Strong volumes mask margin erosion; coal cost spike derailed Q2 guidance

Delivered ₹31,997.5 Cr, closely aligned with call figures

Coal rose ₹1,700/ton QoQ (INR22,930 vs ₹21,300), opposite to prior guidance

Cut to 21 million tons mid-call; H1 achieved 9.33 MT, expecting Q3-Q4 'best quarters'

Delivered PAT ₹1,750.5 Cr (within 1.3% of stated; YoY calc checks at 318% vs stated 221%)

H1 growth corroborated; Q2 margin 12.9% OPM shows coal headwind impact

Maintained from Q1; H1 ₹5,500 Cr spent, Q3-Q4 target ₹9,000-10,000 Cr = ~₹14,500-15,500 Cr

FY27 sales volume cut from 22 MT (Q1 prior) to 21 MT (this call); H1 9.33 MT achieved, Q3-Q4 expected best but still landing at 21 MT, not 22 MT.

Q1 guidance: coking coal expected to fall ₹1-1.5K in Q2. Actual Q2: rose to ₹22,930/t (+₹1,700 QoQ). Geopolitical factors cited; now expecting ₹22-23.5K/t Q3-Q4 (stable, not falling).

FY27 ₹15,000 Cr maintained; but multi-year trajectory now explicit: ₹20K+ next 2 years, ₹1,20,000 Cr by FY30-31. Commitment to expansion deepened.

Analyst pressed on FPO timing; MD deferred: 'growth phase now, timing TBD; profitability needs to improve first.' No numeric target stated.

FPO timing TBD; company is in growth phase, profitability needs improvement first. Capex will be financed via internal accruals ₹10-12K Cr/year, debt, and FPO later. No near-term FPO.

Geopolitical situations spiked international prices (Pliats index ₹290 August→₹267 now). China demand also rising. Q2 was rainy season; pressure easing now. Q3-Q4 expected ₹22-23.5K/t, stable.

Steel inventory 1.59 MT: 0.86 MT saleable, 0.73 MT in-process. Targeting 1.2-1.3 MT by year-end. Plan: increase Q3-Q4 production & sales to reduce. Currently 15 days inventory (vs 17.5 days Mar 31, 2026).

IISCO is where majority cash will increase next year. This year ₹15K Cr. Next year >₹20K Cr. Q3-Q4 this year ₹9-10K Cr. In 4 years, ₹1.2L Cr total (FY27-FY30).

Q2 fines ~1-1.1 MT. Full-year target 7-8 MT MOUs. Blockade issues: Odisha Group Mines (approvals pending), Jharkhand Group (permit delays). Rowghat & Gua expansion proceeding; beneficiation capacity growing.

Tasra on track for January 2027 start—major cost savings from Q4 onwards. Rowghat: started interim mining, 3 MT EC, full production phased: 1→3→4→6→9→14 MT by FY31-32. Gua & Bhilai expansions also phased.

Debt will rise from ₹1,00,000 Cr → ₹1,20,000 Cr internal accruals expected over 4 years covers incremental debt. FPO to follow (timing TBD). No encroachment issues at IISCO, Bokaro. Debt step-up phased as projects progress.

RINL sales included. NMDC not selling right now; only some limited volumes per their availability. Yes, 21 MT is inclusive of RINL.

Normal separation ~3-4K/year. VRS pending announcement in Jan-March. Expecting gradual reduction to 26,000 by 2031. Superannuations + VRS phased.

Fully captive. 15% indigenous, 85% imported coal (19 MT basket). No external coke purchase. Tasra start Jan 2027 will reduce imported coal burden.

Rails ~8% of volume production (1.2 MT expected this year, up from 1.2 MT last). Bar & rod 22%. Higher-end & TMT product uplift ongoing; >8% of turnover from TMT+rails expected.

H1 achieved 9.33 MT. Q3-Q4 are best quarters, expect 21 MT total. Crude production 22 MT, but saleable steel 21 MT (accounting for non-saleable). Production challenges (rain impact) and technical parameter issues are behind; Q3-Q4 improvement expected.

Q2 is rainy season: wet coal, furnace issues. EBITDA/ton ₹9,561 in H1 will improve in Q3. Q3 guidance ₹10,000 possible, Q4 ₹11,000-₹12,000 if market holds. NSR, monsoon cost pressures are Q2-specific.

H1 achieved 9.33 MT. Q3-Q4 'best quarters' expected. Crude 22 MT target, but saleable (ex-SMS) ~21 MT. Monsoon impact Q2 behind us.

Geopolitical situation stabilizing. Q2 was spike due to China demand + supply constraints. November expected INR24,000, December INR23,500 trend cited.

Q2 was weakest EBITDA/ton ₹8,170 (rainy season penalty). Q3-Q4 technical parameter improvement + lower monsoon impact expected to lift per-ton EBITDA.

MD expects coal to stabilize; furnace issues from monsoon rain expected to ease. But inflation in repo rate + wage costs (VRS pending) could offset gains.

H1 spent ₹5,500 Cr. Q3-Q4 target ₹9,000-10,000 Cr = ~₹14.5-15.5K total. Major spends at IISCO, tenders issued, work started.

Expansion across IISCO (500 MW power), Bokaro, Bhilai, Rourkela. IISCO major orders placed. Land acquisition cleared for IISCO, Bokaro, Bhilai (RSP advanced stage).

Q2 coking coal spiked ₹1,700/ton vs prior ₹1-1.5K fall guidance. Imported coal 85% of basket (19 MT/year). China demand swings & geopolitical tensions (Russia, Middle East) drive spot prices.

₹1,20,000 Cr over 4 years across 4 plants (IISCO, Bokaro, Bhilai, Rourkela). Land acquisition at RSP, Rourkela still in advanced approval stage. Contractor readiness & cost inflation (labor, materials) could stretch timeline.

Iron ore fines MOU target 7-8 MT FY27 faces blockade (Odisha Group Mines permit renewal 2030, Jharkhand Group permit approval pending). Rowghat, Gua ramps depend on clearances.

FY27 sales volume cut 22 MT → 21 MT mid-call. H1 achieved 9.33 MT; Q3-Q4 'best quarters' expected but cut implies lower-than-prior confidence. Monsoon impact (wet coal, furnace issues) cited but competitive pressure also evident.

Net debt ₹20.6K Cr at H1. Capex acceleration H2 (₹9-10K Cr Q3-Q4) will raise debt. Long-term ₹1.2L Cr capex plan requires debt/FPO mix; FPO timing vague ('growth phase, profitability needs improvement').