Vardhman Special Steels Limited

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.

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.

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.

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.

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 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.

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.