Steelcast Limited ($513517)

Ladies and gentlemen, good day, and welcome to Steelcast Limited Q4 and FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Arpit Mundra from EY. Thank you, and over to you, sir.

Thank you. Good evening, everyone. We welcome you all to the Steelcast Limited earnings call to discuss the Q4 FY '26 and FY '26 financial results. Today from the management side, we have with us Mr. Chetan Tamboli, Chairman and Managing Director; Mr. Rushil Tamboli, Whole-Time Director; Mr. Subhash Sharma, Executive Director and CFO; and Mr. Umesh Bhatt, Company Secretary. Please note, a copy of all the disclosures is available in the Investors section of the website as well as on the stock exchange. Further, a detailed safe harbor statement is given on Page #29 of the investor presentation of the company. Please note that anything said on this call, which reflects the outlook for the future or which could be constructed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. Now I shall hand over the call to Mr. Chetan Tamboli for his opening remarks. Over to you, sir. Thank you.

Thank you, Arpit Bhai. Good evening, everyone. We welcome you to Steelcast earnings conference call to discuss the company's performance for the quarter and full year ended March 2026. Our Board meeting concluded on Saturday and financial results along with investor presentation have been uploaded on stock exchanges and the company's website. We trust you have had an opportunity to review the same. Now let me begin by sharing an overview of the global and Indian economic environment. During FY '26, the global economy continued to demonstrate resilience despite geopolitical uncertainties, evolving trade policies and supply chain realignments. Global GDP growth remained relatively stable at around 3.3%, supported by investments in technology, infrastructure and industrial capacities. However, the operating environment remained dynamic due to geopolitical tensions, energy price volatility and shifting global trade flows. These developments have accelerated supply chain diversification with companies increasingly adopting China Plus One strategies, benefiting countries like India. India, on the other hand, continued to be one of the fastest-growing major economies globally with GDP growth estimated at 7.3% to 7.6% in FY '26. This growth has been supported by strong domestic consumption, sustained infrastructure investments and a continued policy thrust on manufacturing and localization, all of which have contributed to the resilience and expansion of the Indian economy. Industrial activity remained robust, driven by expansion across manufacturing, mining and infrastructure sectors, all of which are key end-user segments for our business. Let me now briefly touch upon industry trends before moving on to our financial performance. The global metal casting industry remains a critical enabler of international growth with demand driven by sectors such as construction equipment, mining, energy and engineering. The industry is expected to grow at a healthy pace supported by ongoing infrastructure development, a revival in industrial capital expenditure and increasing investment in energy transition and renewable sectors. India continues to strengthen its position as a global manufacturing hub, benefiting from rising localization, expanding export opportunities and deeper integration into global supply chains. In this evolving landscape, Steelcast is well positioned to capitalize on emerging opportunities supported by increasing outsourcing by global OEMs, continued diversification of global supply chains and rising demand for specialized high-performance casting. Let me now briefly highlight our financial performance for FY '26 Q4 and FY '26 year as a whole, starting with performance during the current year vis-a-vis previous year and current quarter versus preceding quarter. During FY '26, the revenue from operations was at INR 423.17 crores, an increase of 13.33% from INR 373.39 crores in FY '25. EBITDA during the year was INR 129.64 crores, a growth of 17.3% from INR 110.5 crores in FY '25. EBITDA margin was at 30.64%, an increase of 104 basis points from 29.6% in FY '25. PAT during the year was at INR 86.86 crores, a growth of 20.31% from INR 72.2 crores in FY '25. PAT margin came to 20.53%, increase of 119 basis points from 19.34% in FY '25. Q4 FY '26 versus Q3 FY '26. During Q4 FY '26, the revenue from operations was at INR 112.43 crores, an increase of 15.43% from INR 97.4 crores in Q3 FY '26. EBITDA during Q4 FY '26 was at INR 34.25 crores, a growth of 9.7% from INR 31.2 crores...

I'm sorry to interrupt, Chetan, sir. We are not able to hear you.

PAT during Q4 FY '26 was at INR 23.1 crores, a growth of 12.58% from INR 20.59 crores in Q3 FY '26. Ladies and gentlemen, the quarter reflects an encouraging performance for the business, while overall volumes have improved compared to the immediate last period. There has been some moderation when compared to the corresponding period of the previous year. Revenue trends follow a similar trajectory with sequential growth supported by strong contributions from both export and domestic segments. Encouragingly, demand has continued to improve in recent months despite ongoing global uncertainties, particularly in regions affected by prolonged geopolitical tensions. In this environment, the export segment has clearly emerged as a strong growth driver consistently outperforming domestic business across both the quarter and full year. During the year, exports contributed over 60% of revenues, reaffirming our strong global positioning while we continue to witness steady traction from North America and other developed markets alongside increased engagement with global OEMs driven by ongoing supply chain diversification. The company has maintained strong discipline on cost. Material costs were effectively managed despite volatility in commodity markets through agile procurement strategies such as just-in-time sourcing, ensuring stable consumption levels. However, certain cost pressures were evident during the quarter. Manufacturing expenses increased due to higher maintenance activities, machinery repairs and provisions related to export-related obligations. Additionally, higher fuel prices, coupled with increased production activity led to rise in power and energy costs. Other operating expenses remain largely stable and consumption of stores and spares was managed efficiently with only marginal movements. Despite the short-term pressure on margins, the broad annual performance remains strong, underpinned by healthy growth in volumes, revenues and overall profitability compared to the previous year. I would also like to address the key point regarding the impact of elevated fuel and freight costs, especially in light of the ongoing Middle East situation. There may be a question on whether we will receive price adjustments from customers in subsequent quarters to compensate for this incremental cost. I would like to clarify that, yes, wherever applicable, we do expect to receive such adjustments in the coming quarter. These adjustments and rupee depreciation will help offset cost impact observed during the current period. In summary, while the quarter reflects some margin pressure arising from external cost factors, the underlying business fundamentals remain strong and resilient. With improving demand trends, robust export performance and continued focus on disciplined cost management, the company is well positioned for sustained growth going forward. At the same time, we continue to maintain strong financial prudence with debt-free balance sheet and healthy cash reserves of around INR 114 crores as of 31st March '26, providing us with the flexibility and strength to navigate uncertainties and capitalize on future opportunities. On the operational front, we remain focused on enhancing capacity and cost efficiency supported by our 2.4 megawatt hybrid power project, which is under commissioning by June '26 and is likely to improve sustainability while generating annual savings of approximately INR 3.6 crores. At Steelcast, strong governance, robust operational cost control remains central to our growth strategy. The company has established a comprehensive governance framework supported by strong internal control system and audit mechanism with regular oversight by the Audit Committee and senior management to ensure high standards of financial discipline and transparency in reporting. At the same time, we actively manage key risks arising from cyclicality of end-user industries, foreign exchange fluctuation, volatility in raw material and energy costs as well as geopolitical and supply chain disruptions. Our diversified customer base and presence across multiple sectors and geographies help us to mitigate concentration risk and enhance overall business resilience. The Middle East war has significantly impacted various industries in India, particularly those that rely heavily on imported crude, oil and gas such as energy sector. Oil and gas trade and logistics the effect of this war was on crude oil prices inflation trade and balance of payments, remittances and employment, financial markets and investor sentiments and energy security has underscored the urgency for India to develop strategies that mitigate economic vulnerabilities and adapt to the evolving geopolitical landscape. So far, the company has been successful in managing these disruptions through its various efforts and is further confident to navigate through these disturbances in future also. Looking ahead, global demand remains steady with gradual recovery across industrial sectors, while India's strong infrastructure push and continued growth in manufacturing are expected to provide sustained support to demand. At the same time, ongoing supply chain diversification is creating significant opportunities for export-oriented players like us. In this context, we remain confident of sustaining our strong growth momentum, maintaining stable margins and delivering healthy long-term growth. And we expect going forward an estimated CAGR of 20% plus over the next 3 years and particularly for the year FY '27. In conclusion, FY '26 has been a year marked by resilience, disciplined execution and meaningful strategic progress for Steelcast. Despite facing near-term uncertainties, we have delivered strong financial performance, further strengthened our global positioning and continue to invest in key growth drivers that will support our long-term expansion. We remain firmly committed to creating sustainable long-term value for our stakeholders. At Steelcast, the smart goal of our top management team is to make Steelcast more than INR 100 crores PAT company in FY '27. Moreover, we all have a very strong aspiration to double our sales by FY '29 compared to FY '26 with present capacities. We have been contemplating for increasing capacities by December '26 with increase in demand and the new parts getting converted into serial supplies, we will decide increasing capacity by end July 2027. With that, I would now like to open the floor for questions. Thank you.

We will now begin the Question and Answer session. [Operator Instructions] The first question is from the line of Harshil Solanki from Equitree Capital.

Sir, I had one question. So one of your large client is saying the demand is strong because there is a data center angle to it also that the CapEx is happening there. So do you think in India also going forward, we can see the domestic demand picking up on account of any data centers coming in? That's my first question. And second question is we had supplied our defense components to an overseas country. So are we trying to enter other geographies as well showcasing our products? And third, just wanted a clarification. We said that by June '27, you will look to take a decision on CapEx -- so I'm assuming you will not wait for the 75% utilization levels to touch and you are looking to do CapEx much earlier given the demand visibility. If you can clarify on that part also.

Yes. Thank you for this. Now increasing demand due to data centers. According to our knowledge, there is practically no requirement of steel castings in data centers. So there will not be any significant increase in demand because of this data centers. Second, regarding export of different products, our parts have been approved by them. We are now only waiting for getting orders for serial supplies, because of the Iran-U.S. war orders are getting delayed, but we expect in the next 1 or 2 quarters will happen. In terms of CapEx, I was saying that initially, we were trying to decide this towards end of 2026 with increase in requirements from all our customers and also approval of all the new parts developed by us, which are being converted to serial supply. We don't want to wait till December '26 for capacity expansion, and we will decide this by end of July.

July '26, right?

July '26, yes.

Okay. So this is what I'm trying to understand that earlier we were going to wait till 75% utilization levels, but now you are going to do it earlier. So are you trying to say that your capacity utilization will ramp up significantly in FY '27 and hence, the need to put on a CapEx. Is that understanding right?

Our current year capacity utilization is expected to be around 63%, 64%. And the indications from customers are quite strong. So we don't need to wait until we reach 75% utilization. We can go ahead and decide much earlier. So hence, we are in a very advanced stage of finalizing the CapEx for capacity expansion. And we will be ready with this by July end.

Okay. And what is the order book for FY '27, if you can highlight?

Generally, in our company, it's always anywhere from 110, 120 days' time. And in terms of value is about INR 130 crores, INR 135 crores.

This is for Q1, right?

Yes. This is as of effective 1st April.

Next question is from the line of Mihir Desai from Desai investments -- Mihir your line is unmuted please go ahead with the question. We move on to our next question. We will take our next question from Meet Mehta from [indiscernible] Financial.

So my first question is that, let's say, you improve your utilization going forward and as the new driver of growth comes in, so do we see any impact on realization like from like high value to lower value work are you doing or something like that?

Any other question you have?

That and also that after like when you are saying the CapEx, you will decide. So any ballpark how much you will increase the capacity like from like 20%, 30% something like that.

Our realizations are quite steady. In spite of the geopolitical tensions and the near-term uncertainties, our realizations are steady. There have been increase in cost. And with we having sales price variation formula with all the customers, any increase in cost, we have permission to pass them on. So there is no really effect on realizations. And in terms of capacity expansion, we will be ready with the exact numbers by end July. We are now halfway through our exercises. So you'll have to wait till end July.

[Operator Instructions] We will take our next question from the line of Mihir Desai from Desai Investments.

Sir, just wanted to highlight that you spoke on the new part development. So can you please give me some color on this? Is this China Plus One -- or how is the demand for this? And is the demand for this product impacted due to the recent macro developments which are there?

Yes. Like in our case, the new part development is a constant exercise. Close to more than 50 parts are under different stages of development. As and when they are ready, they are sent to customers for approvals, which then get converted into serial supplies. Surprisingly, in spite of the near-term uncertainties and the geopolitical tensions and the Middle East war and prior to that Russia-Ukraine war, there has been no impact on the pace of new part development coming to us. In fact, lately, we have seen this significantly increasing in the last 4 to 6 weeks. And so this has been our constant endeavor there.

Okay. Sir, just a follow-up on this. Can you please highlight like what are the applications of this part maybe industry-wise or...

Due to confidential reasons, we may not be able to go too deep into this. But the major end-user industries we supply are mining, earthmoving, construction, locomotives, railroad. So these are the industries where we are receiving new parts development. And the applications will be going into some machines depending upon which customer and which geography. But basically, these are all coming from these industries, as I said.

Okay. And sir, if it permits, if you can guide on the kind of kg the product would come, the weight -- it would be a higher weight products.

No. See, these parts come -- our capabilities are today 5 kg to 2,500 kg. The new parts come depending on customer requirement in this weight range. So -- and we get development orders for all kinds of weight. There is no specific like only a particular weight range or so. It's coming across the entire weight range, what we are able to do.

And sir, if you can guide on how '27 looks.

So I just said in my speech, which just got concluded some time back that our smart goal is that we want to grow 20% plus in FY '27. And keeping in mind that even for the 3-year period till FY '29, we will have year-on-year cumulative growth of 20% plus.

Okay. That's a very good growth, sir. And sir, just wanted to check on the defense part. Like are we doing anything working towards defense or we have added a few orders?

No. Defense, we have really not -- we have shifted our focus from defense to various other industries where we see a lot of opportunities and where we have a lot of strength. So defense, we do -- if we come across our bandwidth and our capabilities, but the focus is on industries like mining, earthmoving, construction, locomotives, railroad, ground engaging tools. So this is where the business is coming and this is where we are focusing on.

Sure, sir. Sir, and my last question from my side is that as you guided the growth on the top line, sir, what is the guidance on the margin? Like is there a scope in margin improvement? And how -- where this incremental alpha will come from, sir?

So if you really see last several quarters, we've been operating with EBITDA margins anywhere from 28% to 30% and PAT margins of 18% to 20% I feel on a sustainable level basis, sustained EBITDA margins of 25%, 26% is a reasonable thing to expect going forward.

[Operator Instructions] We take next question from the line of Manjunath K, an individual investor.

Chetan Bhai, congrats on the wonderful set of numbers in this global turmoil. I got just 2, 3 small questions. Regarding the railroad, you had stated in the last meeting that critical component was under some stress and developing this quarter, some development on this. And next is, you have -- because of this Iran-U.S. war, there has been increase in the gas and petrol prices and logistics. How what is the increase? And how much will be compensated in the coming years as per our cost-plus approach? -- then what will be the amount of -- third question is what is the capital expansion in terms of the project cost and the duration of the project cost? And my last question will be regarding what will be the contribution from the ground engaging tools in this following year, ending '27, sir?

See, we had some issues on the railroad development we have been doing. We have not been able to solve this. But simultaneously, we have got a lot of opportunities from -- as I just said a little while ago from mining, earthmoving, construction, locomotives, these industries. And these -- the competitive scenario is much better in these industries than railroad -- so while we continue to work on this, but we are encashing the opportunities what we are already seeing. And the growth will come from these 5 industries as I just said a little while ago, that for the coming 3 years, we will grow 20% plus and we will ensure and we are very confident that for the current year FY '27, we'll also grow 20%. Then comes the increase in cost you asked. Yes, there has been increase in costs, which started--

To what extent ?

Yes. It started effective 1st March. There has been across the board increase in raw material cost by about 10% or so. The impact on sales prices will be about 4% to 5%. So we already got compensated effective 1st April and balance will come effective 1st of July. And then so -- and also in my speech, I said that by and large, we will be covered for this increase in cost. And also the rupee depreciation will also help us -- and with exports of 60% plus, we should be on a good wicket going forward.

Yes.

So thank you, and thank you for your interest in our company.

My last question, sir, Q4 of '25-'26 was almost 12% higher. What's the reason why it came down, PAT and top line of '25-'26 compared to this year compared to last year?

I would recommend that you -- one should compare yearly numbers.

Of course, year-on-year, it's wonderful only the last quarter versus last year.

But these are aberrations. -- this happens. So I would always see an annual numbers. So that's very important for us. And I would also see the numbers of the preceding quarter.

Sir. My last question, sir, regarding the ground engaging tools, what will be the contribution in this year? And what's -- who are the type of customers? And I mean, what is the contribution to top line and margin in this line, sir, ground engaging tools?

In terms of margins, we work on the margins what you have been seeing? So in FY '26, the ground engaging tools contribution in total sales was 1.1% -- in the next financial year FY '27, we plan to go up to 3.8% -- and this comes from our existing customers, but I'm not -- I'm sorry, I cannot give you names of customers.

Next question is from the line of Aman Srivastav from Bellwether capital

Yes. So sir, we mentioned in our PPT about repeat orders from overseas defense. So sir, can you throw some light on quantum of this order and which geography we are comfortable sharing?

It will be very difficult to give details on geography and all. But these are parts for compact vehicles, which are generally used in ground wars. And the prototypes have been approved. The prototype batch has been sent, that has been approved. So we are only waiting for serial supplies. And if everything goes well, we could have sales for this segment in the region of INR 15 crores to INR 18 crores...

Okay, sir. So sir, is it on the same cost-plus model as a forecasting or is pricing margin structurally different in defense? And also, does defense carry working capital characteristics different from the blended like 90, 95 days receivables?

The business model for this defense will be same like our existing customers only because unless people agree on compensating for cost increases, we don't do business. And that too, we ensure that it's an automatic formula put in place. So if there is cost increases, we get price increase. If the cost reductions, we give price reduction. And what was the other thing you asked? I missed your second point.

Second was like does defense carry working capital characteristics different from your blended 90, 95 days receivables? Is it longer or short term? ..

You mean working capital cycle?

Yes.

By and large, all working capital cycles are anywhere ranging from 90 -- sorry, 75 to 110 days. So these products also will fall under that.

Next question is from the line of Sahil Goyal from Equinox Capital.

Sir, my question is on the margin side, EBITDA margin side. Now we are doing around 28% to 30% level of margin and you are saying -- you are guiding going forward for '25, '26, the decline of 2%, 3% of the margin. What is the reason?

No. What I meant was that for longer term, you talk about a few years. One cannot expect anything about 25%, 26%. That is the EBITDA margin on a sustainable level basis. We may still do 30%, but I would recommend to all investors that one should not -- one should consider 25%, 26% as a sustainable level.

[Operator Instructions] We will take our next question from the line of Saket Saurabh from [indiscernible] Capital..

So sir, a few questions from my side. So you talked about INR 100 crore PAT as the, say, aspiration for FY '27. But if I look at our current numbers, we are already sitting at say around say, INR 87 crores. Sir, by that logic, sir, and we are also looking at, say, 20% top line growth. So -- and add to that, there is a renewal plan that is going to go live, I think, at the end of Q1. So sir, the PAT growth first should be higher than 20% because, again, there is an additional impact of that cost savings. And on top of that, it should be more than 25-odd percent. So just comment on that growth, sir.

See, this 20% was I said about volume growth. The second thing, what we said volume growth in FY '27. The second thing I said was more than INR 100 crore PAT. So more than INR 100 crores means it could be INR 101 crores or it could be INR 115 crores also. But we wanted to be part of this INR 100 crores PAT company group.

Got it. It's more of an aspiration that you just highlighted.

Yes. Aspiration and strong aspiration, and we are going to work very hard on this.

Fantastic, sir. So by that Logic, I think our next aspiration will be INR 1,000 crores kind of, right, by FY '25, if not 30 because you are looking at doubling our revenue in the next 3 years. Is that a fair assessment?

So what I said was that another aspiration what we have is within the present capacities, we want to double the volumes. So if the volume was INR 430 crores in FY '27, theoretically, the number should be INR 860 crores in FY '29. Okay.

Okay. Sir, another question is if we had -- if I look at, say, look back at our data and last time, we had some challenge despite being a very robust company on multiple parameters because of concentration within geographies as well as, say, client. But I think as I increasingly look at your commentary and I've been an investor in this company for multiple quarters now that you have made a lot of effort on diversifying both geographically as well as industry-wise. So sir, just one request, if in subsequent slides, can we give us, say, a breakup of our, say, revenue in terms of both sector-wise like auto, non-auto or earthmoving or ground moving? And second, a bit more color on the exports breakup, like North America or is there -- because that would just give us -- and if you can showcase this more of a long-term kind of a trend, like how we were saying 15, 20, 25 and so then that would give us a better understanding. While, of course, the data definitely shows and your commentary shows that diversification is very much underway. So will that be possible, sir, to get data at that level, sir?

Sir, your suggestion well taken, and we will try and implement this from first quarter of FY '27.

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

On behalf of Steelcast, I would...

Sorry to interrupt, sir. We have one question. Can we take that?

Yes.

Sir, we'll take the next question from Manjunath K, an individual investor.

Chetan Bhai, when we see our results and surplus consistently. Any thoughts on any bonus issue? It will increase our what we call acceptance and I think bonus is not issued for quite long. Any thoughts on this, sir? And capital is just INR 10.1 crores.

Yes, yes. So I think a very good question. So there are several things we are thinking not able to decide on what we should do. But as of now, there is nothing in the horizon, I should tell you, frankly. But we will try and make sure that whatever we do is in the larger interest of all our 16,000 shareholders.

[Operator Instructions]

Can we conclude this, please?

Yes. As there are no further questions, I now hand the conference over to the management for closing.

Okay. Thank you. And on behalf of Steelcast, I want to thank each and everyone who was on this call. I also want to thank Ernst & Young who are our advisers and also the Steelcast management team for robust performance. And we meet in the investor call of Q1 FY '27. Thank you all. Thank you.

Thank you very much. On behalf of Steelcast Limited, that concludes this conference. Thank you all for joining us today, and you may now disconnect your lines.