Surya Roshni Limited
Q1 FY26
Call date · August 13, 2025
1 · Management Commentary
Key Positives
- Maintained zero debt status with net cash surplus of INR331 crores as of June 30, 2025.
- Lighting & Consumer Durables segment posted 3% YoY revenue growth, with healthy double-digit volume growth in LED lamps, battens, and water heaters.
- Export volumes in Steel Division grew by 23% YoY, led by strong demand from the Middle East.
- Commissioned cold rolling mill in June 2025; minimal Q1 contribution but expected to ramp up.
- Healthy order book: INR750–800 crores in Steel, INR100 crores in Professional Lighting.
- Launch of INR25 crore domestic wire cable facility at Gwalior on August 18, targeting INR150 crores revenue in year one.
- Appointment of Surya Kumar Yadav as brand ambassador to strengthen brand presence.
Key Negatives
- Consolidated revenues at INR1,605 crores, down 15% YoY; EBITDA at INR83 crores, down 48% YoY.
- EBITDA margin declined to 5.14% from 8.37% YoY, impacted by softer commodity prices, muted government project execution, and early monsoon.
- Steel Division faced SAP HANA implementation disruptions, resulting in sales loss of 25,000–30,000 MT (INR180–200 crores).
- Steel Pipe & Strips revenue down 20% YoY; EBITDA per ton fell 52% YoY to INR2,922.
- Domestic steel volumes down nearly 30% due to slow government execution, funding constraints, and monsoon disruption.
- Lighting EBITDA margin declined to 7.8% from 9% YoY, due to price erosion and demand volatility.
Forward Guidance
- Capex: 60,000 tons DFT Forming Technology mill at Anjar Bhuj to commission by March/April 2026; Gwalior wire cable facility launching August 18.
- New products: Expansion in premium lighting, domestic wire cables, and enhanced steel product range.
- Expected client wins: Strong order book in oil & gas, water infrastructure, and exports; execution expected to aid Q2/Q3 recovery.
- Revenue/margin outlook: Management reiterates FY26 guidance of >20% revenue growth, steel volumes of ~10.5 lakh tons, and steel EBITDA of INR5,500/ton for the year; Lighting EBITDA guidance of INR180–190 crores.
- Strategic initiatives: Continued investment in capacity, product innovation, brand building, and regional expansion; focus on operational efficiencies and channel engagement.
2 · Q&A Highlights
Q 1 (Composite): Why did actual Q1 results diverge sharply from earlier guidance, and how confident is management in achieving full-year targets after the SAP disruption and weak Q1?
A (Management):
• SAP implementation in Steel Division caused significant April/May disruption, leading to sales and EBITDA loss;
• Early monsoon and government project delays also impacted demand;
• Confident of strong Q2 recovery (35–38% revenue growth guided), maintaining full-year steel volume target of ~10.5 lakh tons and EBITDA/ton of INR5,500;
• Lighting and overall company guidance for >20% revenue growth and INR590–600 crores EBITDA for FY26 reiterated.
Q 2 (Composite): What is the outlook for Lighting margins given ongoing price erosion, and how sustainable is segment growth?
A (Management):
• Price erosion persists in bulbs and battens, but company is shifting to higher-margin categories and premium products;
• B2B lighting grew but at lower margin in Q1;
• Lighting EBITDA for FY26 guided at INR180–190 crores, with new wire cable launch to add INR150 crores revenue in FY26.
Q 3 (Composite): Can management provide details on GI pipe contribution, product mix, and reasons for lower EBITDA/ton in Steel?
A (Management):
• GI pipe volume down 10–12% YoY (from 50,000 to 40,000 tons);
• Trade business in steel segment contributed ~55%, with GI pipes ~13% of exports;
• Lower high-margin product contribution, higher fixed costs, and inventory losses led to EBITDA/ton drop.
Q 4 (Composite): How realistic is the aggressive volume and EBITDA ramp-up in H2, and what are the risks if government spending remains muted?
A (Management):
• Historically, H2 sees higher volumes;
• Q2 dispatch expected at ~2.5 lakh tons (vs. 1.9 lakh in Q1);
• Order book and new capacity commissioning support guidance;
• Risks include further delays in government spending, but current pipeline and export demand provide confidence.
Q 5 (Composite): What is the status and outlook for exports, especially given US tariffs and Middle East demand?
A (Management):
• Q1 export growth driven by Middle East, Europe, and Australia, not US;
• US tariffs (Section 232) create uncertainty, but company’s exposure is limited;
• Middle East remains strong;
• No order cancellations experienced historically.
Q 6 (Composite): Is there progress on the long-discussed demerger, and what is the dividend payout outlook?
A (Management):
• Board is aware of shareholder interest in demerger;
• Management reiterates commitment to consider it;
• Dividend payout guided at INR200 crores for FY26 (vs. INR120 crores in FY25), with policy to distribute ~50% of profits.
Q 7 (Composite): How does Surya Roshni compare to competitors in terms of product mix, margins, and growth strategy?
A (Management):
• Focused on value-added, premium, and export-oriented products rather than low-margin segments;
• Per ton EBITDA among the best in industry (excluding Q1 one-off);
• Regional expansion and capacity additions planned to reduce freight and improve competitiveness.
3 · Other Key Numbers
- Q1 FY26 consolidated revenue: INR1,605 crores (vs. INR1,893 crores YoY)
- Q1 FY26 consolidated EBITDA: INR83 crores (vs. INR159 crores YoY)
- Q1 FY26 consolidated PAT: INR34 crores (vs. INR92 crores YoY)
- Q1 FY26 Lighting & Consumer Durables revenue: INR397 crores (vs. INR385 crores YoY)
- Q1 FY26 Lighting EBITDA: INR31 crores (vs. INR35 crores YoY); margin 7.8% (vs. 9%)
- Q1 FY26 Steel Pipe & Strips revenue: INR1,207 crores (vs. INR1,509 crores YoY)
- Q1 FY26 Steel EBITDA: INR52 crores (vs. INR124 crores YoY); EBITDA/ton INR2,922 (vs. INR6,065)
- Steel Division sales loss due to SAP: 25,000–30,000 MT (INR180–200 crores)
- Steel Division volume down 13% YoY; domestic product volume down ~30%
- Export volumes in Steel up 23% YoY
- Steel order book: INR750–800 crores; Professional Lighting order book: INR100 crores
- Net cash surplus: INR331 crores as of June 30, 2025
- Capacity utilization (Steel): 68% in Q1 FY26
- Gwalior wire cable facility capex: INR25 crores; revenue target INR150 crores in year one, INR500 crores in 2–3 years
- Dividend payout guided: INR200 crores for FY26
- Brand ambassador appointed: Surya Kumar Yadav
- DFT Forming Technology mill (Anjar Bhuj): 60,000 tons capacity to commission by March/April 2026