Vardhman Special Steels Limited (VSSL), a leading producer of special steels in India, has reported its financial results for the second quarter, revealing a mixed performance with volume decline but improved financial position.

Quarterly Performance

VSSL reported a sales volume of 55,536 tonnes for Q2, marking a decrease from 59,018 tonnes in the same period last year. This decline in volume contributed to a 12.64% year-on-year decrease in revenue from operations, which stood at Rs. 432.27 crore for the quarter.

Despite the volume decline, the company's financial performance showed resilience:

Debt-Free Status Achievement

A significant milestone for VSSL this quarter was the complete clearance of both its long-term and short-term debts, resulting in a debt-free balance sheet. This strategic move has led to reduced interest expenses, contributing positively to the company's profitability.

Operational Highlights

• EBITDA per tonne reached Rs. 10,170, driven by lower raw material costs and higher other income.
• The company commenced commercial utilization of the Kocks Block, expanding its range of rolled products and improving overall productivity.
• VSSL is progressing with its capex for a new reheating furnace, expected to be commissioned in the second half of the fiscal year, which may boost capacity and operational performance.

Management Commentary

Mr. Sachit Jain, Vice Chairman & Managing Director of VSSL, commented on the results: "Q2 was a stable quarter with total revenue of Rs. 432.27 crores, EBITDA of Rs. 56.48 crores, and PAT of Rs. 34.56 crores. The Company achieved its EBITDA per ton of Rs. 10,170, primarily driven by lower raw material costs and higher other income."

Strategic Investment

VSSL received Rs. 385 crores from Aichi Steel Corporation, of which Rs. 150 crores were utilized to repay short-term borrowings. The balance has been temporarily parked in investments, providing the company with a strong liquidity position for future growth initiatives.

While VSSL faces challenges in terms of volume decline, its improved financial position and strategic investments may position the company well for future growth in the special steels sector.

Vardhman Special Steels Limited (VSSL) has announced its financial results for the second quarter, showcasing improved profitability despite a decline in revenue. The company's performance reflects its ability to enhance operational efficiency in the face of challenging market conditions.

Financial Highlights

Revenue and Profitability

Despite a 13.13% year-over-year decline in revenue to ₹4,300.00 crore, Vardhman Special Steels demonstrated strong profitability growth. The company's EBITDA increased by 15.65% to ₹453.00 crore, compared to ₹391.70 crore in the same quarter last year. This improvement led to a significant expansion in the EBITDA margin, which rose from 7.91% to 10.53%.

The company's bottom line also showed remarkable growth, with net profit surging by 34.11% to ₹346.00 crore, up from ₹258.00 crore in the corresponding quarter of the previous year.

Operational Efficiency

The substantial improvement in EBITDA margin, despite the revenue decline, suggests that Vardhman Special Steels has successfully implemented cost optimization measures and enhanced its operational efficiency. This ability to maintain profitability in the face of reduced revenue demonstrates the company's resilience and adaptability to market challenges.

Strategic Initiatives

The Board of Directors of Vardhman Special Steels has approved the introduction of an equity-based compensation scheme called "Vardhman Special Steels Limited Employee Stock Option Plan 2025." This plan, subject to shareholder approval, aims to align employee interests with those of the company and its shareholders, potentially boosting long-term performance and retention of key talent.

Outlook

While the revenue decline may raise concerns, the significant improvement in profitability metrics indicates that Vardhman Special Steels is effectively managing its operations. The company's ability to expand margins in a challenging environment positions it well for future growth as market conditions improve.

Investors and stakeholders will likely keep a close watch on how the company maintains this profitability trend and whether it can reverse the revenue decline in the coming quarters. The implementation of the employee stock option plan may also be seen as a positive step towards long-term value creation for the company.

As the steel sector navigates through various market dynamics, Vardhman Special Steels' performance this quarter demonstrates its capability to adapt and thrive, setting a solid foundation for future growth.