Rathi Steel and Power Q1 FY27: Volume Growth Leads, While Integration and Mix Remain the Real Story

Rathi Steel and Power Limited began FY27 with a volume-led quarter, even as management acknowledged a softer steel realisation environment and ongoing volatility in energy and input costs. For Q1 FY27, total income stood at INR 193.67 crore, up 24.63 percent year on year. EBITDA rose in line with revenue to INR 7.77 crore, while profit after tax increased sharply to INR 3.48 crore, translating into a PAT margin of 1.8 percent.

The quarter’s defining feature was scale. Total sales volumes rose about 30 percent year on year to 28,372 MT. Within that, the mild steel TMT bar segment delivered the biggest step-up, with volumes more than doubling to about 18,677 MT versus about 8,200 MT in the same quarter last year. Management attributed the performance to an optimised product mix, widening market reach, and disciplined execution.

At the same time, the stainless steel side was softer. On the earnings call, management stated stainless steel volumes were about 9,000 MT in Q1 FY27 and were down roughly 10 to 12 percent year on year. The reason offered was geopolitical disruption, with a portion of stainless end-user demand linked to export-oriented applications. The company’s ability to flex between categories mattered in this context. As stainless softened, TMT scaled up to support throughput and revenue.

Q1 FY27 performance in context

For a scrap-based steelmaker, the operating environment is often shaped as much by realisations and electricity as by demand. Management underlined that Q1 FY27 growth came despite softer steel pricing and input volatility. It also noted that some moderation in certain raw material prices has improved the cost backdrop, while still flagging geopolitical and energy-market volatility as key variables.

Rathi Steel and Power operates an integrated manufacturing facility in Ghaziabad (NCR) with steel melting and rolling operations. The investor presentation highlights steel melting capacity of around 85,000 TPA and installed rolling mill capacity of around 2,00,000 TPA, with utilisation levels in FY26 shown at about 51.5 percent for rolling. The strategic focus is to increase utilisation and improve operating leverage.

Mix is shifting, and flexibility is a key lever

Management described the business as operating with meaningful flexibility across stainless steel products and MS TMT bars. This flexibility was visible in Q1 FY27. When asked about revenue mix, management stated that TMT contributed roughly 45 to 48 percent of Q1 revenue and the balance came from stainless steel.

This mix is not positioned as fixed. Management said the company can adjust product output depending on which category is more margin-accretive and depending on demand conditions. It also stated that stainless steel, in general, offers a better margin profile because the company is more integrated in stainless steel operations, while TMT has historically been less integrated.

The integration point matters because it directly links to margins. In the call, management explained that it has successfully taken trial runs to integrate melting capacity with the TMT plant. Earlier, integration was operational primarily for the stainless steel division. TMT has multiple sizes and management said trials are required across sizes. While it did not claim full commercialisation in Q1, it indicated that a full-throttle ramp-up is expected by Q4 FY27. It also highlighted seasonal impacts in NCR, with monsoon conditions in Q2 and potential construction slowdowns in Q3 due to pollution.

Capex, working capital, and the margin question

Questions on capex and margins dominated the call, reflecting investor focus on whether the company can structurally lift profitability beyond a range-bound profile. On capex, management stated that FY27 spending so far is about INR 4 to 5 crore. For the full year, it indicated capex spend of about INR 15 crore plus, largely funded through internal accruals. It framed this as part of an ongoing multi-year effort to upgrade older equipment and maintain the plant at industry standards.

On margins, management acknowledged that EBITDA margin has been relatively range-bound around 4 to 4.5 percent in recent years. It linked future improvement to three levers.

First is scale. The company aims to continue ramping volumes and reiterated a target of about 20 percent revenue CAGR over the next two years, also referencing earlier guidance anchored to FY25 as a base.

Second is financing cost and working capital. Management said the business is working-capital intensive and noted that incremental needs have been met through working-capital cycle management including credit period extension from suppliers. It also stated it is exploring refinancing with lenders to reduce cost of borrowing and improve competitiveness versus peers.

Third is integration of TMT operations with the melt shop, which management believes can improve gross margin and EBITDA profile as a larger share of TMT production becomes integrated.

When pressed for an aspiration, management indicated that, relative to peers, it would like to see an overall EBITDA improvement of about 2 to 3 percent over time. It also cautioned that the steel industry is cyclical and that timing is hard to predict.

Sustainability positioning and certifications

The investor presentation places significant emphasis on energy efficiency and sustainability initiatives. It describes direct billet charging technology for stainless steel wire rods, which eliminates billet cooling and reheating and is positioned as a source of fuel and electricity savings as well as lower oxidation losses.

The company also stated that about 27 percent of power is sourced from renewable energy, and in another section claimed more than 25 percent through renewable open access. On the call, management said renewable consumption continues to be above 25 percent, while also indicating it could be around 20 percent, suggesting some variability depending on the measurement window.

On GreenPro certification, management said it is increasingly becoming a norm for large builders and helps in winning orders, though it did not quantify a direct revenue impact. It also confirmed BIS approvals for relevant TMT grades.

The company also discussed rooftop solar, but stated it is still evaluating feasibility and supplier projections and will proceed only when the technical team is confident about achievable generation numbers. Management also clarified that rooftop solar would not materially cover its total power requirement.

Takeaways

Rathi Steel and Power’s Q1 FY27 performance was defined by strong volume growth and a decisive surge in TMT sales, which helped offset softer stainless steel volumes. Financial growth tracked volume growth, with revenue and EBITDA rising around 25 percent year on year and PAT rising faster.

The strategic emphasis is clear: increase utilisation, improve mix, and push deeper integration in the TMT segment. If the company executes the integration ramp-up and simultaneously improves cost of working capital, it could create a path to better margins, although management itself highlighted cyclicality and seasonality risks.

For investors tracking the next few quarters, the key indicators to watch are whether stainless volumes recover, whether integrated TMT production ramps up as planned by Q4 FY27, and whether borrowing cost reductions translate into visible margin expansion.