MSP Steel triples first-half capex as operating cash declines

MSP Steel & Power Limited spent Rs 61.8323 crore on property, plant and equipment including capital work in progress in the half year ended September 30, 2026, against Rs 20.8814 crore a year earlier, while net operating cash generation declined to Rs 79.1775 crore from Rs 100.8254 crore.

Why did MSP Steel’s first-half capital expenditure rise?

MSP Steel’s spending on property, plant and equipment, including capital work in progress, rose by Rs 40.9509 crore year on year to Rs 61.8323 crore in the half year ended September 30, 2026. The outflow was almost three times the Rs 20.8814 crore recorded in the corresponding half of 2025, according to the standalone cash-flow statement.

The capital-spending outflow was the largest component of MSP Steel’s investing cash flow during the 2026 half year. It also recorded Rs 0.9561 crore of proceeds from sale of plant and equipment, Rs 4.7275 crore from fixed deposits given as margin money and Rs 0.8703 crore of interest received, resulting in net cash used in investing activities of Rs 55.2784 crore, compared with Rs 33.8346 crore a year earlier.

Capital work in progress, or CWIP, increased to Rs 72.5226 crore as of September 30, 2026 from Rs 18.1525 crore on March 31, 2026. In contrast, the carrying value of property, plant and equipment declined to Rs 754.3694 crore from Rs 780.9258 crore, while depreciation and amortisation expense was Rs 28.9052 crore for the half year.

How did MSP Steel’s operating cash generation change?

MSP Steel generated net cash from operating activities of Rs 79.1775 crore in the half year ended September 30, 2026, down Rs 21.6479 crore from Rs 100.8254 crore in the comparable 2025 period. Cash generated from operations before income-tax payments fell to Rs 79.9062 crore from Rs 101.7210 crore, while income taxes paid declined to Rs 0.7287 crore from Rs 0.8956 crore.

Operating profit before working-capital changes increased to Rs 125.4336 crore from Rs 67.8773 crore a year earlier. The cash-flow statement separately reports changes in trade and other receivables of negative Rs 47.4671 crore, inventories of negative Rs 128.1119 crore, trade and other payables of negative Rs 127.1454 crore, and provisions of Rs 0.9732 crore.

MSP Steel’s standalone balance sheet recorded inventories of Rs 457.5171 crore at September 30, 2026, compared with Rs 585.6290 crore at March 31, 2026. Trade receivables stood at Rs 81.1960 crore, down from Rs 85.1005 crore over the same six-month period, while other current assets increased to Rs 153.5703 crore from Rs 102.4075 crore.

How was MSP Steel’s investment and cash position funded?

MSP Steel received Rs 34.6478 crore from long-term borrowings during the half year ended September 30, 2026, compared with Rs 6.5533 crore in the prior-year half. Its balance sheet reported non-current borrowings of Rs 32.5551 crore at September 30, 2026, compared with no such balance at March 31, 2026.

Current borrowings declined to Rs 275.9650 crore at September 30, 2026 from Rs 310.1502 crore six months earlier. The cash-flow statement reported net cash used in financing activities of Rs 24.8136 crore, compared with Rs 67.4523 crore used in the 2025 half year, after finance costs paid of Rs 20.9655 crore and lease-liability repayments of Rs 2.2180 crore.

Cash and cash equivalents declined by Rs 0.9145 crore during the 2026 half year, ending at Rs 2.7888 crore compared with Rs 3.7033 crore at the start of the financial year. Bank balances other than cash equivalents were Rs 19.4630 crore at September 30, 2026, down from Rs 24.3238 crore at March 31, 2026.

How did MSP Steel’s earnings compare with cash generation?

MSP Steel reported profit before tax of Rs 76.2241 crore for the half year ended September 30, 2026, compared with a pre-tax loss of Rs 78.9702 crore a year earlier. Revenue from operations increased to Rs 1,633.5015 crore from Rs 1,387.7261 crore, while total expenses rose to Rs 1,560.2522 crore from Rs 1,367.5117 crore.

The year-on-year earnings comparison includes an exceptional item of Rs 100.8830 crore in the half year ended September 30, 2025, while no exceptional item was reported in the 2026 half. Net profit was Rs 56.4342 crore in the 2026 half year, against a net loss of Rs 56.9291 crore in the prior-year period, following deferred tax expense of Rs 19.7899 crore compared with a deferred tax credit of Rs 22.0411 crore.

Finance costs increased to Rs 22.0562 crore from Rs 20.0518 crore. MSP Steel identifies manufacturing and trading of iron and steel products as its single significant primary business segment, so the filing does not provide separate capital-expenditure or operating-cash-flow figures for individual product lines.

What accounting matter remains disclosed by MSP Steel?

MSP Steel recognised a deferred tax asset of Rs 47.3737 crore in the financial year ended March 31, 2026 relating to an unused tax benefit, based on management’s assessment and an independent tax opinion. The claim concerned interest liabilities of Rs 188.2326 crore following conversion of optionally convertible debentures, or OCDs, into equity shares during financial year 2024-25.

Net deferred tax assets were Rs 32.3265 crore at September 30, 2026, down from Rs 52.2562 crore at March 31, 2026. The statutory auditor drew attention to this matter in its limited-review report but did not modify its conclusion; the report states that a review is substantially narrower in scope than an audit.

MSP Steel’s unaudited standalone results were reviewed by the audit committee and approved by the board on November 13, 2026. The company said recognition of the earlier deferred tax asset reflected management’s assessment that sufficient future taxable profits were probable for use of the tax benefit.

Conclusion

MSP Steel’s first-half disclosures show sharply higher capital spending, with Rs 61.8323 crore deployed on property, plant and equipment including CWIP, alongside a Rs 21.6479 crore year-on-year decline in net operating cash generation. Long-term borrowing proceeds of Rs 34.6478 crore accompanied the investment period, while cash and cash equivalents ended Rs 0.9145 crore below the opening balance.

The next disclosed unresolved matter to watch is utilisation of the deferred tax asset linked to Rs 188.2326 crore of interest liabilities on converted OCDs. Management’s prior recognition depended on its assessment of future taxable profits, and the net deferred tax asset stood at Rs 32.3265 crore on September 30, 2026.