Rathi Steel - Rathi Steel

📊 BSE: 504903 🏢 Iron & Steel Products 📅 Last Updated: 11/13/2025 15:25

💰 Financial Performance

Revenue Growth by Segment

The company reported Net Sales of INR 156.30 Cr for Q2 FY26 and INR 311.59 Cr for H1 FY26. While segment-specific growth percentages are not explicitly detailed, the company is shifting focus toward high-margin stainless steel products and ramping up its TMT bars facility, which currently operates partly on a conversion basis.

Geographic Revenue Split

The company primarily operates in North India, leveraging a well-distributed dealer network across the region for B2C access and targeting the NCR region for its 550/550 D TMT grade products.

Profitability Margins

Net Profit Margin (NPM) stood at 1.04% for Q2 FY26 and 1.13% for H1 FY26. Excluding exceptional items, the NPM for FY 2024-25 was 1.83%, an improvement from 0.77% in FY 2023-24, driven by cost optimization projects.

EBITDA Margin

EBITDA margin was 4.07% (INR 6.37 Cr) in Q2 FY26 and 4.04% (INR 12.60 Cr) in H1 FY26. The operating profit margin for FY 2024-25 was 4.36%, up from 4.19% in FY 2023-24 due to the implementation of hot charging technology.

Capital Expenditure

The company is deploying internal accruals for balancing capital expenditure to replicate the direct charging model in TMT operations. Specific historical INR Cr values for total capex were not disclosed, but internal accruals are the primary funding source.

Credit Rating & Borrowing

The company has resumed banking relationships to fund future growth. Interest costs for H1 FY26 were INR 3.87 Cr. The Debt Equity Ratio stood at 0.28 as of March 31, 2025, compared to NIL in the previous year as the company reintroduced debt into its capital structure.

⚙️ Operational Drivers

Raw Materials

Key raw materials include stainless steel scrap and billets. Raw material consumption (Cost of Consumption) was INR 243.58 Cr in H1 FY26, representing approximately 78% of total income.

Capacity Expansion

Current installed capacity includes 85,000 TPA for steel melting and 200,000 TPA for rolling. The company is currently backward integrated to 40% and aims to sweat existing assets before expanding further.

Raw Material Costs

Cost of consumption was INR 118.74 Cr in Q2 FY26 (75.9% of sales). The company uses a 'hot charging' process for SS billets which reduces fuel costs and scale loss, directly improving margins.

Manufacturing Efficiency

The company is the only player in India using direct billet charging for stainless steel wire rods, leading to significant fuel savings and efficiency gains. Capacity utilization is being ramped up to divide fixed overheads across higher volumes.

Logistics & Distribution

The company utilizes a legacy dealer network across North India. Distribution costs are managed through strategic plant location in Ghaziabad, near the high-demand NCR market.

📈 Strategic Growth

Expected Growth Rate

Not disclosed

Growth Strategy

Growth will be achieved by increasing capacity utilization of the 200,000 TPA rolling mill, transitioning TMT operations from conversion-based to backward-integrated, and pioneering the retail market for stainless steel rebars (SS rebars) following recent BIS certification.

Products & Services

Stainless steel billets, wire rods, bright bars, TMT bars (FE550/550D), and stainless steel reinforcement bars (SS rebars).

Brand Portfolio

Rathi (used under license from the Rathi family).

New Products/Services

Stainless steel rebars for retail and infrastructure; expected to be a high-margin contributor as the company is an early mover in this segment.

Market Expansion

Targeting nationwide rollout of stainless steel rebars leveraging the existing North Indian dealer network and expanding into coastal/infrastructure projects where corrosion resistance is critical.

Strategic Alliances

The company collaborates with recognized downstream stainless steel manufacturers and a large network of distributors; specific partner names were not disclosed.

🌍 External Factors

Industry Trends

The Indian steel industry is growing, supported by a 12% import duty and the PLI Scheme for Specialty Steel, which has seen industry-wide investment commitments of INR 29,530 Cr.

Competitive Landscape

Faces competition from large integrated players and companies that recently acquired assets through the IBC process and are now ramping up supply.

Competitive Moat

The 80-year 'Rathi' brand legacy provides a strong retail moat. The direct billet charging technology for stainless steel provides a sustainable cost advantage of approximately 2-3% over competitors using traditional reheating.

Macro Economic Sensitivity

Highly sensitive to infrastructure spending and government policies like the Vehicle Scrappage Policy and Smart Cities initiatives which drive steel demand.

Consumer Behavior

Shift toward high-strength (FE550D) and corrosion-resistant (Stainless Steel) rebars in the construction and real estate sectors.

Geopolitical Risks

Global overcapacity and high levels of imports (dumping) pose a threat to domestic price stability and profitability.

⚖️ Regulatory & Governance

Industry Regulations

Operations are subject to Ministry of Steel safety guidelines (16 new guidelines introduced July 2024) and BIS certification standards for specialized steel products.

Environmental Compliance

The company faced a temporary resumption order from regulatory authorities regarding environmental/operational issues, which has since been resolved with conditions for compliance.

Taxation Policy Impact

Tax expense for H1 FY26 was reported as 0.00, suggesting the utilization of brought-forward losses or specific tax incentives.

Legal Contingencies

The company successfully resolved a regulatory notification that had briefly impacted operations; no other major pending court case values were disclosed.