material prices started rising in late December and early January, which is expected to impact the fourth quarter and first quarter of next year.

  • The company is currently capacity constrained, noting they could have sold an additional 5,000 tons in the full year if capacity was available.

Key financials

2 periods

Headline

  • Sales Volume (Rolled)
    55,000 tons
    YoY +4.6%
  • Revenue
    ₹430 Cr
    YoY +0.94%
  • EBITDA
    ₹56 Cr
    YoY +33.3%
  • EBITDA per ton (excl. non-operational income)
    ₹9,263

9M FY26

  • PAT
    ₹88 Cr
    YoY +20.5%

What they filed

Q1 FY27: revenue up 12.0%, net profit up 105.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue495 427 428 434 432 −13%431 +1%458 +7%486 +12%
EBITDA39 35 31 32 45 +15%43 +23%46 +48%58 +81%
Net profit26 21 20 20 35 +35%34 +62%34 +70%41 +105%
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.

Order book

low confidence
Management indicated strong demand, stating they could have sold an additional 5,000 tons if capacity was available, but did not provide a quantified order book.

Source: Inferred

Capital allocation

high confidence
  • Capex Capex disclosed
    • Forging project (land, buildings, second line) ₹475 Cr
    • New steel plant ₹2,000 Cr
    • Reheating furnace
    • Non-destructive testing line
    The investment proposed is INR475 crores, which includes land and buildings, some extra buildings will be made. But most of this capex would also take care of the second line, which will come in. So second line of forging, which will come in, will take lesser investment than this one. ... So once we do this INR2,000 crores capex, our incremental capex is never going to be in that kind of sizes.

Guidance & targets

Profitability

  • EBITDA per ton Profitability · FY26 · High confidence INR 7,000 to INR 10,000
    We have said that for this year, it was INR7,000 to INR 10,000, and from next year INR8,000 to INR11,000?

    — Sachit Jain

  • EBITDA per ton Profitability · FY27 onwards · High confidence INR 8,000 to INR 11,000
    This year INR7,000 to INR10,000, next year INR8,000 to INR11,000 per ton?

    — Sachit Jain

  • Aspirational EBITDA per ton Profitability · Long-term · Low confidence INR 12,000
    Aspirationally, we have said we'd like to target INR12,000, but we are not ready to reach that level as of now.

    — Sachit Jain

Capacity

  • Total finished steel production Capacity · Post-full commissioning · Medium confidence ~720,000 tons
    And once the capacities are fully commissioned, we will have about 8 lakh tons roughly of steel production, which will mean about 7,20,000 tons of finished steel.

    — Sachit Jain

  • New steel plant capacity Capacity · Post-commissioning (July '29) · High confidence 500,000 tons (expected to produce more)
    The new steel plant is expected to have a capacity of about 500,000 tons. It's going to we believe we'll be able to produce more from it than the stated capacity of 500,000 tons.

    — Sachit Jain

Sales Volume

  • Sales target Sales Volume · FY26 · High confidence 2,25,000 tons
    I say, our target is 2,25,000 tons for this year, and we hope to make that target.

    — Sachit Jain

  • Sales target Sales Volume · Next 3 years (before new steel plant) · High confidence 2,70,000 to 2,75,000 tons
    And in the next 3 years, we should reach our full potential of 2,70,000 tons before the new steel plant comes in. So from 2,15,000 this year, in the next 3 years, we will reach 2,70,000 to 2,75,000 tons.

    — Sachit Jain

Product Mix

  • Non-automotive steel segment share Product Mix · Next 10 years · Medium confidence 30%
    But in the next 10 years, we expect to be about 30% of our business, just as a rough guidance, I would say.

    — Sachit Jain

Project Timeline

  • Solar power commissioning Project Timeline · Q4 FY26 · High confidence Next week, 10 days
    So in the next week, 10 days, everything going well, we should have solar power coming in.

    — Sachit Jain

  • Reheating furnace commissioning Project Timeline · Q4 FY26 · High confidence March
    As far as Vardhman Steel is concerned itself, the reheating furnace capex is in progress. It is likely to get commissioned by March, and we should get the full benefits of it from mid-April onwards.

    — Sachit Jain

  • Non-destructive testing line capacity Project Timeline · Q1 FY27 · High confidence June or July '26
    Then this next bottleneck comes in terms of non-destructive testing line. That capacity is the next bottleneck, which will get broken by -- that constraint will get broken by June or July. So then even we can produce as much of the high-quality material, which needs to be tested on the non-destructive testing line. More and more customers are asking for that, and we will have the capacity by June or July latest of '26.

    — Sachit Jain

What to watch in Q4 FY26

Reheating furnace commissioning and benefits realization

Next quarter (Q4 FY26 / Q1 FY27)
Current In progress, expected commissioning by March 2026
Target Full benefits from mid-April/May 2026

Why it matters

Expected to improve yield, reduce job work outsourcing, and contribute to the bottom line.

As far as Vardhman Steel is concerned itself, the reheating furnace capex is in progress. It is likely to get commissioned by March, and we should get the full benefits of it from mid-April onwards. So let's say, May onwards, we'll get the full benefits of the new reheating furnace.

Risks & concerns

  • Raw material price volatility

    medium

    Raw material prices started rising in late December and early January, with an expected impact on Q4 FY26 and Q1 FY27 margins.

    Management acknowledged

  • Capacity constraints limiting sales

    medium

    The company noted it could have sold an additional 5,000 tons in the full year if it had the capacity, indicating demand outstrips current supply.

    Management acknowledged

  • Project execution delays for new facilities

    medium

    While projects are on track, management noted that commissioning timelines for new plants can vary from 1 to 5 years, introducing some uncertainty.

    Management acknowledged

  • Uncertainty in government policy for green steel

    low

    The timing of government mandates for green steel, which could unlock significant commercial gains, is difficult to predict.

    Management acknowledged

Q&A highlights

6 direct
Expected peak revenue, EBITDA margin, and ROC from the new forging capex Partial
Those details will come in. But once both the lines are established, we should be able to get a decent return on capital employed.

Analyst sought specific financial projections for a major new investment, but management deferred detailed figures, indicating they are still being worked out.

Asked by Amit Agicha

Sustainable EBITDA per ton for investors to model Direct
We have said that for this year, it was INR7,000 to INR 10,000, and from next year INR8,000 to INR11,000?

Management provided clear guidance on expected EBITDA per ton ranges for the current and upcoming fiscal years, crucial for financial modeling.

Asked by Amit Agicha

Revenue growth and sustainable margins once all capacities are commissioned Direct
So the sustainable margin as of now will remain at INR8,000 to INR11,000 a ton. Aspirationally, we have said we'd like to target INR12,000, but we are not ready to reach that level as of now. And once the capacities are fully commissioned, we will have about 8 lakh tons roughly of steel production, which will mean about 7,20,000 tons of finished steel.

Management outlined long-term capacity and production targets, along with aspirational margin levels, providing a vision for future growth.

Asked by Nishita

VSSL's market position in automotive special steel in India Direct
No, no, we are not. So size-wise, JSW would be bigger and Tata Steel is in fact, we are amongst the smallest players. ... OEM-wise, I would still say, as far as we would consider ourselves Number 2 players in terms of width of OEs.

Management clarified their competitive positioning, distinguishing between size and OEM reach, providing a more nuanced view of their market share.

Asked by Amit Agicha

Benefits and timeline of the reheating furnace project Direct
Currently, our billet sizes are 4.2 meters and you take some end from both sides that are cut as waste, which goes into scrap and we reuse that scrap. That billet size is going to go up from 4.2 to 5.2 meters. So that's where the yield benefit is going to come in. Also, the yield benefit partly will come in, in our continuous casting machine because of longer-sized billets.

Management detailed the specific operational benefits, such as improved yield and reduced waste, expected from the reheating furnace, linking it directly to bottom-line improvements.

Asked by Aditi Chavan

Impact of Kocks Block operation on product quality and customer service Direct
So the first benefit is the roundness of the bars is better, which enables superior quality and especially some of the products that we are trying to we are targeting as import substitution from Japanese steels. ... Second, we can give exact diameters. ... And the third advantage is the change of size time goes down, which increases our flexibility to give better service to customers.

Management explained how the Kocks Block operation enhances product quality, allows for precise customization, and improves operational flexibility, supporting import substitution and better customer service.

Asked by Aditi Chavan

Distinction between current melting shop capacity and new steel plant capacity Direct
No, no. This capacity will remain at 3 lakhs. We are applying to the government to increase our license to the Environment Ministry. If we get that license, then the capacity, we believe, can go up in a year's time. ... The 5,00,000 tons you're talking about is a new plant. And the new plant will come up by July '29.

Management clarified the existing capacity versus the future capacity from the new Greenfield plant, addressing potential confusion about expansion plans.

Asked by Saket Kapoor

Commercial advantages of green steel initiatives Partial
So when we talk to customers, there is a lot of excitement. And even our largest customer largest car company in India, Maruti Suzuki, has started discussing this more seriously. ... As of now, yes. But if you ask me, my personal belief, though I will never put that into our forecast and so on because it's all still in the air. My personal belief is moment the government of India makes that into mandatory that everyone has to have a minimum percentage of this thing, it will lead to commercial gains also.

Management acknowledged growing customer interest in green steel but noted that direct commercial advantages are currently limited, pending government mandates, which could significantly alter market dynamics.

Asked by Rohan

3 min read 7 chapters

Detailed narrative

Q3 FY26 Performance Overview

Vardhman Special Steels Limited reported a robust Q3 FY26 with sales volume (rolled vs rolled) increasing by 4.56% YoY to 55,000 tons. Despite a marginal revenue growth of 0.94% YoY to INR 430 crores, primarily due to price reductions offsetting volume gains, EBITDA saw a significant 33.33% YoY increase to INR 56 crores. The EBITDA per ton for the quarter stood at INR 10,200, or INR 9,263 excluding non-operational income. The company also achieved its highest ever 9-month PAT of INR 88 crores, marking a 20.55% YoY growth.

Strategic Growth Initiatives: Forging Project

The company announced a new forging project with an investment of INR 475 crores, targeting commissioning by July 2028. This project leverages the expertise of Aichi, a Toyota Group company, known for its strong capabilities in forgings. The investment includes land, buildings, and provisions for a second line, aiming to transfer Toyota's manufacturing systems and capabilities to the new plant. This initiative is expected to significantly expand Vardhman's product offerings and market reach.

Greenfield Steel Plant & Capacity Expansion

Vardhman is progressing with its Greenfield steel plant project, which is expected to have a capacity of 500,000 tons and will be commissioned by July 2029. The total investment for this plant is estimated at INR 2,000 crores. Land purchase for this project is in its final stages and is expected to be completed this quarter. This expansion will enable the company to produce larger sizes (90mm and above) and diversify into non-automotive steels, which are currently not part of its portfolio.

Technology & Product Mix Diversification

The company renewed its technical assistance agreement with Aichi for another three years, reinforcing its commitment to advanced technology. With the new steel plant, Vardhman aims to expand its product mix beyond smaller and medium sizes, catering to crankshaft materials, specialized gears, and products for commercial and off-highway vehicles. The long-term vision includes developing technical capabilities to enter non-automotive segments like bearings, railways, defense, and aerospace, targeting 30% of its business from these areas within the next 10 years.

Operational Efficiency Improvements

The reheating furnace capex is on track for commissioning by March 2026, with full benefits expected from mid-April/May. This upgrade is anticipated to reduce job work outsourcing, improve yield by increasing billet sizes from 4.2 to 5.2 meters, and enhance overall servicing to the market. Additionally, the Kocks Block operation has already improved bar roundness, enabled precise diameter delivery (to 0.1mm), and reduced size changeover time, leading to better quality and flexibility.

Raw Material & Market Outlook

Raw material prices, which had been declining, started rising in the last week of December and continued into January. This trend is expected to have an impact on the company's costs in Q4 FY26 and Q1 FY27. Despite this, demand remains strong, with management indicating they could have sold an additional 5,000 tons if capacity were available. The company's export markets primarily include Thailand (over 70% of direct exports), with indirect exports (components made from their steel) going to the US and Europe.

Green Initiatives: Solar Power & Green Steel

The solar power plant is in its final stages of commissioning, with connectivity issues resolved and stringing completed. It is expected to be operational within the next week to 10 days. This initiative will reduce the company's carbon footprint from 0.73 to 0.48 and lead to cost savings. While direct commercial advantages for green steel are not yet realized, customer interest, particularly from European OEMs and Indian Tier 1/2 suppliers, is high, and management anticipates future government mandates will drive its adoption.

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

More Capital Goods earnings calls