SAIL reported its best-ever Q1 sales at 4.55 MT, with a 15% YoY growth. Despite global headwinds and price pressure, EBITDA improved due to operational efficiency and lower coking coal costs. The company reduced debt by ₹1,100 crore and targets ₹7,500 crore capex in FY26. Strong domestic demand, infrastructure push, and IISCO expansion drive future growth plans.
Global Economic and Steel Industry Overview
- Global Economy: The global GDP growth rate in 2025 is projected at 2.4%, down from 2.9% in 2024 due to trade tensions, rising protectionism, and policy uncertainty. Inflation is cooling but central banks remain cautious.
- India’s Outperformance: India shows resilience with GDP growth of 6.4% in FY25, supported by 7.3% private consumption growth and healthy activity across all sectors. Retail inflation in June was just 2.1%, giving RBI room for rate cuts.
- Capex & Trade: Government-led capex and FTA with the UK (signed July 24, 2025) are expected to boost manufacturing, exports, and startups.
Global and Domestic Steel Industry
- Global Steel Demand: Expected to grow 1.7% (WSA). Advanced economies show flat or negative growth, while emerging economies like India and Southeast Asia are driving growth.
- China’s Overcapacity: Domestic slowdown in China has led to steel dumping in global markets, suppressing global steel prices.
- India’s Steel Demand: Growing at over 8%, driven by infrastructure, housing, railways, renewables, defense, and automotive. Per capita consumption has reached 120 kg, signaling future growth potential.
- Challenges: Include rising imports (+24% YoY), volatile raw material prices (especially coking coal), and global oversupply.
SAIL Q1 FY26 Performance
- Production: Saleable steel production was 4.7 million tons, up 12% YoY.
- Sales Volume: At 4.55 million tons, up 15% YoY — highest-ever Q1 sales volume for SAIL.
- Turnover: Up 8%, limited by lower steel prices.
- PBT: Rose 2.7x to ₹890 crore (vs ₹326 crore in Q1 FY25).
- Net Borrowings: Reduced by ₹1,100 crore to ₹28,741 crore as of June 30, 2025.
Operational Efficiency Initiatives
- Improved fuel rates, coal-to-hot metal ratio, and coke rates.
- Increased use of CDI (Coal Dust Injection) and lowered basic energy consumption.
- Focused on sustainability: Better CO₂ emissions, zero liquid discharge, and community CSR efforts.
Key Financial and Operational Insights
| Metric | Q1 FY26 | Q1 FY25 / Q4 FY25 | Comments |
|---|---|---|---|
| Blended Coking Coal Cost | ₹16,918/ton | ₹17,653/ton (Q4) | Lower costs helped margin |
| EBITDA/ton | ₹6,400 | ₹6,000 (Q1 FY25) | Lower due to inventory valuation impact |
| Stock Valuation Impact | ₹1,050 crore (negative) | – | One-time impact due to lower production costs |
| Capex Q1 FY26 | ₹1,642 crore | Target: ₹1,500 crore | Ahead of plan |
| FY26 Capex Target | ₹7,500 crore | Up from ₹6,000 crore in FY25 | |
| Inventory (FG) | 1.7 million tons | 1.4 million tons (Q4 FY25) | |
| Blended NSR | ₹51,700/ton | ₹50,100/ton (Q4) | Increase of ₹1,600/ton |
| Sales Guidance FY26 | 18.5 million tons | – | Excludes NMDC steel |
One-Time and Recurring Impacts
- Inventory Valuation: ₹950–1,050 crore negative impact in Q1 due to drop in imported coal prices.
- Iron Ore Royalty: ₹173 crore higher due to IBM price hike.
- NMDC Steel Sale: 0.37 million tons sold, revenue of ₹1,800 crore (marginally EBITDA positive).
- Railway Price Revision: ₹173 crore gain booked in Q1 for FY24; no further gains expected in FY26.
Capex and Expansion Plans
- FY26 capex of ₹7,500 crore approved; target exceeded in Q1.
- IISCO Expansion: ₹36,000 crore project for 4.5 MTPA capacity (to be executed over 36 months, orders from Q4 FY26).
- Future capex to increase from FY27 onward due to project execution at IISCO and other plants.
Guidance and Outlook
- Coking Coal: Expected to remain flat in Q2.
- NSR Trend: July NSR dipped (₹50,000 vs ₹51,700 in Q1), but signs of recovery in late July expected to continue into August–September.
- Q2 Expectations:
- No further stock valuation loss.
- Lower iron ore royalty impact.
- EBITDA to improve, though steel price decline in July may weigh slightly.
- Inventory Risk: Currently priced at low Q1 cost, unlikely to see further markdowns.
Question and Answer Session Highlights
Q: What was the blended cost of coking coal in Q1?
A: ₹16,918 per ton, compared to ₹17,653 per ton in Q4 – a reduction of ₹600–700 per ton.
Q: Why was EBITDA per ton lower despite better coking coal prices and operational improvements?
A: Due to a one-time stock valuation impact of ₹950–1,050 crore. Lower coal prices reduced the production cost, which in turn lowered inventory value, affecting P&L.
Q: What’s the outlook for coking coal prices in Q2?
A: Prices are expected to remain flat or slightly increase; no major decline is anticipated.
Q: What was the capex in Q1 and target for the year?
A: Q1 capex was ₹1,642 crore. The FY26 target is ₹7,500 crore.
Q: How is the IISCO expansion progressing?
A: It’s in the tendering stage. Major capex will begin from FY27. Total estimated cost is about ₹36,000 crore for 4.5 MTPA capacity.
Q: What was the rail price adjustment benefit?
A: ₹173 crore was booked for FY24, based on finalized pricing by the joint pricing committee.
Q: Will any further benefit from rail price revision be recorded in FY26?
A: No. The FY24 benefit has been fully accounted for.
Q: What was the total stock valuation impact this quarter?
A: ₹1,050 crore, which is a one-time impact and will not repeat in Q2.
Q: What was the impact of higher royalty on iron ore in Q1?
A: Approximately ₹173 crore increase due to higher IBM-determined prices.
Q: Was there any revenue from NMDC steel sales?
A: Yes. 0.373 million tons were sold, generating about ₹1,800 crore in revenue.
Q: How much did NSR improve in Q1 versus Q4?
A: NSR increased by ₹1,600 per ton.
Q: What is the outlook for NSR in Q2?
A: July NSRs are lower, but prices have shown signs of recovery in the last two weeks. Q2 NSR is expected to be slightly lower than Q1.
Q: What were actual NSRs for longs and flats in Q1 vs Q4?
A:
- Longs: ₹54,500 (Q1) vs ₹53,300 (Q4)
- Flats: ₹50,400 (Q1) vs ₹47,300 (Q4)
Q: Why does the EBITDA bridge show a negative impact from NSR despite the increase?
A: NSR had a positive impact of ₹650–700 crore, but stock revaluation had a negative impact of ₹950 crore, resulting in a net ₹258 crore negative.
Q: What are the current (July) NSRs?
A:
- Longs: ~₹51,500/ton
- Flats: ~₹48,600/ton
Q: What is the full-year sales volume guidance?
A: 18.5 million tons, excluding NMDC steel.
Q: Why was raw material usage higher in Q1 compared to Q4?
A: Q1 included shutdowns and capital repairs, leading to lower efficiency. Q4 typically has the best technical parameters and highest production.
Q: Is inventory valued at Q1 closing prices, and is there a risk of further markdown?
A: Inventory of 1.7 million tons finished goods and 1.3 million tons in-process is already valued at low Q1 cost. No further markdown is expected.
Q: How is NMDC steel accounted in financials?
A: Treated as stock-in-trade. Revenue appears in sales, and cost in purchases. EBITDA impact is slightly positive.
Q: Are NMDC volumes included in the 18.5 MT guidance?
A: No, the guidance is for SAIL’s own products only.
Q: What is the current coking coal inventory level?
A: Around 25–30 days at ports and 5 days at plants — considered normal.
Q: What was the blended NSR in Q1, Q4, and expected for July?
A:
- Q1: ₹51,700
- Q4: ₹50,100
- July: ~₹50,000
Q: What were imported coking coal costs in Q1 and Q4?
A:
- Q1: ₹17,600 per ton
- Q4: ₹18,500 per ton
Q: What was the inventory at end of Q1 vs Q4?
A:
- Q1: 1.7 MT finished goods
- Q4: 1.4 MT finished goods
Q: Are NMDC revenues impacting other expenses?
A: No, the increase in other expenses is primarily due to higher iron ore royalty.
Q: When will IISCO tendering be completed?
A: By end of Q3 or early Q4 FY26 — around December to January.
Q: How is the ₹950 crore stock valuation loss split?
A: It is primarily from finished and in-process steel inventory, caused mainly by decline in imported coal prices.
Q: If coal prices rise in future, can inventory value rise too?
A: Yes. A rise in coal prices would increase the cost of production, improving stock valuation positively in future quarters.
Q: What are the key earnings variables for Q2 vs Q1?
A: Stock valuation loss and higher royalty will not recur. Only NSR (price realization) is expected to vary and drive earnings change.