Sarda Energy & Minerals Limited (504614) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Sarda Energy & Minerals Limited Q3 and 9 Months FY '26 Earnings Conference Call hosted by Adfactors PR. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Manasi Bodas from Adfactors PR. Thank you, and over to you, ma'am.

Good evening, everyone, and thank you for joining us today to discuss Q3 and 9-month FY '26 business performance of SEML. We have with us Mr. Pankaj Sarda, Managing Director; Mr. Manish Sarda, Deputy Managing Director; Mr. Padam Kumar Jain, Director and Chief Financial Officer; and Mr. Nilay Joshi, Executive Director. Before we proceed with this call, I would like to mention that some of the statements made in this call may be forward-looking in nature and may involve risks and uncertainties. The company undertakes no obligation to update any forward-looking statements to reflect developments that occur after the statement is made. Documents related to the company's financial performance, including the investor presentation, have been uploaded on the stock exchange and company's website. I now hand over the conference call to Mr. Pankaj Sarda. Thank you, and over to you, sir.

Thank you, Manasi. Good evening, everyone. For the 9-month period ended December 2025, the company has delivered a robust operating performance, reflecting steady execution across our integrated energy plus minerals platform. Our focus on scaling the energy business, strengthening integration across mining and maintaining discipline in metals has continued to support stability and predictability across cycles. In line with this long-term strategy, the third quarter posted steady performance, barring certain planned and timing-related factors. The quarter was impacted by the annual maintenance shutdown of the IPP, the shutdown of captive power unit for equipment replacement and a period of subdued metal and energy prices. These were largely anticipated operational events, and our integrated model helped absorb the impact while maintaining stability across businesses. Operationally, production across key assets remained broadly stable. Thermal power generation at IPP and Raigarh benefited from improved plant reliability and fuel availability, although planned maintenance affected output during the quarter. Hydropower generation followed normal seasonal patterns. For the 9 months period, hydropower generation increased by 28% year-on-year to 621 million units, supported by above-average monsoon conditions and the commissioning of the 24.9-megawatt Rehar hydropower project. For the Rehar project, we have signed a 40-year power purchase agreement with Chhattisgarh State Power Distribution Company Limited. The tariff has been fixed at INR 7.42 per unit, providing long-term revenue visibility and further strengthening the quality of our energy portfolio. Approval to enhance the capacity of the Gare Palma IV/7 coal mine from 1.68 million tonnes to 1.8 million tonnes is at the final stage and is expected shortly. We remain confident of achieving the enhanced output within the current financial year. Development of the Shahpur West high-grade coal mine is progressing as scheduled with commissioning targeted before the end of the next financial year. Approval processes for the Gare Palma IV/7, Bartunga and Senduri coal mines are ongoing. Within our power portfolio, captive solar power, 50-megawatt, commissioning of the 50-megawatt captive solar power project is expected in the first quarter of the next financial year. Work is progressing on schedule. This is regarding 30-megawatt TG set replacement. Work is progressing on schedule with commissioning expected by mid-FY '27. Shutdown [indiscernible] in December temporarily affected steel production at Raipur. We are also pursuing approvals for expansion of our existing 600-megawatt IPP thermal power project. As an update on the ongoing litigation matters regarding SKS Power acquisition, the appeals filed by the unsuccessful resolution applicants have been heard by the Honorable Supreme Court, and the matter has been reserved for order. Coming to the financial performance. Consolidated revenue for Q3 FY '26 stood at INR 1,360 crores, reflecting the impact of plant shutdowns and weaker price realizations. EBITDA increased to INR 395 crores compared to INR 368 crores year-on-year, driven largely by the Energy segment. Consolidated PAT stood at INR 190 crores. For the 9-month period, PAT increased by 59% to INR 954 crores. Our balance sheet remains strong with negligible net gearing and net debt to EBITDA well below 1x. Consolidated net debt as of 31st December 2025 was below INR 500 crores, significantly reduced from approximately INR 1,500 crores as of 31st March 2025. And liquidity remains robust. On a stand-alone level, the company remains cash positive. With that overview, I now hand over to Mr. Manish Sarda to discuss the industry overview and outlook. Over to you, Mr. Manish.

Thank you, Pankaj, and good evening to everyone on the call. I will briefly touch upon the broader industry environment and the demand outlook across steel, power and related commodities. During calendar year 2025, India stood out positively among global steel markets. Crude steel production in India grew by over 10%, even as China and several global markets recorded contraction. While China steel production fell to a 6-year low, exports increased by 7.5% to around 119 million tonnes, continuing to influence global trade flows and pricing dynamics. India steel consumption reached approximately 160 million tonnes, supported by sustained infrastructure spending and steady manufacturing activity. The imposition of safeguard duties has meaningfully altered trade dynamics, turning India back into a net exporter after 6 consecutive quarters of net imports. Steel prices, which had touched the multiyear lows earlier in the year, recovered sharply towards the end of December and have strengthened by around 10% to 15%, reflecting improving sentiment and tighter domestic supply conditions. From a policy perspective, the union budget allocation of INR 20,000 crore towards carbon capture utilization and storage is a significant development. They're expected to support the adoption of greener technologies across energy-intensive sectors such as steel and cement and reinforces the long-term policy commitment towards sustainability and green transition. Turning to the power sector. Demand during the quarter was largely flat on a year-on-year basis. Thermal plant utilization, which had softened since April, showed signs of improvement towards December. Power prices on the exchange moderated with [ IX ] average prices at around INR 3.33 per unit compared to INR 3.79 per unit last year.

I'll continue with that. There might be some line issue in the Manish Sarda's line.

Nilay, can you hear?

Am I audible?

Yes.

Yes. Coal index prices also declined modestly during the period, contributing to a relatively benign fuel cost environment. Am I audible?

Yes, yes, I can hear you clearly.

Okay. Looking ahead, infrastructure spending, Ferro Alloys export in Q3 went up from 23,256 metric tons to 33,272 metric tons year-on-year, registering a growth of 43% for 9-month period. It remained near flat. Looking ahead, infrastructure spending policy continuity and the ongoing expansion of India's manufacturing bases are expected to support economic activity and steel demand. Recent firmness in commodity and Ferro's metal prices points to improving -- recent firmness in commodity and ferrous metal prices points to improving fundamentals, while power prices have also shown signs of recovery since December. To add on the power side, we have secured 200 megawatts of medium-term and 100 megawatts of long-term offtake to our IPP, providing stability to cash flows. In addition, the signing of pretrade agreements with regions such as the EU, the U.S. and other markets is expected to support exports and enhance overall economic activity over the medium term. That concludes our overview of the industry environment and outlook. Thank you.

Should we open the floor for Q&A?

Yes, please. Go ahead.

[Operator Instructions] First question comes from the line of Manav Gogia with Yes Securities Limited.

Sir, first of all, I wanted to ask a bookkeeping question that was -- could you give me what was the captive, the CPP production and sales units for this particular quarter?

Pardon?

On the captive power plant that we have.

Now you can refer to the investor presentation that has been uploaded on the website, you will find the data.

Yes. We have the IPP data over there, but not the CPP one.

CPP, I mean, nothing very meaningful.

On the production side as well because there was a plant shutdown, I believe.

[ 327 -- 328 ] million units and sales was 12 million units. During the quarter.

That is -- and for our IPP, what was the average tariff that we got for this particular quarter?

Average tariff.

Yes.

That was somewhere in the range of INR 5.

INR 5. And I mean, in the opening remarks, you mentioned we are seeing some improvement. So how is Q1 shaping up -- or Q4 shaping up?

Q4 will be better than this level.

5.5...

It was slightly lower than INR 5, near INR 5, not INR 5. Now it will be slightly above, but we expect is above INR 5.

Okay. Okay. That is quite helpful. Sir, secondly, I just wanted to know about the captive coal mine expansions that we are doing right now, moving from 1.8 million to 3 million tonnes and then to 5.2 million. I think we had to apply for fresh ECs, right, if I'm not wrong. And where are we in the process of that right now?

Right. We are in the process.

Okay. So what time lines are we looking at for the 3 million tonne expansion in FY '26 end or...

No, it will take minimum 2 years because forest clearance also is there. Apart from...

So sort of 18 months to 24 months period for the final ECs to arrive on the product?

Minimum 24.

Got it. Got it. So one question I also had, I think we have -- we usually go for the Shakti coal, right, when it comes to our -- Yes. So what would be the cost differential between the Shakti coal that we're using versus the captive coal from our Gare Palma mines?

So it is almost equivalent, I would say. In fact, our captive coal prices might be 10 paise higher per [ JC ]. But we can use our captive coal for other purposes, including commercial sales. because the market price of the coal for the other in the power plant are higher than the Shakti coal. So we have option to sell the captive coal in the market as well as it totally depends on the auction also that is happening in Shakti coal. So sometimes we get it at cheaper prices, sometimes the prices are higher.

Okay. Okay. Sure, sir. So one last question. I wanted to know what's the company's take on now doubling the capacities at SKS Power? How are those stocks shaping up?

So we have already signed an MOU with the state government, and we should get the MOU in hand maybe in another 1 month. And then we'll start all the environment clearances process, et cetera.

Okay. But it's going to be sort of a story for 3, 4 years down the line, right? I think all the approvals might take another 2.5 to 3 years. Would that be the right understanding?

Correct.

[Operator Instructions] The next question comes from the line of Rajesh Bhandari with NAKODA Engineers.

[Foreign Language]

[Foreign Language]

[Foreign Language]

Above 5.50.

Above 5.50. [Foreign Language] 7.42 units, 7.42 [Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

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[Foreign Language]

It will create demand for steel and power [ both ]. [Foreign Language] that will also improve the efficiency of the steel plant.

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[Operator Instructions] The next question comes from the line of Aman [indiscernible] and Individual Investor.

[Foreign Language] My simple question was that, if you allow, revenue, EBITDA, PAT sequentially [indiscernible] or the Y-o-Y [indiscernible]? [Foreign Language] what are the reason, headwind, demand [Foreign Language]?

[Foreign Language] that gives above average realization in case of thermal power. And second quarter [Foreign Language] is the pricing of the steel which has gone down. Second is lower generation of hydropower because of seasonal effect. And third shutdown of the unit of captive power plant IPP for maintenance and also 1 captive power plant unit was also shut down for replacement. [Foreign Language]

So considering this all, we assume -- coming 2, 3 quartes will be in the same line or is there any improvement?

[Foreign Language] will also go up. [Foreign Language] first quarter again will be much higher, because [Foreign Language]

[Foreign Language]

[Foreign Language]

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[Foreign Language] in the industrial activity improving. Our price list will also move up from here.

[Operator Instructions] The next question comes from the line of [ Rajesh Varma ] with [indiscernible] Securities.

Sir, my question was like given that there is healthy cash generation in the company, are you looking for some more inorganic expansion opportunities? Or you'll focus more on brownfield expansion only for now?

We are looking for both inorganic as well as the brownfield. Brownfield whatever we have plans. And there are certainly good brownfield, we are taking up a few of the greenfield coal mines and greenfield hydropower project. So these are the greenfield opportunities. In addition to that, we are looking for definitely the inorganic opportunities also.

All right, sir. And sir, just a follow-up question on that. Given that there is -- there are so many tailwinds in sectors like nuclear energy, critical mineral mining and battery storage, do you have plans to diversify in any of these sectors, sir?

We are open for the opportunities. And whenever all these mine blocks and comes, we do study them as well. So if any opportunity comes, knocking our door regarding these, we'll have a positive outlook towards these.

[Operator Instructions] The next question comes from the line of [ Pooja Rathod ] an individual investor.

I want to check [indiscernible] if we are on track to achieve the INR 2,000 crore EBITDA in FY '26, what could be the guidance for FY '27?

We are in the cyclical industry. So generally, we don't give advanced guidance. But what we foresee, it should be better from 2026 -- [indiscernible] than 2026.

The next question comes from the line of [ Nupur Gandhi ] with [indiscernible] Technologies.

Sir, I wanted to ask you a couple of questions. First being on the planned shutdown. So sir, how long was it for, approximately?

So it was around for 40 to 45 days.

For the plan?

No, no, no. The First one unit that is 300 megawatts of our IPP unit was in a shutdown for 45 days for planned shutdown for a yearly overhauling. And another 30-megawatt plant turbine was taken on a shutdown on 1st December. This was Siltara captive power unit, and it is being replaced with a new turbine, and we'll start the turbine by mid of June.

Mid of June?

Yes.

Okay. And sir, any update on the Supreme Court hearing?

We already covered in our opening address, hearing is closed and reserved for order.

[Operator Instructions] The next question comes from the line of [ Devang Sanghvi ] with [ Abakkus ].

My first question is regarding SKS Power Plant. We had a guidance of INR 400 crore units of generation, and we are slightly lower in Q3. So are we on track to that particular number for the whole year?

Yes, yes, we are on track.

We are on track. And any guidance for next year for SKS generation?

Generation should be slightly ahead from that level.

Slightly...

Yes, it should be slightly ahead from that level.

INR 420 crores, INR 430 crores. Is that a good number today?

Maybe INR 410 crores, INR 420 crores in between somewhere it should be.

Right, sir. Secondly, we said that the steel prices have started moving up. So I wanted to know on a quarter-on-quarter basis, I think point-to-point, we had said 10% to 15% hike. So what is the quarter 3 average? And what could be the quarter 4 in terms of numbers, how high it should be?

The quarter 3 average has been given in our presentation. And we can say the current price realization. So from there, you can consider about 12% to 15%, depending upon product to product.

Right 12% to 15% could be the blended hike from Q3 levels.

Yes, blended. Ultimately, up and moving down. So giving specific percentage, but yes, it should be somewhere in the range of the product to product, there are variations. [indiscernible], in case of petty 10%. In case of billet and wire rod, it is in the range of 15%.

Right, sir. Right, sir. And what is case of Ferro Alloys in terms of pricing this quarter as compared to last quarter, that has increased?

Slight improvement, not material.

Slight improvement of Ferro, okay.

But yes, there is some improvement, but...

Right, sir. And the CapEx guidance for this year and next year, how much you spend in 9 months? What is the Q4 we are going to spend? And what is the guidance for FY '27?

We have spent more than INR 400 crores already in the 9 months. And what we had given the guidance of INR 500 crores to INR 600 crores, we should be able to comfortably achieve somewhere in the range of INR 550 crores to 600 crores approximately. That will be the CapEx [indiscernible] INR 600 crores for the FY '26. And similar expenditure, except the inorganic opportunities for the organic opportunities, what we have already committed, we shall be -- of CapEx.

[Operator Instructions] The next question comes from the line of Rajesh Varma with [indiscernible] Securities.

I just wanted to ask another question. When do you plan to -- when do you plan to double the SKS Plant capacity?

So already, as in one of the questions I have answered, so we have recently done an MOU with the state government. So this MOU copy we'll get in a month or 2 months' time. And then we'll start the process of environment clearances and which will take another 2 years. So -- and immediately, we'll then go for placing the orders.

[Operator Instructions] The next question comes from the line of [ Pooja Rathod ] an individual investor.

I just had a follow-up. Earlier, energy was a big lever for your growth. And now you're saying that Minerals is also going to add value. How will the segment composition and the revenue contribution change? Will power continue to be 66%, 67% Will it increase? Will it reduce and mineral will take over? How will it pan out?

Power will remain in the present category, slightly, it may be adding more value because ultimately, minerals will also get converted into the energy only. So power will remain prominent contributor to our bottom line.

Sir, in your opening remarks, you talked about how you move the Ferro Alloy capacity to domestic right now versus exports. Is that going to be the outlook for the rest of the year? And what's the differential in the realization, export versus domestic?

Manish?

Can you please repeat again? If I'm able to hear you correctly, the question that you asked that whether the domestic pricing or the export pricing was better?

Ferro Alloys, yes.

Yes, in the Ferro Alloys, right? So on certain grades like the 70-grade silico manganese that we produce, we get a better realization. And on certain grades like [ 60- 14 ], the domestic market is far better compared to the export markets. And primarily, the pricing remains almost the same. It's only the payment cycles, which get impacted in terms of exports because in the export markets, you typically have around 21 days of payment cycles.

So is that going to be the trend that you'll continue focusing on domestic is the demand...

We will be continuously focusing on domestic as well as export markets because we have a very dedicated domestic market, and we have a very dedicated export market. And we keep a tab on the pricing on a regular basis as to where we get our realizations, which are the best for the company. But there are also angles of what you call continuity of supplies because on certain contracts, it cannot be opportunistic. The export markets have to be continuously fed.

No, fair enough. Of course, there are some long-term relations....

Long-term relations because it's very difficult to pinpoint a certain contract because there are certain contracts which you have to maintain for continuity as well.

[Operator Instructions] As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments.

Thanks to all the participants who have come on the call. To conclude, the quarter reflects steady execution against our strategic priorities, supported by a constructive pricing environment across both energy and metals. We have continued to make visible progress on our growth initiatives. Gare Palma IV/7 mine has received enhanced capacity -- is in the final stage of receiving the enhanced capacity approval of 1.8 million tonnes. Our solar power plant is expected to commission operations in the next quarter, and the Shahapur mine remains on the track for commissioning next year. In parallel, we continue to evaluate opportunities in the green power to further strengthen our future-ready portfolio. Our disciplined approach to deploying surplus cash into diversified long-term growth projects provide strong medium-term visibility and reinforces our commitment to sustainable value creation. Thank you for joining us today. Should you have any questions, please feel free to reach out to us or to our Investor Relations team. Thank you.

Thank you. On behalf of Sarda Energy & Minerals Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.