Sarda Energy and Minerals FY26: Energy Takes the Lead as Cash Flows Strengthen

Sarda Energy and Minerals Limited (SEML) closed FY26 with a clear shift in business mix. Consolidated total income rose to INR 5,928 crore from INR 4,815 crore in FY25, while EBITDA increased to INR 2,025 crore from INR 1,409 crore. Profit after tax also climbed to INR 1,109 crore from INR 702 crore. Management attributed the performance to stronger execution across power assets, higher hydro contribution, and improved integration after the SKS Power acquisition.

The quarter was not without interruptions. Q3 and Q4 FY26 were impacted by planned maintenance of one 300 MW turbine at the thermal plant and the planned shutdown of a 30 MW captive unit at the steel plant for replacement. Even so, Q4 FY26 EBITDA rose to INR 352 crore versus INR 318 crore, and PAT improved to INR 155 crore versus INR 101 crore.

Energy becomes the earnings backbone

SEML’s investor presentation positions energy as the core vertical, and FY26 results support that narrative. Segmental disclosures in the presentation show that energy contributes the majority of consolidated EBIT, and management stated that about two-thirds of consolidated EBITDA now comes from the energy segment.

Thermal and hydro both delivered record annual numbers. Thermal generation reached 5,458 million units in FY26 and sales reached 3,833 million units. Hydro generation reached 661 million units and sales reached 643 million units, supported by the commissioning of the 24.9 MW Rehar hydropower project in July 2025.

A key strategic milestone was legal closure on the SKS acquisition. The company stated that the Supreme Court upheld SEML’s resolution plan in February 2026, dismissing dissenting appeals. Management described this as removing the residual overhang and enabling a clearer runway for expansion planning.

Mining integration and coal expansion pipeline

Coal mining is framed as a fuel security lever and a second growth driver after energy. FY26 coal production from Gare Palma IV/7 touched 1,799,998 MT, which management said effectively met the maximum permissible annual limit after the expansion to 1.8 MTPA. This also explains the lower domestic coal production seen in Q4, as output was curtailed due to full utilisation of the annual cap.

The FY30 roadmap presented by SEML targets a substantial scale-up in mining. Coal mining capacity is shown at 1.80 MTPA as of FY26, with expected capacity of 7.10 MTPA by FY30, including the Bartunga mine at 2.10 MTPA in a joint venture where SEML’s share is 67%.

Management also spoke about Shahpur West as the next major coal mining milestone, with commissioning targeted before the end of FY27. Approval processes for other coal mines such as Gare Palma IV/5, Bartunga, and Senduri were described as progressing.

Metals stays relevant, with selective capex returning

Metals and ferro alloys remain part of the portfolio, but SEML’s recent messaging emphasizes selective and integrated expansion rather than aggressive steel capacity bets. FY26 recorded the highest ever annual production for multiple products including iron ore pellets at 826,293 MT, sponge iron at 345,066 MT, and HB wire at 40,425 MT.

The major fresh capex decision in metals is the pellet expansion. Through the Board meeting outcome disclosure dated 23 May 2026, the company approved expansion of pellet manufacturing capacity by 1.1 MnT at an approximate investment of INR 500 crore. Annexure details indicate the current pellet capacity is 0.90 MnT with 92% utilization, and the expansion is expected to be completed within 30 months from start of work or placement of order. Management said environmental clearance is already in place and DPR is under preparation.

This decision is notable because the company had previously focused more on diversifying into power and mining. On the earnings call, management justified the pellet capex on expected iron ore availability in the region as new mines open up, and indicated they want to be ready when supply expands over the next two to two-and-a-half years.

Cash generation and balance sheet positioning

A strong balance sheet was a central theme across both the presentation and the concall. Consolidated net debt reduced sharply to INR 215 crore at March 2026 from INR 1,566 crore at March 2025. Operating cash flow improved to INR 1,735 crore in FY26, while investing cash outflow increased to INR 1,166 crore, reflecting continued capital deployment.

The company highlighted liquidity of INR 2,380 crore and credit rating reaffirmations, including CRISIL AA- with a positive outlook for SEML. The Board recommended a dividend of INR 2 per share (200%) for FY26, subject to shareholder approval.

From a near-term operating perspective, management indicated that FY27 drivers include the full-year benefit of the Rehar hydro plant, improvements in IPP efficiency, commissioning of the solar plant (expected before the end of the next quarter), and restart of the 30 MW TG set by end of June.

Takeaways for investors

SEML’s FY26 results show a business that is increasingly shaped by energy cash flows and mining integration, with metals now positioned as a value-added and selective growth vertical. The key catalyst in the narrative is the successful scaling of SKS Power and the removal of legal overhang through the Supreme Court ruling. The next phase is defined by execution and timelines: commissioning of near-term projects like solar and the captive unit replacement, progress on coal mine approvals, and the long-dated SKS expansion that management targets around FY30-31.

The company’s stated roadmap is ambitious, but the FY26 balance sheet improvement and record operating metrics provide a stronger platform to pursue it. The next few quarters may be more about operational normalization and efficiency rather than headline capacity additions, as management itself indicated FY27 growth will largely be driven by availability and efficiency parameters rather than major new commissioning.