Shyam Metalics and Energy Ltd (SHYAMMETL) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to the Q2 FY '27 earnings conference call for Shyam Metalics and Energy Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Pankaj Harlalka from Shyam Metalics and Energy Limited. Thank you, and over to you, sir.
Pankaj Harlalka (Shyam Metalics and Energy Limited): Thank you, Damien. Thank you, ladies and gentlemen, for joining us in the call. I wish you all a very good afternoon and an advanced Shubh Deepavali. And a warm welcome to the second quarter FY '27 post-results conference call. Before we delve into discussing the quarterly numbers, I hope you all had an opportunity to review our press release and the attendant investor presentation read along with the safe harbor statement, which are available under the investor section on our website, and the same are accessible in the BSE and NSE websites also. To discuss the second quarter and H1 results FY '27, I am joined by Mr. Brij Bhushan Agarwal, Chairman and Managing Director; Mr. Deepak Agarwal, Executive Director, Finance and Compliance; and Mr. Binesh Sharda from E&Y, our investor relations partner. Now I would like to invite Brij Bhushan ji to provide his perspective on the performance of the second quarter of the current financial year. He will also provide his thoughts on our strength and strategies of the future. Thank you, and over to you, sir.
Brij Bhushan Agarwal (Shyam Metalics and Energy Limited): Very good afternoon, ladies and gentlemen. Welcome to Shyam Metalics Q2 H1 FY '27 earnings call. I wish you and your family a very, very happy Diwali and a prosperous festive session. Our ambition for Shyam Metalics is clear: to build an leading integrated multi-metal business with capabilities, cost competitiveness, financial strength to grow across industry cycle. The first half of FY '27 reflects our progress towards that ambition as investment in downstream business
Brij Bhushan Agarwal (Shyam Metalics and Energy Limited): October outlook projected broadly flat global steel demand in 2026, followed by 1.7% growth in 2027. India remain the major source of growth, with the demand expecting to increase 7.9% in 2026 and 8% in 2027. The opportunity is substantial, and our priority is to build the capability to capture the opportunity with profitability. In Q2 FY '27, the revenue grew 33.4% year-on-year to 5,960 crores, supported by a 26% increase in the sales volume. The growing contribution of flat steel and the stainless steel demonstrate the direction of our transformation. Under Vision 2031, we are building a business that captures a greater value for every stage of production and converts that advantage into sustainable earnings for the long-term value chain and for the beneficial for our shareholders' value. Across our metal portfolio, we are investing to broaden our capability and capturing the greater value from our integrated operations. In carbon steel HR product, the plant capacity of 1.6 million ton HR mill will strengthen our downstream foundation, while the 900 crores and 0.8 million ton specialty bar combo mill auto steel project at Kharagpur will extend our presence into the specialized steel grade. This capability will help us to serve more demanding engineering and manufacturing applications and build deeper customer relationships and adding much greater value in the complete supply chain management. Stainless steel represents our other significant opportunity where we are diversifying by investing 2,700 crores expansion in our Odisha plant. With complete downstream processing capability together is scheduled both to be commissioned target by March 2029, including the SBQ plant. By F1 '37, we expect these business to contribute approximately 1,100 crores EBITDA from stainless steel and 1,000 crores EBITDA from SBQ business, respectively. Our ambition to build a competitive, integrated stainless steel complex, where we all know that we have a capability of having the backward integration, where more than 75% to 80% of the ingredients in making stainless steel will be added in the complete supply chain management. In aluminium, our focus is on building an integrated downstream business with greater control over feedstock, quality and cost. The newly commissioned foil facility expanded our market presence, while the plant flat rolled product facility will strengthen in our house foil stock ability by strengthening the raw material, going backward integration and adding more value to the complete supply chain management. Finstock and battery foil offer opportunity to serve speciality application, special application and broaden our customer base. We will develop these business in time with customer requirement, with emphasis on product qualification, commercial viability, and profitable growth. One more development during the quarter was proposed by acquiring 51% controlling stake in a company called Elam Solar Private Limited, a successful bidder for the Putamara coal block in Chhattisgarh, advance our strategy to create integrated operation. With estimated reserve of 170 million ton and the production expected by July 2027, the block will support long-term captive coal requirement and reduce the dependency on the external source. The estimated capex for the said project is going to be 3,060 crores -- 360 crores, where our share is going to be close to 185 crores. And initiative is expected to generate an incremental EBITDA of
Brij Bhushan Agarwal (Shyam Metalics and Energy Limited): to 400 crores by FY '31. Together with captive power, railway logistics, this investment will strengthen supply security and help building resilience against raw material price volatility. Alongside securing critical raw material, we are strengthening our energy mix to support efficient and sustainable growth. The newly commissioned solar plant of close to 9 MW in Jamuria will increase the renewable energy use, support lower power cost, and reduce emissions from our operation. This investment reflects our focus on environmental responsibility with long-term cost advantage. This initiative, from a connected road map under the Vision 2031, secure critical inputs, deepens operational integration, and expand our value presence in the various metal sector such as stainless steel, aluminium, auto steel, flat products, colour coated business, and other various flat products, which is used in the special application. Capacity expansion will support by the technical capability, product quality, and customer relationship needs to build for a long-term, profitable business. Looking ahead, our priority is to translate our investment program into sustainable operating performance. This means commissioning project on schedule, ramping up new facility efficiently, and building world-class plant with decent profitable numbers across various metal chains. Alongside capacity, we will strengthen product quality, technical capability, and customer relationships to establish a large presence in high-value applications. Raw material security and cost competitiveness will remain central to this growth. Our investments in mining, beneficiation, and downstream integration are intend to give us greater control over critical input and strengthen our ability to perform through changing market conditions. We will support this progress with discipline, capital allocation, keeping cash generation, return on investment at the center of our decision to create lasting value for our shareholders. Once again, thank you for your continued support and trust what you have shown in the company, Shyam Metalics. I will now invite our group CFO to take you through the financial performance, following which we will be happy to start with our Q&A session. Thank you so much.
Deepak Agarwal (Shyam Metalics and Energy Limited): Thank you, sir. Good evening, everyone. I am Deepak Agarwal, Director, Finance, and Group CFO of Shyam Metalics and Energy Limited. Before moving ahead, I want to extend a warm Diwali greetings to you and your family. Our Chairman has outlined our strategic directions. I will take you through our financial performance for the second quarter and also for half yearly of the current financial year, that is 2026-27. Our financial performance for the second quarter build on the momentum of the first quarter with revenue, operating EBITDA, and profit after tax growing both year-on-year and sequentially. Revenue from operations stood at 5,960 crore, up of 33.4% on year-on-year basis and 9.3% on quarter-on-quarter basis. Similarly, the EBITDA increased 40.9% on year-on-year basis and 5.5% on quarter-on-quarter basis, which stood at 857 crore. With a margin of 14.4%, operating EBITDA, excluding the other income, grew 52.6% on year-on-year basis and 7.5% on quarter-on-quarter basis to 823 crore. The operating EBITDA margin expanded by 170 bps year-on-year basis to 13.8%. Profit after tax increased to 96.2% on year-on-year basis and 45.7% on quarter-on-quarter basis to Rs. 511 crore, supported by a strong
Deepak Agarwal (Shyam Metalics and Energy Limited): operating earnings, and a lower depreciation cost during this quarter. The first half year of the current financial year, the revenue stood at 11,415 crore, up 28.4% on year-on-year basis. EBITDA increased 34.4% to 1,670 crore with a margin of 14.6%. Operating EBITDA grew by 41.9% to 1,588 crore with an operating EBITDA margin at 13.9%. The profit after tax for the first half of the current financial year increased by 56.4% to 862 crore with a PAT margin of 7.5%. As you would have read through in our presentations, during this quarter, we changed our depreciation methodology. The shifting from written down value method to straight-line method, which is in line with the industry practice, to provide a more representative and true and fair picture of the company's financial performance. At Shyam Metalics, we have continuously strived to make our communications more transparent and effective, and we continue to align with all stakeholders in this regard. Our earning performance was accompanied by a strong operating cash flow of Rs 1,544 crore during the first half, covering a capital expenditure of 1,291 crore. This reinforces our ability to fund the ongoing expansion program primarily through internal accruals, reflecting the strength of our cash generations and a disciplined capital allocations. Since listing, the company has incurred a capital expenditure of 9,921 crores, representing approximately 53% of the total planned capex of 18,785 crore. Of this, 6,671 crore has already been capitalized. During the quarter, we incurred a capex of 716 crore, reflecting our continuous focus on executing the planned capital investment program and strengthening our operational capability. The balance planned capex of approximately 8,864 crore is expected to be deployed over next 2 to 3 years and which is also through our internal accruals and which is also in line with the project execution timelines. As far as working capital discipline, the working capital discipline remains central to this approach. As of September 2026, the working cap stood at a negative of 16 days, supporting efficient utilizations of capital and liquidity. The net debt remained modest at 192 crore, providing a flexibility to meet our investment requirement while maintaining the prudent leverages. Our focus also remain on improving the returns generated by our asset base. As of September 2026, we are further strengthening the profitability to a ROAE of 14% and ROCE that 20%. Importantly, this return do not yet factor in the earning potentials of approximately 3,000 crore of CWIP is in our asset base, arising from our announced capex program, as these assets are commissioned and begin contributing to operations. We expect them to further enhance our profitability and drive a meaningful improvement in returns. Higher utilization, greater downstream integration, and disciplined capital allocation will be key to strengthening this return as of our investments mature. We continue to target ROAE of 16% and ROCE of 24% by 2031. Our operating performance this quarter was marked by strong volume growth, led by the continued scale-up of flat steel and stainless steel. The total sales volume increased by 26% on year-on basis to 15.49 lakh tonnes in quarter two of the current financial year, taking first half of volume is 29.32 lakh tonnes, up from 20 20%. The carbon steel flat product sales more than doubled year-on-year basis to approximately 81,500 tonnes, while stainless steel volume grew by 27% to approximately 29,850 tonnes. Stainless steel realization has also increased by 35.2% on year-on-year basis.
Deepak Agarwal (Shyam Metalics and Energy Limited): supporting the growing contribution of our downstream businesses. The carbon steel long product volume grew modestly year on year basis and increased 6.8% quarter on quarter basis. Specialty alloy recorded volume growth of 4.7% on year-on-year basis, alongside an 18.4% improvement in realization. As far as aluminium volume is increased by 3%, while realizations rose by 27.7% on year on year basis, supporting our revenue performance. Our expansion program continue to progress during this quarter with a commissioning milestone in downstream downstream aluminium and raw material beneficiation. In July, we commissioned 18,000 ton per annum of aluminium foil facility at Sambalpur, taking total foil capacity to approximately 42,000 ton per annum. The 800 crore of downstream aluminium program also includes a planned 60,000 ton of per annum of FRP facility, which which strengthen our backward integration and reduce dependency on external foil stock and support margins improvement. Alongside this downstream expansion, we commissioned a 1.5 million ton of beneficiation plant at Sambalpur with an investment of rupees 150 crore. By upgrading the lower grade ore into higher quality feed stock, the facility strengthen raw material integration and supports better resources utilization and cost efficiency. As a part of our efforts streamline operations, the NCLT has also approved the amalgamation of Sri Venkateswara Electrocast into Shyam SEL Limited, consolidating our aluminium foil operations. This merger is expected to improve our operational efficiency, and also we will get the tax benefit of over 15 crore through the utilization of carry forward losses from this unit. Together, these initiatives support our progress towards Vision 2031, and our aim is to not simply to add capacity, but to build a better earning mix and improve the productivity of the capital we deploy. To conclude this statement, we first half of 2027 has combined strong financial performance with tangible progress in downstream capacity and raw material integration. Our priorities for the coming quarter are clear, stabilize newly commissioned facility, build profitability volumes across verticals, execute the existing investment program, and strengthening the cash conversion. I would take this opportunity to thank to our customers, employees, partners, and investors for their continuous confidence in Shyam Metallics. Thank you for your time and continued support. With that, I conclude my remarks, and we will happy to take your question answer. Thank you.
Moderator: Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to please use handsets when asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Amit Dixit with Goldman Sachs. Please go ahead.
Amit Dixit (Goldman Sachs): Yeah. Hi, good evening, everyone. And thanks for the opportunity. Congratulations for a very good set of numbers this quarter. A couple of questions from my side. The first one is essentially if I dissect the revenue growth, almost 70% of it comes from the volumes. I just wanted to understand the volume drivers we have over next, let us say, next six months or maybe a year. I know there's a sponge iron plant that is coming up and then you have stainless steel plant. So just wanted to get your thoughts on the on the volume drivers next in next, let us say, 12 months or so.
Brij Bhushan Agarwal (Shyam Metalics and Energy Limited): Amit, we will not see a major change on the revenue driving mechanism what is going right now. But I can tell you in next 2 years from now, we should be able to do more than 75 close to 70 or 80% from the value added. And it will be from 20% will be from the basic supplies what we which is
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