VSSL - Vardhman Special Steels Ltd Share Price

Management has provided an optimistic outlook for Vardhman Special Steels, highlighting a record profit of approximately INR 122 crores and a sales volume of 225,000 tons, which met their budget expectations. Looking ahead, the company plans to increase production capacity and improve operational efficiencies. The outlook includes several key forward-looking points:

1. Volume Growth: The company targets to increase its production from 225,000 tons in FY26 to approximately 250,000 tons in FY27 and aims to achieve 270,000 tons in the subsequent years.

2. EBITDA Guidance: Management has revised its EBITDA per ton guidance from INR 8,000-11,000 for FY27, increasing it further to INR 9,000-12,000 by FY29. This marks a significant shift from its previous range of INR 7,000-10,000.

3. Capex Plans: For FY27 and FY28, management anticipates capex exceeding INR 700-800 crores, primarily due to investments in a new forging plant and a greenfield steel plant, with a total projected expenditure of about INR 2,600 crores by FY30.

4. Production Capacity: Plans for future expansion include a new steel plant expected to have a capacity ranging from 500,000 to 600,000 tons, projected to commence production in July 2029.

5. Strategic Diversification: Management is looking to diversify its special steels portfolio to include 30% non-automotive steels within the next 10 years and enter sectors such as aerospace and defense.

6. New Product Lines: The company is laying the groundwork for entering ingot casting and specialized alloys, targeting higher-value segments of the steel market.

7. Dividends: The board has declared a dividend of INR 3.50 per share due to strong performance and optimistic growth strategies.

8. Environmental Approvals: The company is hopeful about receiving environmental clearance to expand its melting capacity from 300,000 to 360,000 tons, expected by early next year.

These points reflect management's proactive approach and confidence in meeting their growth aspirations while navigating the current market landscape.

Earnings Conference Call Q&A Summary

Question 1:

Saket Kapoor: "What should we look forward to in terms of our ramp-up in volume of rolled products, aiming for 250,000 tons?"

Sachit Jain: "We closed this year at 225,000 tons. For the coming year, our target is to cross 250,000 tons, perhaps 255,000 tons. Please consider 250,000 tons as a target for your calculations."

Question 2:

Sanaa: "What is the current capacity usage, and how much can we see in improvement next year?"

Sachit Jain: "Our rolling mill capacity currently stands close to 180,000 tons. However, we sold 225,000 tons due to outsourced rolling. In FY '26-'27, we expect our capacity to increase to 270,000 tons, aiming to sell around 250,000 tons."

Question 3:

Nishita: "What is the capex for the greenfield plant, and when do we expect it to commission?"

Sachit Jain: "We expect the new plant to commission by July '29. We are planning for a capacity increase up to 500,000 tons but are currently focusing on reaching 270,000 tons in this plant."

Question 4:

Shlok Bhartiya: "What potential savings from the reheating furnace and solar power do you expect?"

Sachit Jain: "We are increasing our EBITDA range to INR 8,000 to INR 11,000 due to better efficiencies from these new installations. Specific savings remain to be detailed but these initiatives will certainly contribute to cost improvements."

Question 5:

Avdhut Joshi: "What are the plans regarding exports and how do we foresee their growth?"

Sachit Jain: "We have seen a shift towards component exports rather than direct steel exports. Our focus will be on providing components to global OEMs as India's manufacturing capabilities expand, particularly in light of FTAs with Europe."

Question 6:

Ritwik Sheth: "What are your plans for funding the new projects in terms of debt and equity?"

Sachit Jain: "We plan to keep our debt-equity ratio below 0.75, comfortable around 0.5. We anticipate around INR 1,200 crores infusion from equity, with similar debt levels. Significant capital expenditure will be incurred in FY '27 and '28."

These responses encapsulate the company's strategic foresight and immediate operational objectives while maintaining clarity regarding projected growth and performance metrics.