Vardhman Special

Vardhman Special Steels reported a Q3 FY26 sales volume of 55,000 tons (rolled vs rolled), a slight increase from 52,600 tons in Q3 FY25. Revenue for the quarter was ₹430 crores, marginally up from ₹426 crores YoY, primarily due to price reductions offsetting volume gains. EBITDA saw a significant 34% YoY increase to ₹56 crores, with EBITDA per ton at ₹10,200 (₹9,263 excluding non-operational income). The company achieved its highest-ever 9-month PAT of ₹88 crores, compared to ₹73 crores in the previous year.

The company announced a new forging project with an investment of ₹475 crores, which includes land and buildings for the first line. This project is expected to commence production by July 2028, one year before the new steel plant. The forging capabilities will be transferred from Aichi, a Toyota Group company, aiming to serve the Indian market, including customers like Sona Comstar and GNA Axles.

The Greenfield steel plant project is progressing, with land purchase expected to be completed this quarter. The new steel plant, with an estimated capacity of 500,000 tons, is targeted for commissioning in July 2029. This expansion will enable the company to produce larger sizes (90mm and above) and enter non-automotive specialized steel segments, which currently constitute a negligible portion of their business. The long-term goal is to achieve 30% non-automotive steel business within the next 10 years.

Several initiatives are underway to enhance operational efficiency. The reheating furnace capex is expected to be commissioned by March 2026, with full benefits from mid-April/May. This will reduce job work outsourcing, improve yield, and enhance market servicing. The Kocks Block operation has already improved bar roundness, enabled production of exact diameters, and reduced size change time, contributing to better quality and working capital reduction. The rolling mill capacity will increase from 210,000 tons to 270,000 tons from April 2026.

The solar plant is in its final stages of commissioning and is expected to be operational within the next 1-2 weeks. This will reduce the company's carbon footprint from 0.73 to 0.48 and lead to cost savings. While there are no immediate commercial advantages for green steel, it is generating preferential access and attention from European customers. Management believes mandatory green steel policies in India would lead to commercial gains, though the timeline for such policies is uncertain.

The company targets 225,000 tons in sales for the current year and aims to reach 270,000-275,000 tons in the next three years, prior to the new steel plant commissioning. Once all capacities are fully commissioned, the company expects to produce approximately 720,000 tons of finished steel. The melting shop capacity, currently at 3 lakh tons, has the potential to increase further in a year's time if regulatory licenses are obtained.

Aichi Steel has increased its stake to 24.9% and expressed willingness to invest more capital as needed. Similarly, the Vardhman Group has also committed to providing capital for new projects, indicating strong shareholder confidence and support for the company's expansion plans.