Steel Authority of India Ltd Q3 FY2026 Concall Summary

Key Takeaways

• Volume-led turnaround, margins next: Sales volume jumped 16.3% in 9M, driving a 60% PAT increase, inventory liquidation, and nearly ₹5,000 crores of debt reduction; the Q4 story shifts to whether price realizations catch up to rising coal costs.
• Price recovery is real but back-loaded: Market improvement began mid-December, with flat product hikes of ₹3,300-3,500/tonne and long product hikes of ₹2,000-2,500/tonne flowing into January and February realizations, not the reported quarter.
• Coking coal is the margin wildcard: Imported coal cost is rising from ₹18,500/tonne in January to an expected ₹19,700 in February and higher in March, with the benchmark index at \$251/tonne; management bets it stabilizes rather than spikes further.
• Operational disruptions are behind it: Bokaro's SMS converters and Bhilai's converter vessel incident are resolved; all five integrated steel plants are running at 98-100% capacity, setting up Q4 for unconstrained production.
• What to watch next quarter: Whether the February-March price jump delivers margin expansion despite rising coal, the pace of further debt reduction from inventory liquidation, and any quantification of IISCO expansion's EBITDA benefit.

Volume & Operational Recovery

• Sales volume engine: 16.3% volume growth in 9M drove inventory reduction, lower borrowings, and an outreach push to retail and other consumers; Q4 volumes are expected to exceed Q3, with an endeavour toward 0.55 crore tonnes.
• All plants at full throttle: All five integrated steel plants are producing at highest levels after resolving Bokaro's SMS converter issue (impacted Q2) and Bhilai's 15-20 day converter vessel spillover incident; both are now back at 98-100% capacity.
• Semis elimination underway: Semis percentage is down to 10% from prior years due to higher mill production and conversion contracts; the 1-million-tonne Durgapur TMT bar mill has started ground activity with an 18-24 month timeline, after which semis will be "almost zero."
• Volume bridge note: Q3 saleable steel production dipped sequentially because RSP's New Hot Strip Mill had been drawing slabs from Bokaro's excess stock; now that Bokaro's own Hot Strip Mill has picked up, that in-process stock buffer is gone.
• FY27-28 production targets: Hot metal targeted at 2.25 crore tonnes in FY27 and 2.3 crore tonnes in FY28; saleable steel ex-NSL at around 2.1 crore tonnes and 2.15 crore tonnes respectively.

Panda: "The second half of the financial year is always the best for steel industry. Things have already started looking up and we hope that the trend and momentum will continue."

Pricing & Market Dynamics

• Recovery timing: Market was subdued through November, with September-October numbers "quite subdued"; improvement began mid-December, with real price increases of ₹2,000-2,500/tonne in long products and ₹3,300-3,500/tonne in flat products reflected in January.
• February catch-up: Price increases implemented in 2-3 tranches during January could not all be reflected due to averaging; the spillover into February means a "good jump" in sales price is expected in the current month.
• March outlook: Management guidance is for continued upward movement in March, supported by rising coal prices and the seasonal post-monsoon, post-festive demand uptick.
• Safeguard duty support: India returned to net exporter status as exports grew 33% to 0.48 crore tonnes while imports fell 37% to 0.47 crore tonnes; the safeguard duty is playing a role in domestic market stability.
• NSL arrangement: 0.1 crore tonnes of SAIL's 1.46 crore tonne total flows through NSL at identical pricing, targeting South Indian markets; management says the arrangement provides market stability without disadvantage to either party, though margin delta could not be quantified on the call.

Cost Structure & Margins

• Coking coal trajectory: Average imported coal price was ₹18,500/tonne in January, expected to rise to ₹19,700 in February due to weighted average arrivals and stock, with a further ₹1,000 increase possible in March; the benchmark index sits at \$251/tonne versus \$190 previously.
• Coal outlook bet: Management's personal view is that coking coal "should not increase much" beyond current levels, will stabilize, and will "probably taper down" once the situation in Australia improves.
• Power cost structural saving: Actions across plant units to source from renewable energy sources have reduced power costs, creating a structural saving that will persist.
• Employee cost decline: Q3 employee costs fell sequentially due to actuarial adjustments (rising discounting factor) and a gratuity component that had taken a hit in H1 after achieving 50% IDA; the lower run-rate continues in Q4.
• Inventory valuation swing: Q1 had a ₹1,000 crore negative stock valuation impact; Q3 had a positive impact of at most ₹100 crores; Q4 is expected to deliver a "good positive impact" as coal prices rise, with management guessing it could be in the ₹200-400 crore range but declining to commit to a number.
• Salary revision deferred: The next wage revision applies from 1 January 2027, not 2026-27, with most impact landing in 2027-28; annual manpower reduction provides a partial offset, so the net impact remains unquantified pending guidelines.

Panda: "I personally feel that actually it should not increase much. It will stabilize and after that, after the situation improves in Australia, probably it will taper down."

Balance Sheet & Capital Allocation

• Debt reduction momentum: Close to ₹5,000 crores of debt reduced in 9M, with the momentum continuing through February and March; inventory liquidation from sales growth is the primary driver.
• Interest cost trajectory: Interest cost has already fallen by ₹500 crores in 9M; another ₹500 crores of inventory reduction is expected in Q4, taking the full-year interest cost reduction to around ₹1,000 crores.
• CAPEX guidance: ₹15,000 crores planned for FY26-27, with payments toward the IISCO expansion and other projects flowing next year; working capital borrowing has been reduced to accommodate expansion CAPEX.
• IISCO expansion: A ₹36,000 crore project with most major packages already ordered and ground activities started; timeline of three years to completion, with production volume and margin expected to "bolster profitability to a greater extent" afterward, though management did not quantify the per-tonne EBITDA benefit when asked.

Panda: "As you know, in 9 monthly, our interest cost has come down by Rs. 500 crores. We expect that another 500 crores reduction in inventory will additionally happen in Quarter 4. So, overall, for the year, the interest cost reduction could be around Rs. 1000 crores."

Expansion & Capacity Pipeline

• Durgapur debottlenecking: The 1-million-tonne TMT bar mill has started ground activity with an 18-24 month timeline; an additional package including a blast furnace, converter, and caster has been approved, which will increase Durgapur's overall capacity by 0.1 crore tonnes.
• RSP Caster No. 4: Completed and production has started.
• DSP blast furnace replacement: One old blast furnace will be knocked off and replaced with a new one, along with another converter.
• ISP expansion EBITDA ambition: Once expansion is complete, EBITDA per tonne from ISP expansion is targeted at more than ₹10,000.
• IISCO completion timeline: Management indicated completion somewhere around FY30, end of 2029 or 2030.

Panda: "It will take around 2 years' time from now. It will take 18 months' time. Ground work is already started. So, if we are end of 2025-26 right now, 18 to 24 months is the timeline."

Guidance & Commitments

Key Metrics