Vardhman Special Steels (VSSL) Q4 20/21 earnings summary

Executive summary

• FY21 began under lockdown and an initial estimated PBT loss of ₹90 crore, but ended with PBT of ₹66 crore and the strongest quarterly performance to date in Q4.

• Robust H2 demand, higher volumes, improved yields and cost savings lifted profitability; favorable steel prices also supported margins.

• Revenue reached ₹937.08 crore, EBITDA ₹116.31 crore and PAT ₹44.19 crore; the Board recommended a maiden dividend of ₹1.50 per share.

Financial highlights

• Revenue from operations rose 11% YoY to ₹937.08 crore from ₹846.20 crore, driven by higher sales volumes and realizations.

• EBITDA increased to ₹116.31 crore from ₹49.12 crore; EBITDA margin expanded to 12% from 6% YoY.

• PAT rose to ₹44.19 crore from ₹3.34 crore; PBT was ₹66.38 crore versus a loss of ₹2.32 crore in FY20.

• Net cash generated from operating activities was ₹87.24 crore versus ₹135.43 crore; net worth increased 11% to ₹459.36 crore.

• Employee benefit expense rose 24% YoY to ₹59.61 crore, partly reflecting a one-time incentive, managerial commission, pandemic welfare costs and annual increments.

Outlook and guidance

• Normal EBITDA-per-ton guidance was revised from ₹4,500–6,000 to ₹7,000–9,000; favorable steel-cycle pricing supported profitability above that range in FY21.

• FY22 was expected to benefit from price increases and a strong first half, while the second Covid wave created downside risk; near-normal operations were expected in Q2 FY22.

• FY22 priorities include samples and customer approvals; trial orders were anticipated in FY23, actual orders in FY24 and full potential in FY25.

• FY25 targets include expanded capacity of 250,000 tonnes of saleable material, EBITDA of ~₹10,000 per tonne and EBITDA/capital employed of 25%.

• Electric-vehicle steel production had started; hybrid-car grades and Japanese OEM business were targeted for development, with initial orders expected from FY24.