Earnings call transcript: Vardhman Special Steels’ Q2 2025 shows strong EBITDA growth

Vardhman Special Steels Limited (VSS) reported its Q2 2025 earnings, highlighting a robust increase in EBITDA despite a decline in revenue and sales volume. The company showcased strategic advancements in product development and operational efficiency, while maintaining a cautious outlook on future growth amid market challenges.

Key Takeaways

• EBITDA increased by 16% year-over-year, reaching INR 56 crore.
• Total sales volume decreased to 55,500 tons from 59,000 tons.
• Revenue declined by 12.64% to INR 432 crore year-over-year.
• Strategic initiatives include a new reheating furnace and expansion of energy lines.

Company Performance

Vardhman Special Steels demonstrated resilience in Q2 2025, with a notable improvement in EBITDA, indicating effective cost management and operational efficiency. Despite a reduction in sales volume and revenue, the company managed to enhance its profitability, showcasing its ability to adapt to market conditions. The Indian auto steel market’s anticipated growth to 8-10 million cars by 2035 presents a promising landscape for VSS, although export challenges persist due to US tariffs and a weak Japanese yen.

Financial Highlights

• Revenue: INR 432 crore (12.64% decline year-over-year)
• EBITDA: INR 56 crore (16% increase year-over-year)
• EBITDA per ton: INR 10,000
• Profit after tax (PAT): INR 34.5 crore (compared to INR 26 crore last year)
• H1 Total Revenue: INR 865 crore
• H1 EBITDA: INR 96 crore
• H1 PAT: INR 54 crore

Outlook & Guidance

The company is targeting a production of 245,000 tons by FY27, with an EBITDA per ton guidance ranging from INR 8,000 to INR 11,000. VSS plans to maintain a conservative debt strategy, with a debt-to-equity target of 0.5-0.75, and does not foresee major new capital expenditures for existing operations. Potential debt raising is considered for 2026-2027.

Executive Commentary

Chairman and Managing Director Sachit Jain emphasized the company’s strategic focus, stating, "We hope to increase EBITDA per ton to 8-11 or a little beyond that." He also highlighted the importance of maintaining a conservative balance sheet and the potential boost from green steel initiatives: "Green steel becomes a reality in India and becomes a requirement as it should, there will be a massive boost."

Risks and Challenges

• Export challenges due to international tariffs and currency fluctuations.
• Dependence on the Indian auto market’s growth trajectory.
• Potential supply chain disruptions impacting production timelines.
• The need to adapt to evolving environmental regulations and green steel demand.
• Balancing debt levels with strategic expansion plans.

Q&A

During the earnings call, analysts inquired about the company’s export strategy amid current challenges, the benefits of the reheating furnace upgrade, and the collaboration with IT Steel. The management addressed the potential of green steel and circular economy projects as significant growth drivers.

Vardhman Special Steels remains well-positioned to capitalize on industry trends through strategic partnerships and technological advancements, while navigating the complexities of a dynamic global market.

Full transcript - Vishal Mega Mart Ltd (VSSL) Q2 2026:

Conference Moderator, AddFactors PR: Ladies and gentlemen, good day and welcome to the Vardhman Special Steels Limited Q2 FY26 earnings conference call hosted by AddFactors PR. As a reminder, all participant lines are in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Amruthi Bane from the AddFactors PR Investor Relations team. Thank you, and over to you, ma’am.

Thank you, Sadhu. Good afternoon, everyone. On behalf of the entire management, I thank all the participants present on the call and wish you a very warm welcome to our Q2 and H1 FY26 earnings conference call. To guide us through the results today, we have with us the Senior Management Team of Vardhman Special Steels Limited, represented by Mr. Sachit Jain, Chairman and Managing Director; Mr. Sanjeev Singla, Chief Financial Officer; Mr. R. K. Regari, Executive Director; Ms. Soumya Jain, Executive Director; and Mrs. Sonam Dingari, Company Secretary. Before we begin, please note that this conference may contain forward-looking statements about the company, which are based on beliefs, opinions, and expectations of the company, as on the date of this call. These statements are not a guarantee of future performance and involve risks and uncertainties that are difficult to predict.

We will commence the call with the opening briefs by Mr. Sachit Jain, Chairman and Managing Director, followed by the financial highlights from Mr. Sanjeev Singla, Chief Financial Officer of the company. After this, we will open the forum for the Q&A. With that, I will now hand over the call to Mr. Sachit, sir, to share his opening comments. Over to you, sir.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Thank you. A very good afternoon, ladies and gentlemen. Thank you very much for being with us on our call today. Apologies for postponing the call from last week to today, as all three board members were traveling. Mr. Regari and Soumya were in Thailand meeting customers, and I was in Chennai again meeting customers. Last quarter has been a very eventful quarter. One, raw material prices have been trending downwards, and therefore the price reduction also has happened. October also will be a further price reduction because the costs have already come down. We will be discussing with the OEs how much is the quarter-over reduction. Raw material position is quite benign. Full availability of raw material. We are not facing any problems anywhere whatsoever. The board, there have been changes in the board. Our Chairman, Mr.

Rajiv Gupta, stepped down from the board after three terms, two terms as an independent director and one term of three years as a non-independent director and Chairman of the company. Also, Mr. Sanjoy Bhattacharya, long board member, stepped down after his two terms as independent director ended. In their place, we have had two new board members, Mr. Dinkar Gupta, retired NIA Chief of India, as well as retired DGP of Punjab, and Mr. Nishant Arya, a young industrialist in the auto component space, dealing with the major auto components, auto OEs in India, as well as globally. I have taken over as Chairman after Mr. Rajiv Gupta’s wonderful term as Chairman. The other highlights have been the third renewal of the technical assistance agreement for three years from 1st October 2025 to 30th September 2028.

As you are aware, with IT, our technical agreement is always for a stance of three years, for a period of three years, to be renewed. Some changes are always done based on the requirements of the business at that point in time. For example, the technical parts of the technical assistance have come down. More of marketing support is required, as well as quality support is required to improve quality further for the newer requirements and the more sophisticated requirements of the OEs. With the planning for the new project has begun, and IT’s full support is there. That has also been added to the technical assistance agreement. We will have five people from IT posted in India. Earlier, we were three. One new person, senior person for quality, as well as technical transfer from old unit to new unit.

One person for marketing will be joining from 1st of January. Also, IT’s increase of stake to 25% signifies much stronger commitment. More than the capital infused, it is the commitment to India and commitment to VSS that is the important part. I was in Japan for the signing of the ceremony. We had. Very fruitful discussions with our partners, as well as we had a press conference in Japan. For me, a first-time academic press conference in Japan regarding our journey. As regards to CAPEX, the COPS block was successfully commissioned earlier this year, and production now for almost seven months. Production has been running. Six months production has been running. So successfully, this has been a very strong implementation by the COPS team, as well as Daniel Lee and the other machinery manufacturers, as well as our maintenance erection team and the production teams.

As regards the new reheating furnace, which will increase our production. This is getting commissioned by last quarter of this year. From 1st of April, we will have full impact of the new reheating furnace, which will enable increased production of our rolling mill, which means our job work quantum will start coming down. Therefore, the loss of profit on the material that was sent outside for job work will come down substantially from 1st quarter of next year. The new energy line is in progress. By June, it should be commissioned. With this, we will have eliminated any limitations as regards making quality for four wheelers. As our first energy line is getting nearer full capacity utilization, it was imperative to get the second energy line. That should be commissioned by June as per plan.

The other big change that happened last quarter is this new trend towards circular economy. Maruti Suzuki has been the first company in our knowledge that has taken a concrete step in this area, where we’ll be buying CRC scrap from Maruti plant, and we will make steam and send it back to the vendors of Maruti in a closed loop, which will be traceability of material. This process started in the month of September. This will strengthen our relationships further with Maruti. As they go towards their green initiatives and circular economy initiatives, we are there step by step walking along with them. As for the Greenfield steel plant is concerned, we are in the last stages of finalizing our land. Planning for the plant is going on in full swing in terms of machinery selection, layouts, and machinery configuration, sorry, and layouts and specifications of all the machines.

All that’s going on and going on track. Solar power plant, this was supposed to have been commissioned by June of this year. As we had shared that the transmission line was still incomplete because some farmers had gone to court and stay had been granted. In the last four months, all the stays have been vacated. Now all hurdles for completing the transmission line are over. Hopefully, within this month, latest December, the transmission line will be complete, and we should be able to take advantage of the solar power plant, which will also lead to our carbon footprint coming down from 0.72 to above 0.48. Two, since the solar power is cheaper than the grid power, our power cost will also be lower, which will lead to enhanced margins moving ahead.

We have already shared with you that we have been discussing with our partner, IT, regarding the new forging line. We hope to finalize our plans by January. Hopefully, in the January conference, we should be able to share details, timelines, what we are planning to do, investments, and all that. As we had shared in the previous conference, that will take us about six months. We are on track, and hopefully, by January, we should be able to share the details of that. The other thing that we have done is we have done a carbon footprint study by DNV. Earlier, we had done one by CII. We realized that CII is good as far as Indian customers are concerned, but for global customers, DNV is more recognized. That has been done.

The figures are almost identical with the figure that CII had calculated, so 0.72 and 0.73 was the difference from one to the other. We are on track with that. IT funds have been utilized to repay our WCDL of INR 150 crore. The balance funds have been invested in money market funds and liquid funds, which has led to a reduction of finance costs and therefore path improvement in the second quarter. I will pass over the line to Mr. Singla, our CFO, to take you through the numbers, and then we are available for Q&A.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Thank you, sir. Good afternoon, ladies and gentlemen. First of all, I want to share that these quarterly results have been taken from our SAP system, which we have gone live with the latest version of SAP S/4HANA from 1st of July 2025. All the modules have been taken in this S/4HANA integrated solution. Earlier, we were working on two different solutions. One was SAP ECC and now it is one integrated solution, resulting in more strong controls and effective management system. Coming to the numbers, for this quarter, our total sales in terms of quantity is 55,500 tons, as against 59,000 tons, resulting in revenue of INR 432 crore. Year-on-year, 12.64% decline. It is a combination of both. One is quantity, which is down by 4,000 tons, and then price reductions, which is continuously happening from last year.

Every quarter, the prices are declining because of decrease in the input cost also. As a result, our EBITDA, including other income, is INR 56 crore, as against INR 48 crore in the corresponding quarter of last year, 16% increase. EBITDA per ton is INR 10,000 per ton. Our PAT is INR 34.5 crore, as against INR 26 crore in the last year. It is proportionately higher than the increase in EBITDA because our financial cost has come down because of the funds infusion by IT Steel. On a half-yearly basis, our total revenue for the half year is INR 865 crore, and total EBITDA is INR 96 crore, almost the same as in the last year. EBITDA per ton is INR 8,600 per ton, and PAT is INR 54 crore against INR 52 crore last year. That is all on the numbers. Now I request to further question-answer session.

Conference Operator: Thank you very much. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and then one on their touchstone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Again, to register for a question, please press star and then one. Our first question comes from the line of Deepak Pandey from Sagun Capital. Please go ahead.

Hi, sir. Congrats on a good set of numbers. Sir, a few questions. Firstly, on the forging plant that we are putting up, can you throw some color on what sort of business segmental demand are you looking to cater? Is it going to be focused on autos only?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Yes. As of now, as far as this plant is concerned, we are only in auto. Therefore, our forging line that we’re looking at will also be focused on auto. We will be trying to see that if we can make a part that is going into EVs as well. All those are in discussion just now. Beyond this, at this point, we don’t have more details to be shared.

Got it. Secondly, sir, some light on where do we stand in terms of market share for guidebars in terms of capacity and then the sales volume? Are we seeing any sales wins currently with the auto sector growing? Any green shoots from the customers?

Yes. Market share-wise, we will be amongst the smaller players. There is enough scope for us to grow as we go ahead. We would be very strong in market share with the high-end customers. There are customers at the top end where we will be 60-70% share of business of some of the key customers. Some of these customers deal with the entire gamut of automakers. That way, wherever high-quality, sophisticated products and reliability is concerned, we would be the vendor of choice. As regards—sorry, the other question you had was, there is enough scope for us to grow. The second part of the question, can you repeat that, please?

Are there any drone shoots from the clients in terms of auto sector sales wins that currently we are having?

Yes. Those are signals we are getting that two-wheeler sales, of course, have increased. Therefore, demand for two-wheelers will remain good, as well as demand for smaller cars will remain good. This year, the benefit is not too much because the sales were lower initially waiting for this GST reduction. The full impact of these changes, we hope to get next year. Yes, these are all very positive changes. I think the government has done its bit in giving the industry a slip. Overall, there is optimism in everybody that the next financial year, volumes should be pretty good.

All right. Sir, in the last earnings call, we mentioned that there is some competition that we are seeing of undercutting of prices. Is that still the same, or has it eased up a bit in this quarter?

That continues. The only way for us to counter that is to continuously improve our quality, get in better products, as well as look internally to reduce costs further. As I said, with this new reheating furnace coming in, we will obviously see a major cost reduction. One, because of the outside material, which is currently going on job work. The profits that we are passing on to our vendors, we will be able to take those inside, as well as costs of loading, unloading, transportation, and so on. Secondly, with this new reheating furnace coming in, our yields will become better because of two reasons. Our losses on heating and scale loss will come down, as well as losses on end cuts because we’re going to have bigger billets. All told, we’re going to see a decent cost reduction, as well as enhanced capacity.

After this reheating furnace, our rolling capacity will hit 270,000 tons of output, which is what our target is.

All right. That’s very helpful. Sir, last question would be on the split between bright bars and the black bars for Q2 and any color on the split for FY26 in total.

A lot of the bright bars were actually going in for exports to the U.S. Not directly from us, but from our customers. As the U.S. exports have got affected because of the tariff issue, that has affected our volume in bright bars. Therefore, our bright bar volumes are down. If things were normal on the bright bar front, we would have had higher sales this quarter than what we were able to achieve.

Got it. Thank you.

Conference Operator: Thank you. Before we take the next question, a reminder to all the participants, you may press star and then one to ask a question. Our next question comes from the line of Parth Patel from Patel Investment. Please go ahead.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Hello. Am I audible?

Conference Operator: Yes, sir. You’re audible now. Please go ahead.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Okay. Thank you for the opportunity, sir. I just wanted to check that EBITDA per ton has been improving sequentially. For the coming quarters, can you give me a stable EBITDA per ton that we can take into the modeling?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Our declared range was INR 7,000-INR 10,000 a ton. And we have said that from next financial year, we should be upping the range to INR 8,000-INR 11,000. We stand by that as of now.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Oh, okay. Got it. Just for the sake of repetition, can you let me know how the IT collaboration is going on, and is there going to be any sort of internal technology transfers, and what’s the status of land that we were looking?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: The collaboration actually is going very well. That is why we have signed the third agreement. We have increased the number of people who are posted here. They have invested INR 3.85 billion to increase their stake to 25%. All these are signals that they feel that the partnership is going very well. In terms of specifics that we shared with you, what has changed? Our product quality has improved because of know-how transferred by them. Problem-solving approach has improved. Our understanding of certain specific aspects of quality has improved. The overall culture has improved, and customer acceptability and access has improved significantly. For example, the Toyota approval for global operations happened, I would say, only because of their availability. Plus, all the other OEs, they are fully helpful, and they are helping us get those approvals.

Even some of the other Toyota Group companies, which are tier ones, which we are supplying to other Indian OEs like Tata and Mahindra, those all are coming basically thanks to IT. A lot of support in marketing is coming in. Maruti also, the localization project of Maruti, where we will be replacing imported steel with steel made at Vardhman Special Steels, that project also, I do not think without IT support, that project we would have made much headway. All in all, we are having significant benefits thanks to them.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Got it, sir. About the land parcel?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Land parcel, we are in the last stages of finalizing. Hopefully, by the time we have the next con call, we should have the land with us.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Oh, okay. Got it. Thank you so much. All the best to you.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Please understand, this is land that we are purchasing from farmers. With the best of intention, best of plans, sometimes this could get furthered off because there are a large number of farmers and a large number of landowners. Within each land parcel also, within each family, there could be two or three family members, somebody may be overseas, and so on. It is a slow and tedious process, cumbersome process. You have to go through 30-year records of each land parcel. You need land contiguity, and you need land of a particular length. We put a new rolling mill. We need half a kilometer in length and 300 meters in width. You need that kind of land parcel also. All those things have already been seen, and we are in the process of finalizing this land.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Got it. So we can expect two quarters next year.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Yes.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Got it. Thank you.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: In all probability, this quarter it should be done.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Oh, okay, sir. Thank you.

Conference Operator: Thank you. Our next question comes from the line of Ritwik Sheth from OneUp Financial. Please go ahead.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Yeah. Hi. Good afternoon.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Sorry, Ritwik, before you raise your question. The timeline of our project completion as of now remains July 29th. That does not change with the little longer time it has taken us to get the land. As of now, we are quite committed to July 29th for commissioning of this plant. Yeah, Ritwik, go ahead, please.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Yeah. Hello. Good afternoon, sir. A few questions. Firstly, just continuing from the previous question.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Ritwik, can you be a little louder?

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Yeah. Is this better? Hello?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Yeah. Much better. Thank you.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Yeah. Yeah. So.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Yeah, go ahead.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Have you spent anything on the new plant in the current half? Because the CapEx.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: For this plant. Not for the plant, but we have bought a parcel of land for 50 acres, which we could not complete further. Yes, we have bought some land, which will be disposed of at the right stage, or we are talking to a couple of forging companies who want to come into India. A lot of other global companies are also getting very excited with the idea of this kind of steel plant and are examining putting up forging plants near us. For now, we’ll keep this land for some more time so that this land parcel can be sold to a prospective forging company. There are other buyers approaching us for this land. This land that we bought will be disposed of suitably.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Okay. What is the amount that we spent?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: No other.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Okay. What is the amount that we spent on this?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: We invested about INR 700 million.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Okay. INR 700 million. Okay. Sure. My second question is on the deemed exports for IT. If you can give us the brief color on what was that in H1 and any signs of higher volume going forward?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: We haven’t shared. No, we haven’t shared those figures, what business we’re doing with IT. But overall, suffice it to say that. The exports to IT are a bit lower than what we had estimated because of. Thailand market being subdued. Within Thailand, Toyota’s sales are also subdued compared to their original plans. The third factor which came in is the Japanese yen weakened significantly compared to when we started this deal. Yen has moved to JPY 145-JPY 150. Steel from India is almost as expensive as Japanese steel in Thailand.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Oh, okay.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: On Indian steel, there is a fighter customs duty. Yes, it’s taken a little more time. Therefore, seeing that the lifting of product was not up to the mark, we are bringing forward the forging plan to see that the amount of steel that IT had said that we’ll be able to use from VSS, we will partly make up through the forging business.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Okay. Got it. A few quarters ago, you had mentioned that we had given material for approval to a European OEM. Any update on that further? How was the first response from their end?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Yeah. We.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Any signs of any orders coming in?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: The initial feedback is very good. They had a further visit again. I had visited Europe this year. They visited us again this year, audited again. They are very happy with the way things are going. They have suggested some technical changes for us to make, which will be made by March of this year, and then we’ll be ready. Hopefully, next financial year, the business should start.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Okay. Great. And this would be on a long-term contract basis, or it would be on a rolling basis? The new orders that.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Normally, on a ruling basis, I don’t think we have any contract with any OE as of now. Businesses are all regular because these are repeatable businesses.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Sure. Sure. Just one last question. The recycling that we’ll start from procuring scrap from Maruti’s scrap plant, would there be any cost savings for us? Apart from the synergy and getting new business from Maruti, would there be any?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: No. No cost savings.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Okay. So scrap would be at market.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Sorry. This is not scrap from their scrapping plant. This is scrap from their manufacturing plant.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Oh, okay. Got it.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Scrap that is generated through the manufacturing process.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Okay. Sure. Got it.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: From their scrap plant of Maruti Suzuki, we’re anyway consuming 100% of their scrap that they generate.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Sure. Any guidance on volume figures for FY27 and CAPEX figure?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: FY27, as of now, we hope to do about 245,000 tons.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Okay. And CAPEX?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: I’m sorry?

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Yeah.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Oh, there is no major CAPEX. The existing CAPEX plan already announced is only the implementation of that.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Okay. For the new greenfield plant, right?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: No, no, no. New greenfield, we have not announced anything, no plans of investment. This is for the existing plant. We already had announced CAPEX plan. Now, that will be only that is ongoing. The major chunks of that were, one, the COPS block, which is done, so no more CAPEX on COPS block. The reheating furnace will also be done by March of this year, March of this financial year. Again, no further CAPEX on the reheating furnace. The energy line was announced already. That will be done by June. That will be continuing. There will be certain other investments in the R&D lab, EPP plant, and as well as there’ll be some investments being made in the fume extraction system, improving the fume extraction system to handle the increased production. Marginal CAPEX here and there will be there.

All bigger CAPEX will be finished in the ensuing financial year. There’s no new announcements.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Okay. Okay. So got it. Thank you and all the best, sir.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Yeah. Thank you.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Thank you. Our next question comes from the line of Radha from BNK Securities. Please go ahead.

Hello, sir. Thank you for the opportunity. Sir, this quarter, steel prices are down by 11% on a year-over-year basis. Hence, we can see the benefit of that in the raw material prices. However, the realizations are down only by 3% year-over-year, which shows that the pricing benefit is not yet passed on to the customers. Will it be passed on in the next quarter, and hence the next quarter gross margins are expected to be lower than this quarter?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Prices will be lower in next quarter than this year. That part is correct. It would be correct to assume that there’s a possibility that the EBITDA margin for third quarter will be a bit lower than second quarter. That part is correct. That’s why we always give a range of that rather than a precise amount. We will be within the range, and there will be a reduction.

Okay. Sir, second question is that what are the extra processes that are required to make bright bars over black bars? And because of these extra processes, what is the incremental EBITDA per ton that is made in bright bars?

The extra processes is that first we have to straighten the material. Then there is a turning operation. We call it peeling, which is what gives the color, which we call it a bright bar. Then there is settlers grinding after that. Normally we have an inspection and testing, and then we cut to size and then pack.

Sorry, sir?

There is no defined increase. We have not shared what is the increase in EBITDA thanks to bright bar because there is no way to compute that because the prices are specific to customers, and they are not necessarily linked to the black bar prices. There is a standard increase in EBITDA because of bright bar. Sometimes it is the cost of being in business, and sometimes it adds to the profitability.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Radhavam, does that answer your question? Ma’am, we are not able to hear anything from your line.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: We can move to the next question, then she can come back if she has any doubt.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Thank you. A reminder to all the participants, if you wish to register for a question, please press star and then one. Our next question comes from the line of Meera Mittal, an investor. Please go ahead.

Thank you, sir, for the opportunity. Sir, could you please elaborate on the key growth drivers that you foresee over the next three years, like domestic demand revival, export opportunities, or any aftermarket segment contributing to your growth strategy?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Overall market growth because Indian auto steel is expected to go up to about 10 million cars, or that’s one estimation, or 8 million cars is the other estimation by 2035. Towards going towards those numbers, the numbers will keep growing with the growth of the economy. That’s one part. Second driver will be some more approvals that are the development process coming in. That will be the second driver. The third driver will be export of components, again coming back, as I said earlier in an earlier question, that in the second quarter, we have seen a drop because of drop in exports to the U.S. because of the tariffs. As they get resolved in the next three to six months somewhere, that would be another driver. Lastly, some of the things that have already been approved, they are going to start from sometime next year and beyond.

Plus, we were also going a bit slow because we had capacity constraints. After June of next year, those capacity constraints would largely have gone, and therefore, we can also a little freely produce material. Our subsidy is going to become better. Today, we have long lead times because of shortage of rolling capacity. All those problems will get resolved by June. We should have a better chance to sell. The other major drivers are going to be green steel. That is very clearly something that most customers are talking about. Circular economy, which we already started in a small way with Maruti Suzuki. As Maruti Suzuki increases the percentage of business they want to cover under circular economy, that’d be one driver. Other OEs, they want to start this circular economy. That would be the second driver. Green steel is the third driver.

Okay. Thank you, sir.

We would be the best placed. We would be the best placed among the auto steel companies as regards green steel. The European companies coming to us are coming to us only because we have green steel.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Thank you. Our next follow-up question comes from the line of Radha from BNK Securities. Please go ahead.

Yes, I’m on.

Ma’am, your line is not clear.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Yeah. Radha, go ahead.

No.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Sorry to interrupt. Radhavam, your line is not clear.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: I can’t hear you.

I can’t hear you.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: We’ll move on to the next question. Our next question comes from the line of Nimesh Pandya, an investor. Please go ahead.

Hello. I’m auditing.

Yeah, Nimesh. Yes, sir. Please go ahead.

Thanks for giving me this opportunity. Basically, I have two questions. My first question is, what portion of your H1 revenue was contributed by the exports? Which regions and product categories were the key drivers of this export growth?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Export is not a very large amount. I think it’s about 6-7% or 8%. It doesn’t change from quarter to quarter.

Right, sir. Okay. So my second question is, you had earlier mentioned plans to raise debt for your upcoming plan. When do you expect to complete this debt raising? You had earlier mentioned plans to raise debt for the upcoming plan. Am I auditing?

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Hello.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Yes. There are no plans of raising debt for now because we have enough equity aligned with us. When we need the cash, as the cash flows are required, in all probability, the debt will get raised in the year 2027, partly 2026, but mostly in 2027.

Got it. Got it. Thank you. Thanks a lot.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Thank you.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: As you can see, we plan to keep a conservative balance sheet with the new plant because we have seen many companies who go aggressive on their funding and go on high debt-to-equity and then land up into NCLT and so on. Taking a lesson from that, and as a group, we have a long-term approach, conservative approach, so we will have a lower debt. We have already shared that we will never allow debt-to-equity to go beyond 1:1. Our comfortable figure is 0.75 as the upper end, and the target will be around 0.5. Even with this new plant, we expect to be only touching 0.75 for a brief period, if at all, and then coming down quickly to 0.5.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Thank you. Before we take the next question, a reminder to all the participants, you may press star and then one to ask a question. Our next question comes from the line of Prateek Duggar from Intelsense. Please go ahead.

Yeah. Am I audible?

Yes, sir, you’re audible.

Okay. Go ahead, Prateek.

Okay. First of all, congratulations to the management for a great set of numbers. I think a lot of initiative has been taken with the IT partnership to give us a good growth path for the company. I would just like to ask the management, what are the sustainable margins that we see for our business? That’s the first question.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: As we said, from next year, we hope to have between INR 8,000-INR 11,000 EBITDA per ton.

Okay, sir. Do we see right now, I think.

All going well, in the next two years after that, we hope to increase it further, but we can’t, but that is a hope. Eight to 11, there is a reasonable confidence that we’ll be in that range from next year.

Okay, sir. Okay, sir. That’s it. Thank you.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Thank you. Our next question comes from the line of Vineet Thakur from Plus91 Asset Management Company. Please go ahead.

Hi, sir. Good afternoon, sir. Thank you for the opportunity. I’d just like to know the outlook of our industry as a whole. What do you think would be down next two years with the green steel demand going up or no? What do you think about that, sir?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Very difficult to predict in the next year or two, but over the next five-year period, we expect good demand because of all these factors. Year or two, very, very difficult to predict because these are trends which everybody is talking about. The first action we have seen is from Maruti for the circular economy initiative, which we started last month. This is the first initiative from any OE that we have seen. Secondly is the European OEs that are coming to us. That is happening because of green steel. Till the government of India cracks the whip a little bit and gives some targets, very difficult for us to predict when the movement of these green will have an impact.

When I’m saying that we’ll be improving our EBITDA per ton to 8-11 or a little beyond that, we are not taking any impact of these factors which are beyond our control. If green steel becomes a reality in India and becomes a requirement as it should, there will be a massive boost in terms of demand and therefore ability to improve margins. That is not in our control. That may happen three years from now. That may happen five years from now. It may just remain talk. We don’t know as of now.

And sir.

What we do here is that there is seriousness towards this.

Okay, sir. Thank you. Sir, I have one more question. Since you know the government has given the target of 300 million tons by FY 2030, do you think it would have affected you positively or would it have incrementally brought on you your revenue or your cost margins?

These questions are more relevant to a JSW or Tata Steel or ArcelorMittal, which are at 40 million, 50 million, 60 million bigger target. We are a small company. Our target is to reach up to 0.8 million tons.

Okay, sir. Thank you so much.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Thank you. Participants, if you wish to register for a question, please press star and then one. Our next question comes from the line of Aniket Ratkar, an investor. Please go ahead.

Good afternoon, everyone, and thank you for the opportunity. Sir, I just want to understand. In terms of the strategic outlook, can you throw some light on the reheating furnace upgrade?

Hello.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Reheating furnace is a higher, so it is a part of the process. We already have a reheating furnace. Basically, when you make steel, it comes out from the casting in the form of billets. Those billets then get cooled down. You cannot roll cold billets, so they have to be heated again. That machine which does the reheating of billets is called the reheating furnace. We already had a reheating furnace. There were two issues with that. One was it had a smaller capacity, and that was the bottleneck, which would not allow us to increase production in our rolling mill. Second, it had a walking car furnace, which leads to some quality issues. We are moving to a bigger furnace and a walking beam furnace, which means the quality will improve, which means our rejections and rework costs will come down, and our rejections should also come down.

That is one part. Our capacity will go up. The third, we will be increasing our billet size from 4.2 meters to 5.2 meters. Both sides of a billet are cut as scrap. On 4.2 meters, we were cutting out scrap. We will be cutting out scrap at 5.2 meters, which will reduce the total amount of scrap that we generate internally, and therefore our yield will go up, which will all lead to cost savings. There is production improvement, quality improvement, and cost reduction, all three aspects.

Okay. Okay. So, sir, you were saying the capacity is fully utilized in terms of the reheating furnace upgrade. Is there any plan to expand the capacity in this?

Yeah. Yeah. That’s what I’m saying. With this new reheating furnace, then from 200,000 tons, which is our current capacity, we’ll be able to go up to 270,000 tons.

Okay. Okay. Sir, in terms of our revenue and our margin.

Our rolling mill will go up.

Okay.

I’m sorry.

Okay, sir.

Hello? Therefore, revenue will also improve because we’ll be able to produce more material. Two, our margin will go up because our costs will come down with the new reheating furnace.

Okay. Okay. Got it, sir. And, sir, one last question. In terms of revenue and margin mix, how do you envision that revenue and margin mix evolve by FY 2028 across our rolling mills and bright bars?

FY 2028, we expect to hit 270,000 tons, which is our capacity.

Okay.

EBITDA per ton, 8-11, we are quite confident. We hope by then we will be able to increase this range. From 8-11, maybe 8-12 or 9-12. We expect to see a bigger margin, but very difficult to predict so far advanced. The confidence level that we have is 8-11.

Got it. Got it, sir. Thank you, sir. Thank you so much from my side.

If you see the lower end of that, that means 270,000 tons. We’ll be able to achieve that figure, huh? INR 216 crore at the lower end is what the EBITDA should be.

Got it. Got it, sir.

On 270,000 tons, it can go up to 300,000 tons, about INR 3 billion. I’m saying by then we will be able to give a better forecast as we get closer to that figure.

Got it, sir. Got it. Thank you, sir. This is from my side.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Thank you. Participants, you may press star and then one to ask a question. Our next follow-up question comes from the line of Radha from BNK Securities. Please go ahead.

Conference Moderator, AddFactors PR: Hi, sir. Am I audible?

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Yes, ma’am. You’re audible now.

Conference Moderator, AddFactors PR: Sir, what is the incremental cost per ton of the extra processes that happens in bright bars over black bars?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: We don’t share those numbers.

Conference Moderator, AddFactors PR: Sir, generally for the industry, how much?

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: I haven’t looked at industry numbers, so I don’t know. It is 25. Roughly, our bright bar is between 20-25%, and black bar is about 75-80%, roughly.

Conference Moderator, AddFactors PR: Sir, last question. In your previous calls, you had indicated that you will start supplying to auto OEs directly. Sir, actually, the products that you.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Yes, we already discussed that. I’m sorry?

Conference Moderator, AddFactors PR: Yes, sir. OEs usually buy this.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: For gas.

Conference Moderator, AddFactors PR: For gas.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: For gas. Yeah. This is what we discussed a little bit earlier in the call, of import substitution. Where the OE was directly importing steel from Japan, that steel is likely to come to us. That approval process has been done. Now the question is they have to take a decision when will they do the switching over.

Conference Moderator, AddFactors PR: Understood, sir. Thanks and all the best to you.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: This will be the first case where we’re supplying directly to V2 and OE. Otherwise, normally we supply to tier ones or sometimes tier twos.

Conference Moderator, AddFactors PR: Yes, sir. Thank you and all the best to you.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Thank you.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Sachit Jain, Chairman and Managing Director, Vardhman Special Steels Limited: Ladies and gentlemen, thank you so much for having interest in our company. One thing which is very interesting for us is that since I came to this business in 2010, we have been continuously investing in this plant. Now, thanks to those continuous investments, we have reached from 50,000 tons of production. We hope to reach 270,000 tons of capacity by next year and filling up the capacity in two to three years. After this, we should hopefully end our CapEx cycle as far as this plant is concerned. There is one idea which we are working on, which is if it can go even beyond these capacity levels. That idea, once we are able to test it out, then we will share, that may require further CapEx. That is only if this idea works out. Otherwise, as far as we are concerned, this plant is now largely done.

The future CapEx will largely go into the new plant and the forging business. The announcement of the forging business will happen by January. As of now, the target commissioning of the forging line is also before July 2029. Both these things, which will happen simultaneously, the forging line as well as the new plant, should happen simultaneously. We will have more details when we have our January conference. Thank you very much, and we look forward to your remaining with us as we continue on this journey. Thank you.

Sanjeev Singla, Chief Financial Officer, Vardhman Special Steels Limited: Thank you. On behalf of AddFactors PR, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.