Vardhman Special Steels Reports 16% EBITDA Growth Despite Volume Decline in Q2 FY26

Vardhman Special Steels Limited (VSSL) has reported a mixed set of results for the second quarter of FY26, with EBITDA growth offsetting lower sales volumes and revenue decline. The company's strategic initiatives and operational improvements have helped maintain profitability despite market challenges.

Financial Performance

VSSL reported the following key financial metrics for Q2 FY26:

Metric	Q2 FY26	Q2 FY25	YoY Change
Sales Volume	55,500 tons	59,000 tons	-5.93%
Revenue	Rs. 432.00 crores	Rs. 494.50 crores	-12.64%
EBITDA	Rs. 56.00 crores	Rs. 48.00 crores	+16.67%
EBITDA per ton	Rs. 10,000	Rs. 8,135	+22.92%
PAT	Rs. 34.50 crores	Rs. 26.00 crores	+32.69%

The company's revenue declined due to lower volumes and price reductions. However, EBITDA increased by 16% year-on-year, with EBITDA per ton reaching Rs. 10,000. The profit after tax (PAT) grew significantly, benefiting from reduced finance costs following Aichi Steel's Rs. 385 crore investment for a 25% stake in the company.

Operational Highlights

VSSL renewed its technical assistance agreement with Aichi Steel for three years, strengthening their partnership.
The company successfully commissioned the Kocks Block, enhancing its production capabilities.
A new reheating furnace is expected to be commissioned by March, which will increase rolling capacity to 2,70,000 tons and reduce job work costs.
VSSL initiated a circular economy project with Maruti Suzuki, buying CRC scrap from Maruti plants to make steel in a closed loop.

Future Outlook

The management expects FY27 volumes to reach around 2,45,000 tons. They maintain an EBITDA guidance of Rs. 8,000-11,000 per ton from the next financial year, indicating confidence in sustained profitability.

Strategic Initiatives

Capacity Expansion: The upcoming reheating furnace will not only increase production capacity but also improve quality and yield, leading to cost savings.
Green Steel Focus: VSSL is positioning itself as a leader in green steel production, which is attracting interest from European OEMs and aligning with global sustainability trends.
Circular Economy: The partnership with Maruti Suzuki on circular economy initiatives may pave the way for similar arrangements with other OEMs, potentially boosting demand and margins.
Forging Business: The company plans to announce details of its new forging business by January, which could open up new revenue streams and enhance its product portfolio.
Export Opportunities: While current exports are limited to 6-8% of revenue, the company is working on approvals that could drive future export growth, particularly as global trade issues resolve.

Challenges and Risks

The company faces ongoing price competition, which it aims to counter through quality improvements and cost reductions.
Global economic factors, such as the weakening Japanese yen, have impacted export volumes to partners like Aichi Steel.
The auto industry's transition towards electric vehicles may require VSSL to adapt its product offerings in the long term.

Vardhman Special Steels Limited's focus on operational efficiency, strategic partnerships, and future-oriented investments appears to be paying off, as evidenced by its improved EBITDA performance. The company's initiatives in green steel and circular economy position it well for future growth in an evolving automotive market. However, investors should monitor the execution of capacity expansion plans and the development of new business lines, as these will be crucial for VSSL's long-term success in a competitive industry landscape.

1 Day	5 Days	1 Month	6 Months	1 Year	5 Years
-3.42%	-2.74%	-2.94%	+22.75%	+3.31%	+673.45%

Vardhman Special Steels Limited has reported no deviation in the utilization of funds raised through its recent preferential issue, according to the monitoring agency report for the quarter ended September 30, 2025. The report, issued by CRISIL Ratings Limited, confirms that the company has adhered to the disclosed objectives of the issue.

Fund Raising and Allocation

On July 4, 2025, Vardhman Special Steels raised Rs 3,849.09 crore through a preferential issue. The funds were allocated for three specific purposes:

Purpose	Amount (in crore)
Capital expenditure for greenfield steel plant in Ludhiana, Punjab	1,349.09
Capital expenditure for existing plant	1,000.00
Repayment of working capital borrowing	1,500.00

Fund Utilization

During the reported quarter, the company utilized Rs 500 crore for the repayment of working capital borrowing. The remaining unutilized proceeds, amounting to Rs 2,349.09 crore, have been deployed in fixed deposits with ICICI Bank.

Deployment of Unutilized Funds

The unutilized funds have been invested as follows:

Instrument	Amount Invested (in crore)	Maturity Date	Earnings (as of Sept 30, 2025)	Return on Investment
FD in ICICI Bank	499.09	April 1, 2026	7.30	6.00%
FD in ICICI Bank	1,850.00	October 3, 2025	25.26	5.60%

The total market value of these investments as of September 30, 2025, stands at Rs 2,381.65 crore.

Monitoring Agency's Observations

CRISIL Ratings Limited, serving as the monitoring agency, has reported that:

The utilization of funds is in line with the disclosures made in the Notice to Shareholders.
There have been no material deviations requiring shareholder approval.
The means of finance for the disclosed objects of the issue remain unchanged.
No major deviations have been observed compared to earlier monitoring agency reports.

Company's Compliance

Vardhman Special Steels has submitted this report in compliance with Regulation 32(6) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and Regulation 162A of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

The monitoring agency's report provides an objective view of the utilization of the issue proceeds, ensuring transparency and adherence to regulatory requirements.