Jindal Stainless Limited (JSL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Jindal Stainless Q2 FY '26 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vikash Singh from ICICI Securities. Thank you, and over to you, sir.

Thank you, Sumant. Good afternoon, everyone. First of all, on behalf of ICICI Securities, I would like to thank the management for giving us the opportunity to host them. From the management side, we have with us Mr. Abhyuday Jindal, Managing Director; Mr. Tarun Kumar Khulbe, CEO, CFO and Whole-Time Director; and Ms. Shreya Sharma, Head, Investor Relations. Without taking any much time, I'll hand it over to the management for their opening remarks. Over to you, sir.

Thank you, Vikash. Good day, everyone, and thank you for joining us for the company's Q2 FY '26 earnings call. I hope you have all had a chance to review the results and accompanying earnings presentation uploaded on the exchanges and on our website earlier. Our discussion on this call will follow that presentation. Before we begin, I'd like to remind you that some of the statements made today may be forward-looking in nature and covered by the disclaimer on Slide 2 of the earnings presentation. Joining me on the call today is our senior leadership team, who will take you through the key business developments and the performance for the quarter. After their remarks, we will open the floor for the questions. With that, let me hand it over to our Managing Director, Mr. Abhyuday Jindal, to take you through the highlights. Over to you, sir.

Thank you, Shreya, and good evening to everyone, and I would like to welcome you all to the Q2 FY '26 earnings call. I will begin by outlining the key business highlights for the quarter ended September 2025 and the progress we continue to make across our priority sectors. Following that, Mr. Khulbe will take you through our operational and financial performance. Backed by the continued improvement in domestic demand across sectors, we sustained strong growth in our deliveries, increasing by around 15% year-on-year and 3% sequentially. Our strategic focus on expanding our presence across diverse sectors, along with healthy growth opportunities in the market supported this momentum. As we continue to focus on increasing the share of our value-added products, the Special Products division delivered further growth during the quarter. Strong demand from sectors such as pipe and tubes, lift and elevator along with improved traction in passenger coach driven by rollout of Vande Bharat sleeper class orders contributed meaningfully to this performance. High activity in metro projects across the country also supported the strong delivery momentum. This segment is expected to remain a significant contributor with the national metro network targeting an expansion of nearly 1,000 kilometers, positioning India to become the second largest metro network globally. Driven by festive demand and our continued efforts to onboard new customers, the white goods segment delivered strong growth during the quarter. Sequentially, the Auto segment also maintained its volume growth, supported by an increase in demand for special products. With the recent GST cuts, this segment is expected to remain strong in Q3 as well. Additionally, stainless steel adoption in the infra segment continues to rise, supported by the shift towards longer-lasting and corrosion-resistant materials in public projects. This trend is widening the demand base and creating meaningful opportunities for our growth. We are well positioned to benefit from this trend. I'm pleased to share that we have opened our first stainless steel fabrication unit under our subsidiary, Jindal Stainless Steelway Limited in Patalganga and Mumbai in Maharashtra. The facility sets a new benchmark in integrated infrastructure excellence and is designed to meet the growing demand for sustainable, high-quality bridge infrastructure, offering end-to-end fabrication solutions for India's expanding infra sector. On the exports front, the global environment continued to remain dynamic with ongoing trade disruptions continuing to impact overall trade flows. Coupled with soft demand in the U.S. and EU, the transition phase of CBAM implementation buying activity has slowed for both domestic and imported materials as buyers keep inventory lean. Despite these challenges, we were able to maintain our volume base through a sustained focus on expanding our customer portfolio and entering new geographies. On the import front, subsidized and substandard materials continue to flow into India. The temporary suspension of QCO is both concerning and discouraging for the entire domestic industry. Given the prevailing geopolitical complexities, we anticipate a further rise in low-quality cheap imports entering the country. We remain hopeful that the government will strengthen and enforce frameworks that uphold quality standards and ensure a level playing field for the industry. In this environment, our commitment to delivering high-quality products without any compromise on standards remains unwavering and continues to be a key differentiator for us. We are also actively promoting our co-branding scheme, which is gaining a positive response in the utensils and kitchen segments alongside the P&T sector. On sustainability front, we continue to make strong progress towards decarbonization. We have partnered with Greenzo Energy India Limited to commission a green hydrogen plant at our Jajpur facility with a planned capacity of 600 MMQ per hour, targeted for completion by middle of next year. In parallel, our renewable power utilization at Jajpur and Hisar facilities has increased to 42% till Q2 FY '26, up from 26% in FY '25, marking a significant step towards cleaner and more sustainable operations. With this, I would like to hand over to Mr. Khulbe to discuss our operational and financial performance. Thank you.

Thank you, Abhyuday. Good evening, everyone. Welcome to the call. I would like to begin by providing a detailed overview of our operational and financial performance. Our Q2 deliveries are at 648,050 metric tonnes with an increase of around 15% on year-on-year and around 3% on quarter-on-quarter basis. Our Q2 consolidated EBITDA increased by around 17% year-on-year and around 6% on quarter-on-quarter to INR 1,388 crores, while our consolidated PAT stood at INR 808 crores, an increase of around 33% on year-on-year and around 13% on a quarter-on-quarter basis. For H1 FY '26, our deliveries stood at 12,74,302 metric tonnes with an increase of around 12% year-on-year. Consolidated EBITDA increased by around 12% year-on-year to INR 2,698 crores and consolidated PAT stood at INR 1,523 crores with an increase of around 21% year-on-year basis. We are pleased to report continued improvement in our balance sheet. As of November 30, 2025, our consolidated net debt has further reduced to INR 3,646 crores with a net debt-EBITDA ratio at 0.73, comfortably below 1 and net debt-to-equity ratio of 0.2x, reflecting our disciplined approach to financial management. This robust financial management continued to place us in the better position to navigate ongoing macroeconomic challenges. Turning to subsidiaries front. All subsidiaries have shown improvement and contributed positively to the group's overall EBITDA. Operationally, we are encouraged by the ramp-up at Chromeni and MPI with Chromeni achieving peak utilization around 70% and MPI operating around 90% during the quarter. Our SMS project in Indonesia and aligned downstream capacity expansions in India are progressing well and remain on track as per the time line. As highlighted by Mr. Jindal, we are unlocking new growth avenues in the infrastructure sector with the launch of a cutting-edge fabrication facility at Jindal Stainless Steelway Limited. With this unit, we aim to bridge the gap by bringing together material excellence, skill fabrication and a streamlined process to deliver timely and superior infrastructure solutions. To strengthen stainless steel ecosystem and capabilities, we have launched a series of specialized programs, including fabricator training, qualification [indiscernible] training as well as specific modules. These initiatives led to the training of 6,700 fabricators in Q2, bringing the cumulative total to 60,400 till date. These efforts aim to promote awareness and practical applications of stainless steel while reinforcing workforce competency across the value chain. Stainless steel demand in India is rising, driven by economic growth and infrastructure expansion. We are proud to support the shift towards sustainable materials. With that, I conclude my remarks and invite the moderator to begin the Q&A session. Thank you.

[Operator Instructions] The first question is from the line of Amit Dixit from Goldman Sachs.

A couple of questions from my side. The first one is essentially on the recently announced PLI scheme by the government in which the stainless steel, both flats and longs have been brought in the ambit. So just wanted to understand what kind of benefit it will have for us and whether we have done some kind of analysis on this that on what products it would be applicable and how much we can quantify?

Yes. So this PLI scheme just -- which has come out, and we are also studying it. Definitely, we see the possibilities because the certain of the provisions which are given there, we, as a company, will also be benefited. And I'm sure for the industry also benefit, it could be there the way the scheme has been designed. But to get you more specific on that, to be honest, we have also -- because it has just come and we are also now working on it and evaluating it and then making calculations.

We're trying to evaluate how much we can actually extract or benefit we can from it. In a couple of weeks, if you can check back with us, we'll have it ready. There is positivity because these products have been included in this PLI.

Got it. Got it. The second question I have is again on exports. So while I understand that there is a lot of -- due to the very subdued external operating environment, exports have not picked up. But given the fact that in Europe, in particular, they are talking about a lot of infrastructure development pursuant to the ReArm Europe Plan and all. So do you see some feelers from there that the exports can pick up to Europe, our quality of product can be absorbed over there. Is there something that you are seeing happening, which will push exports? Or do you expect that exports remain in the same trajectory?

No, I think currently, short-term export would remain in the same trajectory because I think everybody in terms of -- customers also producers, everyone is looking what will be the impact of CBAM. And every time EU, as we're all tracking, they're always delaying it and not coming up with some clarity. So I believe now in December, sometime some further clarification should come. So we still feel some pressure in the short term. But as per our quality and as per our approvals, we are able to supply and sell to any industry globally. So we are ready with that. It's just that CBAM clarity is required. And as we have announced, every time we're increasing our renewable exposure -- in terms of renewable energy exposure, we are increasing green hydrogen, we're picking up with anyway a scrap-based player. So we are keeping ourselves ready with any kind of CBAM duty that comes. But from really to see that push in exports again, some CBAM clarity first would be required before anyone can claim. Even European players themselves are having a tough time within Europe at the moment.

The next question is from the line of Satyadeep Jain from AMBIT Capital.

Just wanted to check on the QCO order first and then on the capacity expansion. On the QCO order, that would be a near-term headwind. A, just clarity on what exactly is the time line. Initial notification seem to suggest any goods exported till October 10 -- October 30 could be exempted, which will give some lag time on arrival. So what is the current situation? Is this going to end near term? Or is there a possibility this could be extended beyond the next few months? And what is the impact in the near term that you are seeing in the last few days of this? So we've already had 3, 4 weeks of this quarter. What kind of impact on volumes and imports you've seen so far this quarter?

So if I can answer, this has been suspended till December. The QCO order has been suspended till December, and we are working with the government to ensure that the suspension removes and QCO comes back. QCO as a concept is very important for the country. It is not only for the steel industry or stainless steel, but it covers a wide range of industries and is protecting our citizens from substandard products. So as a concept, we are totally pro-QCO. It is, as of now, suspended till December. And whenever there is certain uncertainty, whether it will stay or not stay, there are certain downward pressures. But as a company, in terms of our volumes, we have met our targets in October, and we will meet our targets in Q3 and H2. There could be a little downward pressure on prices, but we are still sticking to our guidance that we have given at the beginning of the year.

Okay. And next, on the capacities that you have lined up in FY '27 and also the [indiscernible]. Maybe could you provide some update where things stand as it pertains to the SMS, MPI, the HRAP and that [indiscernible] blast furnace.

So all our expanding projects are on track, our MPI operations have been started at the beginning of the year already, and our melt shop in Indonesia should start early next year. And apart from that, like we announced earlier, increasing our cold rolling capacities. So that is also on track to be starting end of FY '27.

So the HRAP would also be around later half year of FY '27?

Yes, absolutely.

[Operator Instructions] The next question is from the line of Tushar Chaudhari from Prabhudas Lilladher Capital.

Congratulations on a good set of numbers, at least on volume front. Sir, any issues at Chromeni are we facing? Our Q1 utilization was 65%, but we were targeting around 80%, 85% by first half end. Now you are saying it is just at around 70-odd percent. And would like to know approximate EBITDA contribution from Chromeni, if it is possible?

Yes. So what we have stated, this is true that we have hit the numbers of 70% capacity utilization. And in the second half, we believe that we'll be hitting that 80% what we have told you before of capacity utilization. So it is on track.

And EBITDA? It is already an EBITDA positive, right?

EBITDA is all included. We gave a consolidated number.

The number is -- the guidance stays the same.

So in terms of CapEx, we have given INR 2,700 crores of CapEx for full year. How much we did in Q2, basically first half? INR 665 crores was...

So in H1, we have already done around INR 1,261 crores as a CapEx. So again, whatever INR 2,700 crores guidance we have provided, we are on course to that.

And now we can easily touch 2.65 million tonnes. So are we increasing volume guidance to, let's say, 12%...

No, volume guidance, we had given 9% to 10% for this year, and that we are maintaining.

Yes, we will ensure that...

So that means second half, we will be at a little bit lower than 9-odd percent because first half already, we have done 11-odd percent growth on volumes.

So it's only because of the lot of -- like we mentioned earlier, because uncertainty with CBAM coming in and this QCO, we'll definitely try to achieve higher numbers than we can. But what we have committed, that much we will definitely achieve. And we always, as a company, will try to achieve even higher numbers.

The next question is from the line of Ritesh Shah from Investec.

Sir, a couple of questions. First is, anything incremental on structure simplification. We have Chromeni, we have RVPL, we have Rathi. I presume there will be accumulated losses over there. Then why is it that we are not merging it or making good of the losses?

So Ritesh, all the -- in terms of consolidation, it is in the pipeline, and it is in our plans. It is just for certain factors why we are not taking that step right now. But next couple of years, you'll see most of the assets being consolidated.

Sir, any time lines to that, say, a year or 2?

Different, different time lines for different organizations. So if you would like some clarity, then I'll ask Shreya to share more details with you on that. But most of our assets are going to be consolidated.

Sure, sir. Sir, second question on Maharashtra expansion. We have indicated 4 phases of 1 million ton each, looking to procure land. Just trying to get some clarity on this variable and how should we look at FY '28 CapEx?

So Maharashtra, Ritesh, I mean, the land part is going on. Like in India, the land always takes time when you work on it. And for our kind of plant and our kind of scale, what we are talking about, the requirement is also quite fairly large. So -- but it is -- we are working on it, and it is progressing. This is what I can say. And very soon, we will come out with our plans on Maharashtra.

We [indiscernible] for everybody, for Maharashtra, we do plan to have like a full day kind of session on it to take our investors through what our plans are, what are the metrics, the numbers. So absolutely, we will come out with that.

Sure. And sir, I think in the initial remarks, you indicated MPI at 90% utilization. Sir, is it possible to highlight the underlying economics and the contribution over here and how it's helping the business?