Vardhman Special Steels: Forging Ahead with Strategic Alliances and Operational Excellence

Vardhman Special Steels Limited, a prominent player in India's special steels sector, has reported a stable and strategically significant performance for Q2 and H1 FY26. The company's latest earnings call and investor presentation highlight a period of robust operational enhancements, strategic partnerships, and a clear roadmap for future growth, despite facing some market headwinds. For Q2 FY26, Vardhman reported a total revenue of ₹432.27 crore, with an EBITDA of ₹56.48 crore and a Profit After Tax (PAT) of ₹34.56 crore. This represents a healthy 33.86% year-on-year increase in PAT, primarily attributed to lower raw material costs and a notable rise in other income. The company also achieved a significant milestone by becoming debt-free during the quarter, further strengthening its financial position.

The first half of FY26 also demonstrated resilience, with total revenue reaching ₹865.97 crore and an EBITDA of ₹95.81 crore. While revenue saw a slight decrease year-on-year due to lower volumes and realizations, the company's strategic initiatives and cost management efforts helped maintain profitability. Sales volume for Q2 FY26 stood at 55,536 tonnes, and 1,11,109 tonnes for H1 FY26, reflecting a marginal increase in H1 volumes compared to the previous year. The EBITDA per ton for Q2 FY26 was ₹10,170, driven by reduced raw material prices and increased other income from investments.

Strategic Alliances and Capacity Expansion

A cornerstone of Vardhman's strategy is its deepening alliance with Aichi Steel Corporation (ASC) of Japan. Aichi has increased its equity stake in Vardhman from 11.33% to 24.90%, signaling a robust commitment to the partnership. This collaboration is instrumental in technology transfer, product quality improvement, and market access, particularly with major automotive OEMs like Toyota and Maruti Suzuki. The technical assistance agreement with Aichi has been renewed for another three years, focusing on marketing and quality support for new requirements.

The company is also making significant strides in capacity expansion and modernization. The Kocks Block was successfully commissioned earlier this year, expanding the range of rolled products and enhancing productivity. A new reheating furnace is on track for commissioning by March FY26, which will boost rolling capacity to 2,70,000 tons, reduce job work outsourcing, and improve yields. Additionally, a second NDT (Non-Destructive Testing) line is expected by June FY26 to ensure high-quality standards for four-wheeler applications. Looking further ahead, plans are underway for a new Greenfield steel plant in Punjab with Aichi, targeting 5,00,000 MT of billet production by FY29-30, with an aim to diversify into wire rods, forging, and non-automotive sectors.

Sustainability and Market Outlook

Vardhman is proactively embracing sustainability initiatives, aligning with global trends like Green Steel and the Circular Economy. A notable step is the partnership with Maruti Suzuki to establish a closed-loop system for recycling CRC scrap, strengthening relationships and promoting environmental responsibility. The company is also progressing with a solar power plant, with the transmission line expected to be completed by December, which will reduce power costs and lower its carbon footprint from 0.72 to below 0.48. These efforts position Vardhman favorably in a market increasingly prioritizing eco-friendly manufacturing.

Management projects a positive outlook for the coming years, anticipating strong demand driven by the growth of the Indian auto sector, which is expected to reach 8-10 million cars by 2035. The company expects its EBITDA per ton to range between ₹8,000 and ₹11,000 from the next financial year, with a target of 2,45,000 tons in FY27 and full capacity utilization of 2,70,000 tons by FY28 for the existing plant. While acknowledging competitive pressures and global market volatilities affecting exports, Vardhman's focus on operational excellence, strategic alliances, and sustainable practices underscores its commitment to long-term value creation.

Conclusion: A Foundation for Future Growth

Vardhman Special Steels Limited's Q2 and H1 FY26 performance reflects a company strategically investing in its future. The debt-free status, coupled with significant capacity enhancements, a robust alliance with Aichi Steel, and a strong commitment to sustainability, lays a solid foundation for sustained growth. The management's transparent communication regarding both opportunities and challenges instills confidence, indicating a clear path towards becoming a leading special steels manufacturer in India.