Summary
Vardhman Special Steels Limited - Q3 FY 2026 Earnings Call Summary Wednesday, January 21, 2026
Event Participants
Executives 4 R. K. Rewari (Executive Director), Sachit Jain (Chairman and Managing Director), Sanjeev Singla (Chief Financial Officer), Soumya Jain (Executive Director)
Analysts 5 Aditi Chavan (Deshmukh Securities), Amit Agicha (H.G. Hawa & Co.), Amit Sharma (Adfactors PR), Nishita (Sapphire Capital), Saket Kapoor (Kapoor & Company), Samarth (Janak Merchant Securities)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Sales Volume | 55,000 metric tons | +4.6% YoY on a rolled-to-rolled basis; on track for FY26 target of 2,25,000 tons. |
| Revenue | ₹430 crores | +0.9% YoY; growth muted due to price reductions following a decline in raw material costs. |
| EBITDA | ₹56 crores | +34% YoY; includes non-operational interest income from Aichi funds and electricity duty exemptions. |
| EBITDA per Ton | ₹10,200/MT | Reported value; adjusted for non-operational income, normalized EBITDA is ₹9,263/MT. |
| Profit After Tax (PAT) | ₹88 crores (9M) | Highest ever 9M profit; compares to ₹73 crores in 9M FY25. |
| Billing Capacity | 3,00,000 metric tons | Current capacity; management is seeking licenses to expand this further. |
| Rolling Capacity | 2,10,000 metric tons | Guided to increase to 2,70,000 tons from Q1 FY27 post-reheating furnace commissioning. |
Geographic & Segment Commentary
- Domestic Automotive: Primary segment comprising almost 100% of current business. Management identified the company as the #2 player in terms of OEM width, with a goal to become #1 in special steels post-2029 expansion.
- Exports: Thailand remains the largest direct export market, accounting for over 70% of total export volumes. Indirect exports (components made by customers like Sona Comstar and GNA Axles) are primarily shipped to the US, Europe, and Mexico.
- Non-Automotive Steel: A new strategic focus area targeting 30% of business within 10 years. Focus will be on bearings, railways, defense, aerospace, and oil & gas, utilizing the technical capabilities of the upcoming Greenfield plant.
Company-Specific & Strategic Commentary
- Forging Project: Board approved a ₹475 crore investment for a new forging plant scheduled for commissioning in July 2028. The facility will leverage Aichi Steel’s (Toyota Group) technical expertise, initially targeting the Indian passenger car segment.
- Greenfield Steel Plant: Planned for July 2029 commissioning with a capacity of 5,00,000+ tons. This facility will allow the company to produce larger sizes (90mm+) and cater to non-automotive sectors.
- Reheating Furnace: Commissioning expected by March 2026 with full benefits by mid-April. Expected to eliminate most job work outsourcing, improve yield through longer billets (5.2m vs 4.2m), and reduce rejections.
- Kocks Block & Testing: Kocks Block is fully operational, improving bar roundness and diameter precision. A new non-destructive testing (NDT) line will be operational by June/July 2026 to serve high-end customers and improve product mix.
- Solar Project: Connectivity issues resolved; the plant is expected to go live by late January 2026. This will reduce carbon footprint from 0.73 to 0.48 and lower power costs.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| EBITDA per Ton | ₹8,000 - ₹11,000/MT | FY27 target; increased from ₹7,000 - ₹9,000 range due to reheating furnace efficiencies. |
| Total Sales Volume | 2,25,000 metric tons | Target for full year FY26; 2,70,000 - 2,75,000 tons targeted within 3 years. |
| Total Steel Capacity | 8,00,000 metric tons | Long-term target following July 2029 commissioning of the Greenfield plant. |
Risks & Constraints
| Risk | Context |
|---|---|
| Raw Material Volatility | Management noted a trend reversal in late December with prices rising into January, which may impact Q4 margins or necessitate Q1 FY27 price hikes. |
| Capacity Constraints | Current rolling capacity of 2,10,000 tons is a near-term bottleneck until the new furnace is fully operational in April 2026. |
| Implementation Risk | Simultaneous execution of a ₹475 crore forging plant and a large-scale (₹2,000 crore class) Greenfield steel plant by 2028-29 requires significant managerial bandwidth. |
Q&A Highlights
Operational Efficiencies
- Question: What are the specific benefits of the reheating furnace? (Aditi Chavan)
- Answer: Yield will improve as billet sizes increase from 4.2m to 5.2m; quality improvements will reduce rejections and the elimination of job work will add to the bottom line (Sachit Jain).
Forging Strategy
- Question: Will the new forging plant only serve Toyota/Maruti? (Samarth)
- Answer: No, it will serve the entire Indian market including Tata and Mahindra, targeting components for the car segment and Tier 1 suppliers like Sona Comstar (Sachit Jain).
Future Product Mix
- Question: What is the plan for non-automotive steels? (Amit Agicha)
- Answer: Currently at zero, but targeting 30% of sales in 10 years. We will use the ingot casting route for specialized high-alloys (nickel, titanium, moly) for aerospace and defense (Sachit Jain).
Financial Support
- Question: How will the massive capex be funded? (Sachit Jain - Closing Remarks)
- Answer: Both major shareholders, Aichi Steel (24.9% stake) and Vardhman Group, have expressed willingness to infuse capital as required for the new projects (Sachit Jain).
Key Takeaway
Vardhman Special Steels delivered a resilient third quarter with a record 9M PAT of ₹88 crores, supported by sales volumes of 55,000 tons and an adjusted EBITDA of ₹9,263/MT. The company is at a strategic inflection point, transitioning from a pure-play automotive steel supplier to a diversified special steels and forging entity. Strategic milestones include the ₹475 crore forging project (July 2028) and the 5,00,000-ton Greenfield plant (July 2029). Management raised its FY27 EBITDA guidance to ₹8,000-₹11,000/MT, underpinned by the upcoming commissioning of a new reheating furnace in March 2026 which will eliminate costly job work and enhance yields. While raw material prices have begun to firm up, the company remains well-capitalized with strong backing from Aichi Steel and Vardhman Group to fund its multi-year expansion. Focus remains on breaking operational bottlenecks by mid-2026 to reach a 2,70,000-ton rolling capacity.
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