Steamhouse Expansion Would Double Capacity Despite Low Utilisation

Steamhouse plans to more than double annual installed capacity to 4,466,880 tonnes per annum (TPA) from 2,185,920 TPA, although several existing boiler plants operated at low utilisation in Fiscal 2026. Panoli operated at 7.22%, Sarigam at 12.13% and Vapi Phase 1 at 29.18%, making demand absorption central to the expansion outcome.

Why is Steamhouse expanding while several plants have low utilisation?

Steamhouse says its expansion decisions consider existing capacity, delivery commitments, sales enquiries, lead time for new capacity, fuel availability and financial resources. The plan uses net proceeds for Ankleshwar Phase 3, Panoli Phase 2 and a proposed steam-generation facility at Dahej Gujarat Industrial Development Corporation (GIDC) Phase 2. Once current under-construction and proposed facilities are set up, annualised distribution capacity would reach 705 tonnes per hour (TPH).

The disclosed increase is 2,280,960 TPA, taking installed capacity to 4,466,880 TPA under Steamhouse’s assumptions of 330 operational days and boiler efficiency of 80%. That calculation measures annual installed capacity rather than contracted demand or actual output. Steamhouse says the return on expansion capital expenditure depends, among other factors, on timely regulatory approvals, personnel performance and its ability to absorb additional infrastructure costs.

Steamhouse operates seven community steam boilers in Gujarat, comprising six owned facilities and one leased facility. The facilities generate and distribute steam at Vapi Phase 1, Vapi waste-to-energy (WTE), Ankleshwar Phases 1 and 2, Sarigam, Nandesari and Panoli. Steamhouse states that its financial condition and success are predicated on operating generation capacity at high utilisation levels.

Which Steamhouse plants had the lowest utilisation in Fiscal 2026?

Steamhouse’s lowest-utilised operating facilities in Fiscal 2026 were Panoli at 7.22%, Sarigam at 12.13% and Vapi Phase 1 at 29.18%. Capacity utilisation is actual production divided by aggregate installed capacity for the relevant fiscal year. Installed capacity assumes 330 operational days and boiler operations at 80% optimal efficiency, with capacity prorated for a plant’s actual operating period.

Panoli began operating in June 2025. Its 60 TPH boiler produced 22,864.38 TPA in Fiscal 2026 against fiscal-year installed capacity of 316,800 TPA. Sarigam, which commenced operations in 2023 and also has 60 TPH capacity, produced 46,095.47 TPA in Fiscal 2026, below 50,267.32 TPA in Fiscal 2025; utilisation declined from 13.22% to 12.13%.

Vapi Phase 1, which began operations in 2017 with 60 TPH coal-based capacity, recorded a third consecutive utilisation decline. Its rate fell from 43.38% in Fiscal 2024 to 40.70% in Fiscal 2025 and 29.18% in Fiscal 2026, while output declined from 164,898.73 TPA to 110,921.32 TPA. This differed from Vapi WTE, which reached 77.55% utilisation in Fiscal 2026 after operating for only two months in Fiscal 2025.

How did the better-used Steamhouse facilities perform?

Steamhouse’s Ankleshwar and Nandesari facilities operated at about half of Fiscal 2026 capacity, while Vapi WTE was the highest-utilised site at 77.55%. Ankleshwar Phases 1 and 2 have 120 TPH coal-based capacity and produced 398,652.64 TPA in Fiscal 2026. Nandesari has 30 TPH coal-based capacity and produced 100,478.99 TPA in the same year.

Ankleshwar utilisation slipped to 52.43% in Fiscal 2026 from 55.38% in Fiscal 2025, with production falling by 22,416.02 TPA to 398,652.64 TPA. Installed capacity was unchanged at 760,320 TPA in Fiscal 2024, Fiscal 2025 and Fiscal 2026, so the lower percentage reflected reduced output rather than a larger capacity denominator. Ankleshwar Phase 1 began in 2018 and Phase 2 in 2023.

Nandesari moved in the other direction, with utilisation increasing from 16.66% in Fiscal 2024 to 35.24% in Fiscal 2025 and 52.86% in Fiscal 2026. Production rose from 18,470.12 TPA to 100,478.99 TPA over the two years, while installed capacity increased from 110,880 TPA in Fiscal 2024 to 190,080 TPA in each subsequent year. Nandesari operated for only seven months in Fiscal 2024.

What makes low utilisation financially important for Steamhouse?

Low utilisation can reduce Steamhouse’s ability to absorb costs that do not move proportionately with steam production. Steamhouse identifies employee benefits, finance costs, depreciation and amortisation, and other expenses as significant costs with limited correlation to production levels. Coal and other fuel costs are described as completely variable.

Steamhouse warns that extended underutilisation, significant short-term underutilisation or an inability to realise expansion benefits could reduce revenue and leave fixed costs insufficiently absorbed. This mechanism links the 7.22% Panoli rate and 12.13% Sarigam rate to the proposed 4,466,880 TPA capacity base, because additional facilities add infrastructure costs that require production to support them.

Actual production can also be affected by labour unrest, unexpected events, maintenance scheduling and an inability to procure sufficient materials, according to Steamhouse. Those disruptions could reduce production, utilisation and sales even after capacity has been built. Coal remains the primary fuel at Steamhouse’s listed coal-based facilities, and the company says duties, tariffs or restrictions affecting coal could increase operating costs or reduce margins.

What could delay or constrain the Steamhouse capacity build-out?

The Dahej GIDC Phase 2 project has a disclosed land-possession condition because lease consideration has not been paid in full. Steamhouse states that a delay or failure to pay the balance could affect its ability to obtain or retain possession of the land. That outcome could delay or prevent development of the proposed facility and affect the planned expansion.

Steamhouse also identifies timely regulatory approvals, personnel performance and the ability to absorb added infrastructure costs as conditions affecting expansion returns. Its permanent-employee attrition rate was 34.29% in Fiscal 2026, compared with 37.83% in Fiscal 2025 and 22.74% in Fiscal 2024. Steamhouse says recent vacancies were appropriately filled, but says future growth requires personnel with technical expertise.

Steamhouse had total borrowings of Rs 281.62 crore as at March 31, 2026, and intends to use net proceeds partly to repay or prepay certain borrowings alongside expansion spending. Its financing documents require lender consent or intimation for certain corporate actions, including expansion, diversification or modernisation other than intended capital expenditure. Those requirements may affect how future projects are executed.

Conclusion

Steamhouse’s disclosed capacity plan would increase annual installed capacity from 2,185,920 TPA to 4,466,880 TPA. The operating picture is uneven: Vapi WTE reached 77.55% utilisation and Nandesari 52.86% in Fiscal 2026, while Panoli, Sarigam and Vapi Phase 1 were at 7.22%, 12.13% and 29.18%, respectively. The expansion outcome depends on whether additional output can absorb costs that are not fully variable.

The disclosed next steps are Ankleshwar Phase 3, Panoli Phase 2 and Dahej GIDC Phase 2, including payment of the remaining Dahej land-lease consideration. Steamhouse’s future disclosures on approvals, construction, fuel and staffing availability, and utilisation at existing and new facilities will show whether the planned 705 TPH annualised distribution capacity can be absorbed.