Vardhman Special Steels Limited

Vardhman Special Steels announced the Board's decision to establish a new greenfield plant in Punjab, targeting an investment of approximately INR 2,000 crores. This plant will focus on 'green steel' production, incorporating a solar plant from the outset to achieve a lower carbon footprint (projected 0.45-0.48, down from 0.72). The new facility aims to expand into higher diameter products not currently offered and improve overall quality and cost efficiency. Funding will be a mix of equity and debt, with land purchase initiated and environmental approvals to follow.

The company achieved record production and sales in FY25, testing its rated capacity of 300,000 tons per year for billet making. A significant operational improvement was the implementation of the Kocks block in the rolling mill, which provides precise diameter control, enabling higher value-added products. This upgrade was completed with a minimal 23-day shutdown, increasing rolling capacity, reducing changeover time^⏳s, and consequently lowering working capital inventory. The remaining capex for the existing plant, including a reheating furnace, is INR 50-60 crores, expected to be commissioned by December.

For the full financial year FY25, Vardhman Special Steels reported a total sales volume of 215,000 tons, an 11% increase over the previous year, with sales value up by 6.2%. EBITDA, including other income, stood at INR 177 crores, translating to an EBITDA per ton of INR 8,200, within the target range of INR 7,000-10,000. PAT was INR 93.09 crores, marginally higher YoY. The company increased its dividend from INR 2 to INR 3 per share, achieving a 26% dividend payout, aligning with its policy to maintain around 25% payout.

Management noted stable demand in the car and 2-wheeler segments but observed slower-than-expected growth in the commercial vehicle segment. The alloy steel market in India is currently around 4 million tons and is projected to grow to 10 million tons over the next decade. While the company previously targeted a 27% export mix, this has been revised as 'unlikely to happen' due to current trends, with a focus on domestic sales, including meeting European OEM demand from India. The company anticipates an EBITDA per ton of INR 8,000-11,000 for the existing plant in FY26-27.

The company aims to become net debt-free within the next three years, excluding the capex for the new greenfield project. This strategy positions Vardhman Special Steels with a strong balance sheet, targeting approximately INR 1,000 crores of net worth with zero debt, to support the INR 2,000 crore new plant investment. The new plant will be financed through a combination of equity issuance and debt, with three banks already expressing support for the loan component.