SG Mart Ltd Q4 FY2025 Concall Summary

Key Takeaways

• First full-year operations delivered INR5,800 cr revenue and INR103 cr EBITDA, with management committing to double EBITDA each year to INR400 cr by FY27.
• A royalty-model pivot in TMT distribution removes material-cost revenue from the P&L, lowering reported revenue but protecting per-ton economics; the INR500/ton royalty is expected to rise as the brand scales.
• Service centres are the margin engine: five operational centres now target 8,000-10,000 tons/month each at 4% EBITDA margin vs 1.5% in B2B trading, with five more centres approved under a INR600 cr capex plan.
• Solar structures is a new, uncounted vertical: 50,000-ton order visibility for FY26, 200,000-ton capacity live by August/September 2025, and any profit is incremental to the INR200 cr FY26 EBITDA target.
• What to watch next quarter: whether the March working-capital spike normalizes to 10-15 days by June 30 as promised, the pace of service-centre EBITDA ramp in Q1, and any detail on new solar products.

Business Model & Structural Shifts

• TMT royalty model removes revenue but protects economics: The distribution business shifted from booking full material cost through the P&L to a royalty-only model at INR500 per ton, with franchisee partners now carrying debtors and balance-sheet items. Royalty is expected to rise to INR750 and eventually INR1,000 per ton as the APL Apollo SG TMT brand establishes itself and partner utilization rises from 50% to 70-80%.
• Service centre capacity far exceeds initial assumptions: Early estimates of 3,000-4,000 tons/month per centre proved conservative; after operating five centres, management now sees 8,000-10,000 tons/month achievable, with installed capacity of 12,000-13,000 tons. Five additional centres are planned at Jaipur, Kanpur, Patna, Siliguri, Ahmedabad, Indore, and Bhubaneshwar.
• Working capital stretched temporarily, not structurally: The 30-day cycle in March 2025 reflected advance payments to steel mills ahead of government tariffs (adding ~10 days) and a late-March sales spike that inflated receivables. Both have already normalized in May, and management expects a return to 10-15 days by June 30.
• The model is deliberately asset-light and shockproof: No debt, a 10-15 day debtor cycle, and no high inventory exposure to fluctuating steel prices. Management describes the structure as insulated from global uncertainty or steel-sector swings.

Gupta: "we have created a business model, which is shockproof, from any of the global uncertainty or any massive swings in the steel sector"

Service Centre Economics & Ramp-Up

• Service centres carry higher working capital but deliver 4% EBITDA margin vs 1.5% in B2B trading, and are designed to generate a minimum 25% ROCE. Income from service centres started in Q4 and will ramp through Q1 and Q2, which management says will nullify the elevated other expenses that compressed EBITDA margins in FY25.
• FY26 contribution: Five centres operating for a full 12 months at 40,000 tons/month total translates to 500,000 tons/year and INR100 cr EBITDA. FY27 adds five more centres for an incremental 500,000 tons and another INR100 cr EBITDA.
• Capex is fully internally funded: The INR600 cr board-approved outlay over 3-5 years will be met entirely from operating cash flows, with no external capital, debt, or drawdown of fixed deposits required.

Solar Structures: The Uncounted Vertical

• A new brand, Sun Steel, is already selling to two large independent power producers building utility-scale solar parks. Order visibility stands at 50,000 tons for FY26, expected to double in FY27.
• Capacity build-out is underway: Ghaziabad is operational; Pune (serving Rajasthan/Gujarat) and Raipur (raw-material proximity) lines are being installed; upcoming Hyderabad and Chennai service centres will add lines for Karnataka and Tamil Nadu. 200,000-ton capacity is ordered and expected live by August/September 2025, with only INR50-60 cr of further investment needed over the next 2-3 years.
• Solar working capital is expected to run at 15-20 days, consistent with the broader business model.
• Profitability is explicitly excluded from FY26 guidance: The INR200 cr EBITDA target for FY26 captures only the three existing verticals; any solar profit is incremental. New products are under development, including steel profiles to reduce solar-panel manufacturing costs, with more detail promised next quarter.

Volume & Revenue Outlook

• B2B metal trading volume to grow 50% in FY26, with a sharp ramp-up in H2 as more steel supply comes online. Revenue is difficult to predict because steel prices fluctuate, but per-ton economics and total EBITDA are intact despite a 10-15% decline in steel prices since the original INR18,000 cr FY27 revenue target was set.
• TMT monthly volume to increase 50% in FY26, targeting 180,000 tons for the full year (up from 107,000 tons in FY25).
• Non-TMT distribution revenue expected to double to INR1,000 cr in FY26 from the current run rate.
• Q1 FY26 EBITDA is guided at near INR50 cr, putting the business on track for the full-year INR200 cr target.

Gupta: "I can tell you with full confidence that this EBITDA of INR100 crores will grow to INR200 crores in FY '26 and INR400 crores in FY '27."

Margins & Profitability

• Gross margin rose 700 bps but EBITDA margin fell 200 bps, a distortion caused by NSR fluctuation with steel prices and elevated other expenses from service-centre expansion. As service-centre income ramps, the expense ratio is expected to normalize.
• Interest costs are rising because the company is deploying funds previously held as fixed deposits, not because of new borrowing. With 100% EBITDA growth, PAT growth will match.
• Royalty margins will expand toward 4-5% once the brand is built, but FY26 will see higher brand-building spend.
• Warrant conversion brings INR250 cr into the company within 10 days of the call, further strengthening the balance sheet.

Market Position & Competitive Framing

• Management sees a structural capacity gap: with steel capacities building toward 2030, the addressable market is large enough that "you need at least 10 SG Marts to service only the steel sector." The goal is to become the largest buyer of steel in the country by aggregating demand.
• Imports are treated as opportunistic, not foundational: the business model is built on domestic supply relationships, not import arbitrage.
• On peers, management declined to engage, stating it has not analyzed competitors' business models and that its job is to deliver on guidance, leaving valuation judgments to investors and analysts.

Gupta: "We believe you need at least 10 SG Marts to service only steel sector, the way the capacities are getting built up by 2030."

Guidance & Commitments

Key Metrics