SAL Steel Reports Profit Amid Auditor Concerns and Ownership Transition

SAL Steel Limited , a key player in the ferro alloys and sponge iron manufacturing sector, has reported a net profit of Rs 3.73 crore for the quarter ended September 30, 2023. This marks a significant turnaround from the previous quarter's loss of Rs 9.68 crore. However, the company's financial results come with notable auditor qualifications and amid a major ownership transition.

Financial Performance

The company's financial results for the quarter show:

Particulars	Q2 2023 (Rs in crore)	Q1 2023 (Rs in crore)	Change
Total Revenue	65.73	127.68	-48.52%
Net Profit	3.73	-9.68	Positive swing
EPS (Basic & Diluted)	0.44	-1.14	Positive swing

The total revenue for the quarter stood at Rs 65.73 crore, a significant decrease from Rs 127.68 crore in the previous quarter. Despite the revenue decline, the company managed to turn a profit, largely due to a substantial reduction in expenses.

Auditor Qualifications

The company's auditors, Parikh & Majmudar, have issued a qualified opinion on the financial results, highlighting two key issues:

Unprovided Electricity Duty: The company has not made provisions for electricity duty amounting to Rs 12.69 lakh for the quarter. If accounted for, this would reduce the reported profit by the same amount.
Capital Work in Progress Impairment: The auditors noted that the company has not impaired its entire Capital Work in Progress. This non-impairment amounts to Rs 100.94 lakh, which, if recognized, would further reduce the reported profit.

These qualifications suggest that the actual financial position of the company may be less favorable than the reported figures indicate.

Ownership Transition

A significant development is underway regarding the company's ownership structure. The current promoters, Shah Alloys Limited and SAL Care Private Limited, have entered into a Share Purchase Agreement with Sree Metaliks Limited. This agreement involves:

The sale of 4,29,59,495 equity shares and 48,00,000 share warrants held by the current promoters to Sree Metaliks Limited.
A separate Share Subscription Agreement for Sree Metaliks to subscribe to 1,92,50,000 fresh equity shares and 3,57,50,000 share warrants for Rs 99 crore.

This transition is currently in process, with an open offer to public shareholders underway in compliance with SEBI regulations.

Market Implications

The company's return to profitability, despite reduced revenue, may be viewed positively by investors. However, the auditor qualifications raise concerns about the accuracy of the reported financial position. The ongoing ownership transition adds another layer of complexity to the company's future prospects.

Investors and market analysts will likely keep a close watch on how the new ownership, once finalized, might influence the company's strategic direction and financial management practices. The resolution of the issues highlighted by the auditors will also be crucial for building investor confidence in the coming quarters.

As SAL Steel navigates through these financial and structural changes, stakeholders will be keen to see how the company addresses the auditors' concerns and leverages the potential synergies from the new ownership structure to drive sustainable growth and profitability.

1 Day	5 Days	1 Month	6 Months	1 Year	5 Years
-1.90%	+12.93%	-5.40%	+150.09%	+77.82%	+1,030.81%

Sree Metaliks Limited has made a significant move in the steel industry by acquiring a 39.30% stake in SAL Steel through a preferential allotment. This strategic acquisition involves both equity shares and convertible warrants, potentially reshaping the ownership structure of SAL Steel.

Transaction Details

Particulars	Details
Equity Shares Acquired	1,92,50,000
Price per Share	Rs. 18.00
Total Value of Shares	Rs. 34.65 crores
Warrants Acquired	3,57,50,000
Price per Warrant	Rs. 18.00
Total Value of Warrants	Rs. 64.35 crores
Warrant Conversion Period	Within 18 months from allotment date

Stake Distribution

Type	Percentage
Equity Shares	13.57%
Warrants (Convertible)	25.34%
Total Stake	39.30%

The transaction was completed on November 1, 2025, marking a significant change in SAL Steel's ownership structure. Following this acquisition and the completion of an open offer, Sree Metaliks is set to be classified as a promoter of SAL Steel.

Implications

Change in Promoter Status: The existing promoters of SAL Steel will cease to hold promoter status following this transaction.
Strategic Position: Sree Metaliks' substantial stake positions it as a key player in SAL Steel's future decisions and operations.
Potential for Further Integration: The acquisition may lead to synergies between the two companies in the steel sector.

This move by Sree Metaliks demonstrates the ongoing consolidation and strategic realignments within the Indian steel industry. The transaction's structure, involving both immediate equity and future convertible warrants, provides Sree Metaliks with a significant influence in SAL Steel while offering flexibility in its investment approach.