/** blogpostTitle: VMS TMT Q1 FY27: Revenue Up, Margins Hit as Scrap Costs Spiked blogpostSlug: vms-q1fy27 blogpostShortTitle: VMS TMT Q1 FY27 margin pressure blogpostCoverImageDescription: An ultra-realistic corporate finance scene showing a clean dashboard on a desk with two main charts: a quarterly revenue bar chart rising from Q1 FY26 to Q1 FY27, and an EBITDA line chart dipping over the same period. A third visual shows an energy cost panel with a solar generation progress gauge indicating 12 out of 15 MW completed. In the background, a subtle, out-of-focus industrial steel plant interior with rolling mill equipment silhouettes. No logos or text labels, neutral corporate colors, high detail, professional lighting. */

VMS TMT Q1 FY27: Revenue Up, Margins Hit as Scrap Costs Spiked

VMS TMT Limited started FY27 with higher sales, but weaker operating profitability. In Q1 FY27, revenue rose to INR247.76 crore from INR212.26 crore in Q1 FY26. Total income was INR247.88 crore versus INR213.39 crore. However, EBITDA excluding other income fell to INR12.19 crore from INR20.62 crore. PAT declined to INR4.47 crore from INR8.58 crore.

Management linked the margin compression mainly to raw material inflation. Scrap is the company’s key input, and management said 50% to 60% of scrap is imported. During the quarter, scrap prices rose sharply, which they attributed to geopolitical disruption including the Iran conflict. The company also saw forex-related pressure, as the US dollar moved up between purchase and delivery of imported scrap, increasing landed costs. TMT selling prices did rise, but not enough to offset the spike in input costs.

Operationally, the company continues to position itself as an integrated Gujarat-focused steel player. It manufactures TMT bars and has completed backward integration through a billet plant. The company markets TMT bars under a retail licence arrangement with Kamdhenu Limited in Gujarat, excluding Saurashtra and Kutch, and reported a distribution network of 3 distributors and 227 dealers as of June 2026.

The quarter in numbers

The profit and loss statement shows a clear pattern: revenue improved, but costs moved faster.

The management commentary highlighted that Q2 is seasonally weaker due to monsoon. They also said the benefit from cost levers like solar power is expected to come through as commissioning progresses and market conditions normalize.

Integration and capacity: building a cost and supply advantage

A key structural change in the business is the billet facility created through backward integration. The investor presentation states that in September 2024 the company completed backward integration of its continuous casting machine division, enabling it to manufacture billets from scrap and reduce dependence on external billet suppliers.

The presentation also provides production and capacity information for FY26:

• TMT bars installed capacity: 2,00,000 MT per annum; FY26 production: 1,41,611 MT; utilization shown as 71%.
• Billets installed capacity: 2,16,000 MT per annum; FY26 production: 1,48,708 MT; utilization shown as 69%.

Management’s view on utilization was also addressed in the concall. They stated that about 80% utilization is considered ideal because rated capacity assumes 24-hour operation, while the plant typically runs 20 to 22 hours in three shifts. They indicated they aim to improve utilization over coming quarters.

Solar power: a direct lever on EBITDA

Power is central to steelmaking economics. The company stated its operations require about 22 MW and that it currently sources electricity from Uttar Gujarat Vij Company Limited. To reduce electricity costs, it has initiated a captive solar project.

In the concall, management provided specific progress updates:

• A 15 MW captive solar plant is being installed in Banas Kantha, Gujarat.
• 12 MW became operational on 7 August 2026.
• The balance is expected to be operational within about one and a half months.
• Management estimated the 15 MW project would cover around 30% of current power requirement.

Most importantly, management quantified expected savings. They stated that after paying the bank EMI, the company would save an average of about INR4 per unit. With around 2.70 crore units of annual generation, management estimated savings of about INR10 crore per year after interest and EMI. If delivered, that level of savings is material relative to the company’s quarterly EBITDA run-rate.

Dealer network, Gujarat focus, and the Aditya Ultra Steel amalgamation

VMS TMT sells TMT bars primarily through a retail distribution channel in Gujarat. The investor presentation notes 227 dealers and 3 distributors as of June 2026. In the concall, management said dealer network expansion is ongoing and typically grows 10% to 15% annually.

The company’s Gujarat territory under the Kamdhenu retail licence excludes Saurashtra and Kutch. Management linked the proposed amalgamation of Aditya Ultra Steel Limited with VMS TMT to this gap. They stated that post-merger, the remaining portion of Gujarat including Saurashtra and Kutch would come under them along with Aditya’s dealer network. They also pointed to potential benefits from reduced duplicated expenses and higher scale in purchasing and distribution.

The company also acknowledged that the merger is subject to regulatory approvals and integration would take time. Management said it may take months to merge and complete operations.

Working capital signals: inventory and seasonality

Investors asked about the inventory increase visible in FY26. Management responded with two explanations: product mix and seasonality. They stated that the company added higher-value products such as 550D, which contributed to higher inventory values. They also said monsoon reduces sales in the June quarter while production continues, leading to higher inventory in June and September quarters.

Management said inventory should normalize after Diwali and fall below INR200 crore.

Key takeaways

Q1 FY27 showed that VMS TMT can grow revenue, but profitability remains sensitive to imported scrap costs and currency movement. Management’s near-term expectation is that margins improve in Q3 and Q4 rather than in Q2, due to monsoon season and the need for input prices to stabilize.

The company’s strategic direction is consistent across the presentation and the call: deepen backward integration, reduce energy costs through captive solar, strengthen dealer penetration in Gujarat, and potentially expand territory and scale through the proposed Aditya Ultra Steel amalgamation. Investors will likely track three milestones from management’s own commentary: completion of the remaining solar commissioning, progress and approvals for the amalgamation, and margin recovery as raw material spreads normalize.