Sarthak Metals Q2 FY26: Navigating Challenges with Strategic Diversification

Sarthak Metals Limited, a prominent player in the Indian metals sector, has presented a Q2 FY26 performance report that reflects a strategic pivot amidst challenging market conditions. The company's revenue from operations stood at Rs 36.31 crore, marking a 21% decline both year-on-year and quarter-on-quarter. Despite this, Sarthak Metals demonstrated resilience, with EBITDA at Rs 1.64 crore and a healthy EBITDA margin of 4.53%, showing a 32 basis points improvement year-on-year and a significant 73 basis points improvement quarter-on-quarter. Profit After Tax (PAT) for the quarter was Rs 0.76 crore. The management emphasized its ongoing transformation from a traditional steel consumables supplier to a diversified entity, actively building new growth engines in welding and biotechnology to counter cyclical pressures in its core business.

The core cored wire business, a significant revenue contributor, recorded Rs 25 crore in Q2 FY26. However, volumes in this segment declined by 14% year-on-year. This was primarily attributed to a muted quarter influenced by the monsoon season and intensified competition, including what the company described as 'bad practices' in the market. Similarly, the aluminium flipping coil segment, which generated Rs 5 crore in revenue, remained subdued due to unethical competition. In response, Sarthak Metals made a strategic decision to temporarily scale back operations in this segment to safeguard profitability, indicating a disciplined approach to market realities. Conversely, the welding division emerged as a strong performer, achieving revenues of Rs 3.7 crore in Q2 FY26, a substantial increase from Rs 1.5 crore a year prior, with volumes growing by 168% year-on-year.

Here is a financial summary of Sarthak Metals Limited's performance:

Strategic Diversification and New Growth Avenues

Sarthak Metals' long-term vision, articulated two years ago, to evolve into a diversified company is now an operating reality. The company is actively building three strong pillars: its core cored wires and aluminium wires business, the high-growth welding consumables division, and the high-margin biotechnology division. This diversified portfolio is intended to shield the company from the cyclicity of investment-led economic cycles, as new ventures are linked to consumption-driven trends.

The welding division's strong momentum is bolstered by recent BIS and RDSO approvals from Indian Railways, which are critical endorsements for quality in the railway sector. These approvals are expected to open significant new avenues for growth, with the company targeting Rs 25 crore in annual sales within the next two years. The company is also expanding its product offerings, planning to increase its welding SKU count from 5 to 10. Management anticipates achieving high single-digit to low double-digit EBITDA margins in this segment once the brand is firmly established.

Foray into Biotechnology and Sustainability Focus

One of the most exciting developments is Sarthak Metals' foray into biotechnology. The Solid State Fermentation (SSF) pilot facility, with a 14 kg capacity, became operational in May 2025, and the first fermentation batch has commenced. The company is in advanced discussions with leading ethanol distilleries to integrate its technology solutions, aiming to improve fermentation efficiency and lower operational costs. This initiative is strategically aligned with the Indian government's aggressive fuel blending program and strong policy push for biofuels, tapping into a massive market opportunity. The management expects biotechnology revenues to start very soon, contributing to healthy double-digit margins.

Sarthak Metals also demonstrates a strong commitment to sustainability. Approximately 75% of its Aluminium Flipping Coil production utilizes recycled aluminium scrap, which requires only 5% of the energy consumed in ore reduction. Furthermore, the company operates a 400 KW solar power plant, which is expected to reduce electricity expenses by about 50% due to captive consumption. These initiatives not only align with global shifts towards sustainability and carbon border adjustment mechanisms but also contribute to cost-competitiveness.

Outlook and Management Confidence

Despite the challenging external environment, Sarthak Metals' management maintains an optimistic outlook, grounded in its internal transformation and disciplined financial prudence. The company's strong balance sheet and virtually debt-free status provide the financial flexibility to invest in these new growth areas without straining resources. Management is confident in its ability to control product quality, strategic direction, and financial discipline, ensuring long-term value creation for all stakeholders. The journey ahead, while potentially bumpy, is viewed as exciting, with the company successfully establishing new pillars for future growth as envisioned.