Vardhman Special Steels Limited — Q4 FY26 earnings call

Call held 29 Apr 2026

Management summary

Vardhman Special Steels Limited reported a record FY26 with its highest-ever volumes of 225,000 tons and profits of INR122 crores. The company is undertaking aggressive capacity expansion with new steel and forging plants, aiming for a total capacity of 900,000 tons and strategic diversification into non-automotive steels. Despite raw material price volatility, management expressed confidence in future growth and margin expansion, raising its EBITDA guidance for the coming years.

Highlights

  • FY26 marked a record year with highest volume of 225,000 tons, meeting budget targets.

  • Achieved record profits of INR122 crores for FY26, indicating strong financial performance.

  • EBITDA guidance for two years from now increased to INR9,000-12,000 per ton, reflecting confidence in future profitability.

  • Commissioned a solar plant and new 210X210 section, improving productivity and reducing rework.

  • Board recommended a dividend of INR3.50 per share, demonstrating shareholder return commitment.

Concerns

  • Raw material prices, including gas, increased substantially due to global geopolitical events (Iran-US war scare).

  • Environmental approval for increasing melting capacity beyond 3 lakh tons is uncertain (50-50 chance) due to Ludhiana being a critically polluted zone.

  • Significant product mix changes and impact from futuristic businesses are projected to take 5-7 years or more to materialize for investors.

Key financials

  1. PAT ₹122 Cr
  2. Volume 2,25,000 tons
  3. EBITDA per ton ₹8,500
  4. Dividend per share ₹3.5

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.

Capital allocation

high confidence
  • Capex ₹2,600 Cr Approximately INR1,200 crores equity infusion and INR1,200 crores debt
    • New steel plant ₹2,000 Cr
    • Forging project ₹475 Cr
    • Normal capex, replacement, quality upgradation for existing plant (over 2 years) ₹100 Cr
    • Melt shop expansion (if environmental approval) ₹80 Cr
    So the total capex that we have planned for the new steel plant is about INR2,000 crores. For the forging project, it is about INR475 crores which has been announced. We feel that capex would be a little lower than that. Then there is some internal capex. Plus we will also start some replacement capex and normal capex... Roughly, we see about INR1,200 crores of equity infusion, out of which INR385 crores has already come in. About INR800 crores or so roughly equity and about INR1,200 crores of debt which will be raised.
  • Debt 0.5× EBITDA
    • New borrowing Roughly INR1,200 crores of debt to be raised for capex. ₹1,200 Cr
    At the peak, debt-equity, we will keep it below 0.75 total debt to equity. And we are comfortable at 0.5.
  • Dividend ₹3.5/share (final)
    Overall, seeing the confidence in the future, our Board decided to recommend a dividend of INR3.50 a share.

Guidance & targets

Profitability

  • EBITDA per ton Profitability · FY27 · High confidence INR8,000-11,000

    Previously INR7,000-10,000 → INR8,000-11,000

    Our range earlier was 7 to 10. We have now from this year, we are increasing the range to 8 to 11.

    — Sachit Jain

  • EBITDA per ton Profitability · 2 years from now · High confidence INR9,000-12,000

    Previously INR8,000-11,000 → INR9,000-12,000

    And we said 2 years later, we would like to increase the range to 9 to 12.

    — Sachit Jain

  • EBITDA on Capital Employed Profitability · after FY30 (full capacity) · High confidence >20%
    After the plants are established and running towards full capacity utilization, EBITDA on capital employed, we hope to continue to be above 20%.

    — Sachit Jain

Volume

  • Sales Volume (Existing Plant) Volume · FY27 · High confidence 250,000 tons

    From 225,000 tons today

    Going forward, 225 we closed this year, last year. And this year, we would like to cross 250, maybe 255 we target. But let's say, for your calculation, keep 250 in mind.

    — Sachit Jain

  • Sales Volume (Existing Plant) Volume · next 3 years · High confidence 270,000 tons
    But as of now, please keep in mind 270,000 tons for the next 3 years.

    — Sachit Jain

Capacity

  • Rolling Capacity (Existing Plant) Capacity · post reheating furnace commissioning · High confidence 270,000 tons

    From 180,000 tons today

    It will improve our rolling capacity to 2,70,000 tons of finished product.

    — Sachit Jain

  • Melting Production (Existing Plant) Capacity · after environmental approval · Medium confidence 360,000 tons

    From 300,000 tons today

    And we are trying to see if we can increase our overall melting production beyond 3 lakh tons to maybe 3,60,000 tons.

    — Sachit Jain

  • New Steel Plant Commissioning Capacity · July 2029 · High confidence July 2029
    We seem to be on track that we will start our plant in July 2029 as of now.

    — Sachit Jain

  • New Steel Plant Capacity Capacity · post commissioning · High confidence 500,000-600,000 tons
    With the new steel plant, we will have a capacity of 500,000 to 600,000 tons.

    — Sachit Jain

  • Forging Plant Commissioning Capacity · Q4 FY28 · High confidence Q4 FY28
    And Jan-March of '28, we hope to start the production from the forging line.

    — Sachit Jain

  • Forging Plant First Line Operations Capacity · Q1 FY27-28 · High confidence Q1 FY27-28
    But the first line will start operations in the first quarter of '27-'28.

    — Sachit Jain

Product Mix

  • Non-automotive steel proportion Product Mix · next 10 years · High confidence 30%
    So we have taken a strategic view that over the next 10 years, we will be about 30% non-automotive steel, 70% will be automotive steel.

    — Sachit Jain

Incentives

  • Punjab Government Subsidies Incentives · FY27 · High confidence INR12-13 crores

    From INR24 crores today

    So for next financial year, it will be close to INR12 crores to INR13 crores for both the incentives, because electricity duty exemption will also come down because of the solar power commissioning. The total incentive will be close to INR13 crores.

    — Sanjeev Singla

What to watch in Q1 FY27

Land acquisition for new greenfield plant

May (next quarter)
Current In last stages
Target Closed

Why it matters

Completion of land acquisition is a prerequisite for the new steel plant project to proceed as planned.

We are in the last stages. It should happen in the next within May, we should be closing it.

Risks & concerns

  • Raw Material Price Volatility

    medium

    Raw material prices, including gas costs, increased substantially due to global geopolitical events like the Iran-US war scare.

    Management acknowledged

  • Environmental Approval for Capacity Expansion

    medium

    Obtaining environmental approval to increase melting capacity beyond 3 lakh tons is uncertain (50-50 chance) due to Ludhiana being a critically polluted zone.

    Management acknowledged

  • Global Economic Recession

    low

    Management noted a possible recession in the global economy as a factor that could influence future trends.

    Management acknowledged

Q&A highlights

3 direct
Forging Plant Commissioning & ROCE Partial
We don't disclose project by project. And one line, as you can make out, will not be sufficient. So we will soon be adding a second line and a third line. So we have plans to add at least 3 lines of forging. So that's when it will be completed. And we'll see by when we complete this entire forging project. But the first line will start operations in the first quarter of '27-'28.

Management declined to provide project-specific ROCE for the forging unit, instead focusing on the multi-phase expansion plan, indicating a lack of granular profitability disclosure for new ventures.

Asked by Shlok Bhartiya

Total Capex and Funding Strategy Direct
So the total capex that we have planned for the new steel plant is about INR2,000 crores. For the forging project, it is about INR475 crores which has been announced... Roughly, we see about INR1,200 crores of equity infusion, out of which INR385 crores has already come in. About INR800 crores or so roughly equity and about INR1,200 crores of debt which will be raised.

Provided a comprehensive overview of the significant capital expenditure plans for new steel and forging plants, along with the detailed funding mix involving substantial equity and debt, crucial for understanding future balance sheet implications.

Asked by Anil Kumar Sharma

Product Mix Evolution and Timeline for Impact Partial
Not this year, but this year, we will see the beginning, just the tiny beginning, tiny shoots... But to see changes in the stuff that I was talking about, the futuristic businesses, it will take 5 to 7 years to start making some impact. And for a change for investors to see, maybe 7 years onwards.

Clarified that significant product mix changes and the impact from futuristic businesses will have a long gestation period (5-7 years or more), managing investor expectations for immediate shifts in revenue composition.

Asked by Sanaa

Shift in Export Strategy to Indirect Exports Direct
Exports are going to be a much lower proportion of our business. But we are seeing exports in the form of components increasing from India... Exports for us will be more and more indirect exports rather than direct exports.

Highlighted a strategic pivot in export focus from direct steel exports to indirect exports via components, leveraging India's cost advantages and FTAs, which could alter revenue streams and margin profiles.

Asked by Avdhut Joshi

Customer Approvals and Ramp-up for Forging Plant Direct
We are strategizing because our partners, Aichi, are amongst the world leaders in the kind of forging we're going to enter into. So we are talking to customers if they can start supplying from Japan initially to get those approvals... the attempt will be to reduce the approval process and approval time.

Addressed the critical aspect of customer qualification for the new forging business, emphasizing the strategic role of the Aichi partnership in accelerating approvals and market entry.

Asked by Avdhut Joshi

2 min read 6 chapters

Detailed narrative

Record Performance in FY26 and Strategic Growth Initiatives

Vardhman Special Steels Limited concluded FY26 with a record performance, achieving its highest-ever volume of 225,000 tons and record profits of INR122 crores. The company commissioned a new reheating furnace in March, boosting rolling capacity to 270,000 tons, and a solar plant that will generate 9 crore units of power annually. Additionally, a new 210X210 section was introduced, enhancing productivity and reducing rework, contributing to overall operational efficiency.

Ambitious Capacity Expansion and Diversification Plans

The company is embarking on significant expansion, targeting a new steel plant with 500,000-600,000 tons capacity to be commissioned by July 2029, which will bring the total capacity to approximately 900,000 tons. A new forging plant is also planned, with equipment ordered and commissioning expected in Q4 FY28 (Jan-March 2028), focusing on high-value products like ring gears. Strategically, Vardhman aims to diversify its product portfolio, targeting 30% non-automotive steels (e.g., railways, oil & gas, defence) within the next 10 years, and exploring advanced alloys and materials in the next 3-5 years.

Enhanced Profitability Guidance and Cost Efficiencies

Management has revised its EBITDA guidance upwards, from the previous INR7,000-10,000 per ton to INR8,000-11,000 per ton for FY27, and further to INR9,000-12,000 per ton for two years from now. This improved outlook is primarily driven by expected volume growth, ongoing cost-cutting measures, and process improvements, rather than immediate significant shifts in product mix. The company's focus remains on maintaining healthy spreads, despite facing challenges from rising raw material and gas costs.

Significant Capital Expenditure and Funding Strategy

Vardhman Special Steels has committed approximately INR2,600 crores towards its expansion projects, including INR2,000 crores for the new steel plant and INR475 crores for the forging project, alongside internal and replacement capex. The funding strategy involves roughly INR1,200 crores in equity infusion, with INR385 crores already secured, and approximately INR1,200 crores in debt. The company aims to maintain a peak net debt-to-EBITDA ratio below 0.75, with a comfortable target of 0.5, ensuring financial prudence during this growth phase.

Strategic Shift Towards Indirect Exports and European Market

The company is strategically shifting its export focus from direct steel exports to indirect exports via components manufactured in India. This pivot is driven by higher operating costs in Europe and the impending CBAM regulations, positioning Vardhman to leverage its green steel capabilities and India's cost advantages. Management is engaging with global forging majors and OEs to supply components, anticipating that indirect exports will form a larger proportion of its future international business.

Customer Validation and Aichi Partnership for Forging Business

Entering the new forging business, customer validation is a critical step for Vardhman. The company is leveraging its partnership with Aichi, a world leader in forging, to accelerate customer approvals. By potentially supplying from Japan initially and having Aichi personnel lead the forging division, Vardhman aims to reduce the approval process and time. This collaboration is crucial for successful market entry and ramp-up for products like ring gears, where Aichi's expertise provides a competitive edge.

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