Shri Hare-Krishna Sponge Iron Limited: Forging a Greener, Diversified Future

Shri Hare-Krishna Sponge Iron Limited (SHKSIL) recently held its H1 FY26 earnings call, providing a detailed overview of its performance and an ambitious strategic roadmap for the coming years. While the company reported a modest increase in revenue from operations to ₹39.43 crore in H1 FY26, up from ₹38.2 crore in H1 FY25, its Profit After Tax (PAT) experienced a slight impact year-over-year. This was primarily attributed to higher power costs resulting from state electricity reforms, a challenge that the management is proactively addressing with significant strategic investments.

The company's EBITDA for H1 FY26 stood at ₹7.20 crore, a marginal improvement from ₹7.13 crore in H1 FY25. However, the most striking change was in Capex, which surged from ₹0.20 crore in H1 FY25 to ₹18.70 crore in H1 FY26, reflecting the substantial investments being made in strategic growth initiatives. This period marks a pivotal transformation for SHKSIL, as it focuses on strengthening its fundamentals, improving operational efficiency, and preparing for a significant expansion phase.

Strategic Initiatives: Powering Growth and Diversification

SHKSIL's strategic vision is centered around two core pillars: achieving cost leadership through green energy and diversifying into high-value, specialized product segments. The cornerstone of this strategy is the upcoming 5 MW Green Energy Captive Power Plant, which is on track for commissioning by January 2026. This plant is designed to generate power entirely from green energy sources, utilizing waste heat (hot flue gases from the kiln) and solid waste from the DRI plant, including waste derived from rice processing. This initiative is expected to significantly reduce power costs, enhance operational efficiency, and provide an uninterrupted, low-cost, and sustainable power supply, directly addressing the profitability challenges faced due to external power costs.

Simultaneously, the company is making a significant entry into the Casting Division, with commercial production targeted for May/June 2026. This new division will focus on manufacturing specialized engineered steel and castings such as Tooth Points, Grinding Media Balls, and High Alloy Cast Steel Chain Links. These are critical wear-resistant components with strong demand across sectors like defence, mining, automobile (HEMM), cement, and general engineering. The management highlighted that approximately 80% of these products are currently imported into India, presenting a substantial import substitution opportunity. This move positions SHKSIL as a diversified engineered castings manufacturer, moving beyond commodity steel into high-value, high-margin specialized components, thereby enhancing its revenue mix and strengthening cash flows.

Recommencing Operations and Future Outlook

Beyond new ventures, SHKSIL is also focused on recommencing its previously idle units. The Furnace Division, responsible for MS Ingots and High-Tensile Ingots, is expected to restart production in March 2026. Similarly, the Rolling Mill, which produces structural steel sections like Beams, Angles, and Channels, is slated to resume operations by March 2026. These recommencements, powered by the new captive plant, are crucial for restoring optimal production capacity, improving asset utilization, and contributing to immediate volume addition and revenue growth. The Steel Shots & Grits manufacturing unit will also resume operations concurrently with the captive power plant's commissioning, re-entering a high-demand industrial consumables market.

Management has provided optimistic guidance for the coming years, projecting a threefold increase in the company's turnover by FY27-28. For FY26, revenue is anticipated to grow by 20-25% over FY25. Looking further ahead, FY27 turnover is expected to reach ₹160 crore, representing a 60-70% growth compared to FY25, with a projected total revenue margin of around 13%. These projections underscore the management's confidence in the transformative impact of its strategic initiatives.

Conclusion: A Resilient Path Forward

Shri Hare-Krishna Sponge Iron Limited is clearly at an inflection point, transitioning from addressing immediate cost challenges to building a diversified, integrated, and sustainable manufacturing powerhouse. The strategic investments in green energy and high-value casting products, coupled with the recommencement of core operational units, are designed to create a more resilient business model. By focusing on import substitution and leveraging national growth drivers in infrastructure and manufacturing, SHKSIL is forging a path towards enhanced profitability and long-term value creation for its stakeholders. The company's disciplined execution and clear strategic vision position it well to capitalize on emerging opportunities in the Indian steel and casting sectors.