Vardhman Special Q1 FY27 Earnings Call — Analysis (NSE: VSSL)

Vardhman Special Steels reports strong Q1 FY27 with EBITDA/ton at ₹10,700 (ex-surplus fund income), sees confidence to raise its EBITDA/ton guidance range to ₹8,000–12,000 next year amid capacity constraints and new growth engines.

29 Jul 2026 · Analysis by Alpha Inflection

The take

Q1FY27 Revenue from Operations ₹486 Cr ( +12% YoY ) . New guidance — FY27 fy27 sales volume 255,000 tons . New story: Capacity constraints limiting growth, expansion… .

Results

Revenue ₹486 Cr (+12% YoY); EBITDA ₹68 Cr; PAT ₹41 Cr (vs ₹20 Cr YoY); sales volume 59,000 tons (+6.5% YoY); business EBITDA per ton ₹10,760 (adjusted for surplus fund income).

Financial highlights

Guidance

Management guided FY27 volume target of ~255,000 tons and aims to raise EBITDA/ton range to ₹8,000–12,000 next year (from ₹8,000–11,000), with further upside to ₹9,000–12,000 after solar expansion.

What management committed to

• We are targeting about 255,000 tons for [FY27]. — 255,000 tons, FY27
• Next year [FY28] we expect to cross 270,000 [tons of sales]. — 270,000, FY28
• Next year [FY28] we should be able to increase the [EBITDA/ton] range from 8,000 to 12,000. — 8,000-12,000, FY28
• Once the solar plant gets commissioned, then we would like to change the range to 9,000 to 12,000... For next year [FY28] it will be 8,000 to 12,000. The year after that [FY29], we should move to 9,000 to 12,000. — 9,000-12,000, FY29
• Forging project is likely to get commissioned by last quarter of '27-‘28 [Q4FY28]. — Q4FY28
• From the INR475 crores that we had estimated, there is a substantial saving... The saving is more than 10%. — more than 10% lower than INR475 Cr, FY28
• We have applied to the Environment Ministry for approval to increase capacity to 360,000 tons of melting... in all probability in the next 3, 4 months, we should get the approval. — 360,000 tons, Q3FY27
• If the approval [environmental clearance for 360,000 tons] comes in, then we will up the sales target for next year from 270, we will come up to something like 290... and... reach 330, 340 in the year '28, '29 [FY29]. — 330,000-340,000 tons, FY29
• In about a year or 1.5 years' time, we'll be going ahead and we'll be increasing the capacity by almost 50% of our solar plant. — 50% increase, FY28
• In the financial year '27-'28 [FY28], we should have production of die steels as a regular thing. — FY28
• The commercial production beginning for the import substitution for Maruti... will start happening in the fourth quarter of the financial year [Q4FY27]. — Q4FY27
• New NDT line will be commissioned by September, October of this year [2026]. And new peeling line will be commissioned by September, October of this year [2026]. — Q2FY27

Key themes

Capacity expansion and new growth engines driving margin improvement

How the narrative shifted

• Capacity constraints limiting growth, expansion plans: Management is scrambling to meet demand, applying for EC to raise melting capacity; expansion is necessary to break out of 7-8% growth ceiling.
• Non-automotive diversification into die steel, railways, windmill: Ingot casting to unlock a second engine of growth in high-margin import-substitution segments (die steel, railway axles, windmill shafts), reducing reliance on automotive steel.
• Margin uplift via cost optimization, solar, and insourcing: Fixed cost absorption on higher volumes, yield gains, insourcing of job work, and solar power cost reduction will structurally raise EBITDA/ton ranges.
• Forging JV with Aichi Steel as new growth engine: The forging forge with Aichi technology and >10% cost savings adds a third growth engine; customer approvals are being pre-secured via Aichi’s forging trial.
• Green steel leadership for export/regulatory advantage: VSSL is the only Indian steel company with carbon footprint <0.5 and needed approvals, positioning it as sole green steel supplier for Toyota and European customers.
• Maruti import substitution as near-term volume catalyst: Maruti is localising imported steel via VSSL; commercial start in Q4FY27 will add incremental volume and deepen relationship with India’s largest passenger car OEM.
• Greenfield project reconfiguration to increase capacity and reduce carbon: The new plant is being upgraded with scrap preheating and extra testing lines; capacity will exceed 5 lakh tons, cost per ton will drop, but total capex will rise; final numbers by next quarter.

Operational commentary

• Forging project with Aichi Steel on track; total cost likely >10% lower than earlier estimate of ₹475 Cr, commissioning expected by Q4FY28; ramp-up over 6–12 months thereafter
• New greenfield steel plant (initially 5 lakh tons) being reconfigured with additional equipment (scrap preheating, extra testing lines); capacity to increase significantly; cost per ton expected lower than original estimate, though total project cost will rise due to metal inflation and INR depreciation; commissioning targeted by end FY30
• Applied for Environmental Clearance to raise melting capacity from 3 lakh to 3.6 lakh tons; approval expected in next 3-4 months; post-approval, sales target for FY28 to be revised up to ~290,000 tons and, after capex, to 330,000–340,000 tons by FY29
• New reheating furnace fully stabilised; NDT line and peeling line to be commissioned by Sep-Oct 2026, removing current testing/peeling bottlenecks and improving product mix from H2FY27
• Ingot casting to be established by Q3FY27, enabling entry into non-automotive segments: die steels (currently ~₹1,000 Cr imports), railway axles, windmill shafts; die steel regular production targeted by FY28
• Maruti import-substitution program progressing; commercial production expected to commence Q4FY27, adding volume
• Solar plant contributed 2.3 Cr units (43% of power) in Q1; government policy change to permit 50% solar capacity expansion in about 1–1.5 years, though cost savings lower than phase-1 due to domestic cell requirement
• Toyota-Sambhaji Nagar expansion presents additional demand; VSSL the only approved green steel supplier (carbon footprint <0.5), strengthening position for exports and local green steel mandates
• Future Advanced Metals (aerospace, nuclear) to be pursued as a separate JV with a technology partner; process expected to take 2+ years

Analyst Q&A

• Q. What will be the exact reduction in forging project cost?

  More than 10% saving from the INR475 crores estimate; exact numbers being worked out and will be shared by next quarter.

• Q. Could you quantify how much of sales are exports and the growth outlook?

  Direct exports 6-7%, indirect another ~5%. Earlier assumption about strong export growth was a mistake; domestic demand so strong that exports are not a priority; from next quarter they will estimate indirect exports as components.

• Q. What are the key drivers for raising EBITDA per ton guidance to ₹8,000–12,000 next year?

  1) Higher production spreading fixed costs; 2) Operating costs coming down; 3) Job work/outsourcing reducing from Q3. Solar expansion to add later.

• Q. When will commercial production start for the Maruti import-substitution program?

  Start in Q4 of this financial year (Q4FY27).

• Q. What is the outlook on steel realizations for the next 2 quarters?

  Q2 prices will be higher than Q1. Q3 likely similar or slightly higher/lower depending on raw material cost movement.

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