Steelcast Ltd - leading steel castings

Steelcast has reported another excellent set of results. EBITDA margins have finally started benefitting from op leverage & now at 23.5%.Volume growth remains healthy.

Concall was held today,some highlights:

→ Continue to see good traction from end customers.No signs of slowdown at all.In fact,given poor environment in EU the governments maybe forced to revive the economy via capex.

→ Order book remains at 3-4 months.Mgt said they had wrongly mentioned 300 cr in the last call,they always have 3-4 month kind of order book & that continues.

→ WC will sustain at current levels.Expect to reach 57% capacity utilization in fy23,90%+ in Fy26.Expect to sell 21k MT in Fy24.

→ Will see some price deflation/correction owing to RM & currency movements from Oct. Net impact won’t be more than 1-2%.

→ Power saving plans remain on track.Should lead to 2% kind of margin improvement at current util but in case of higher utilization company will have to buy from external sources.

→ Have been able to enter Japanese market with all prototypes approved.No idea of market size & not targeting any market share but wish to supply high quality castings.Japan will be 10-15% of total exports.American railroad supplies also on track & will start from Q3.

→ Participating in DefExpo & expect to make similar margins on those products.India market in general also continues to be solid.

Management as usual was a bit conservative but continues to deliver very well.Company has also paid another interim dividend.Company should be able to end with ~70 cr kind of pat this fy.

Disc.: Invested.Views are biased.


Steelcast reported another solid set of earnings yesterday.

Revenue up 50%,EBITDA up 80% & PAT up 140%. Margins are up big time vs. Q1 from 23 to 26% now. The concall just concluded some highlights:

→ Did ~4000 MT vols in Q3,will do similar in Q4 as well. For FY24 company has enough visibility to do a run rate 5000 MT,translating to 70% capacity util.

→ Seeing no slowdown in end user industries and at customer end.

→ Broad margin range of 22-25%,very happy to be in this band being a B2B business. However,no one-off in Q3 either. Had around 1 cr of Fx gain.

→ Railroad orders & power cost saving plans are on track.

→ Have purchase orders in hand of 125-30 cr,good for 3-4 months. Keep inventory of not more than 30-40 days.

→ Company is envisaging capex plans,will share final decision after Q1FY24. Capacity addition will be done in phases even if idea is to expand capacity by 50%.

Lot of questions were around slowdown & analyst community seems to be in disbelief on seeing no impact on revenue growth or guidance. Company continues to deliver well. Markets like analysts seem to be in disbelief with stock consolidating since 4-5 months. Thus,valuations are much cheaper now. Company should be able to do 90-100 cr kind of PAT next FY,looks great for a debt free company growing at good rates & prudent with capital.

Disc.: Invested. Views are biased.


Good numbers from Steelcast for Q4FY23.

Sales at 120 cr vs 93 cr YOY (29% increase)
Net Profit at 19.5 cr vs 9.63 cr YOY (103% increase)

OPM at 26%.
Long term debt is 0.
Short term debt of 23.6 cr.
Debt to equity of 0.1.

Results look really good but the stock fell ~8% even before the results were out. Any reason why market is not seeing value in the stock?

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Steelcast has ended Fy23 on a great note.

Revs 477 cr vs. 302 cr,up 58%

EBITDA 114 cr vs 64 cr,up 78%

PAT 71 cr vs 33 cr,up 115%

Return ratios are now in excess of 35% while co. is still at 55% utilization.Company continues to be debt free & WC saw a substantial improvement.Thus,for FY23 they were able to generate OCF of 107 cr.

Concall was held today. Some highlights:

→ Finished with around 16,000 MT volumes sold. Thus,27% volume growth…rest was contributed by higher realizations.

→ Some clients have delayed orders.Most significantly,there was delay in ramp-up of railroad order.Company expects H1 to be flat on volumes,H2 might see recovery.Will have more visibility from Q1/Q2.

→ Will save 10 cr on power cost & all will flow straight to bottomline.Thus,margins can expand from Q4 base other things being equal.

→ Jump in PP&E is mainly on account of solar power plant.Going ahead,nominal capex of 10-12 cr will be done in Fy24.Mostly for balancing equipment & debottlenecking purposes.

→ The board will take a call on utilization of cash once capex outlook is clear.In case,no capex is needed company will come back to shareholders for suggestions.Dividend payout is 20%

→ Order book stands at 123 cr

→ Company strives to be in margin range of 22-23% but Fx or RM tailwind can prop margins further.However,there were no one-offs in Q4.RM prices are stable now.Realizations are down by 1.8%

Call ended a bit abruptly since Mr. Chetan Tamboli was having to answer same questions again & again.One interesting development is that Mr. Rushil Tamboli(his son) is back as a whole-time director & will start to handle day to day ops soon.This should remove succession overhang on the co(if any)

Stock has had a long consolidation post a large move from 300-ish levels last year.However,given tepid near term outlook stock may continue to be in a range for longer.

Disc.: Invested. Views are biased.


Steelcast FY23 AR Notes


  • The Company manufactures steel and alloy casting products. The company’s competence is reflected in its extensive product range: from 2.5 Kg to 2,500 Kg.
  • Company’s revenue grew 58% vs. EBITDA grew 79%. This validates that revenue growth was not due to price discounting but from superior economies of scale and related competitiveness.
  • Facts
    • Export vs domestic mix is 60:40
    • Volumes sold in FY23 = 15740 MT; capacity utilisation just above 50%
    • Revenue per person has increased from 3.3 Cr in FY20 to 4.09 Cr in FY23
    • No. of customers increased from 26 to 43
    • Employee retention rate at 98%
  • There is a structural shift in the industry -
    • Customers want to diversify supply chain from China
    • This led to incremental business for Steelcast as 2.4% of revenue was from first time customers
    • China wage rate has become high and since castings sector is labour intensive, it benefits Steelcast in India
    • Castings production has heat exposure and is physically exerting. Hence shift from developed nations to economies like India where labour is available
    • India is resourceful metallurgical region is the world
    • Customers are demanding stability rather than lowest bidder for castings and there is premium to be paid for highest quality castings in quickest time
    • Steelcast is mostly shortlisted whenever someone comes to India for casting products
  • These factors can help company do -
    • Higher volumes and build economies of scale to increase margins
    • Want to touch 1000 Cr in few years
  • Raw material handling -
    • Company entered into long term contracts with vendors to procure RM at lower cost than LME prices
    • Negotiated pass through costs with customers
  • Besides, the company does not manufacture and market cookie cutter products. It understands customer needs and delivers in line with a precise metallurgical recipe that does not underperform at the customer’s. The result is that our products have established an impressive multi-year track record of robust performance at the customer’s end. This led to product returns from customers less than 0.1%
  • Sectors that influence the demand -
    • Whenever ore and metal sectors perform well, mining and rail equipment OEMs get into capex mode leading to higher demand for castings
    • Cement, steel, Earthmoving and construction sectors offer tailwinds
  • Competitive edge -
    • Steelcast matches the price-value proposition offered by respected North American and Western Europe casting manufacturers.
    • Steelcast’s enquiry to order fulfilment cycle is shorter than most large and reputable casting manufacturers the world over, making it a preferred supplier.
    • Demonstrated that company is not just fleeting suppliers for a customer to capitalise on an arbitrage; but a long term partner with the product development life cycle of some of the most respected companies in USA
    • Low labour cost in India is an advantage
    • Only 5 major players in India
  • Capacity -
    • Increased capacity from 17K TPA to 30K TPA
    • Aim to enhance production from 16K TPA in FY23 to 20K TPA in FY24
  • Cost savings
    • Renewable energy plant to save 11 Cr annually
  • Management targets -
    • Shrink product dev time from 9-12 months to 6-7 months by new tooling introduction
    • Moderate product dev cycle time from 55-60 days to 40-45 days
    • This will mean that business can grow with internal accruals rather than debt or extra equity
    • Shrink working capital days from 100 to 90
    • Intends to manufacture higher value added products
    • The Company expects to reach 100% capacity utilisation by FY 2026-27, produce 5,000 Tonnes per quarter and growing over 20% per year by volume


  • Business is very labour intensive and can only scale linearly with labour opposed to machine driven businesses
  • There is a challenge to grow beyond moderate teen percentages due to this reason. Company cannot raise production by pressing a button
  • Needs to be on toes to deliver higher quality and new employee training needs to be at par
  • Appreciation in iron and steel prices increases costs for the business
  • Freight challenges exist as bulky material need to be exported
  • Customer concentration as 32% of export revenues come from single customer
  • Domestic realisations are lower than exports

Capital Allocation

  • CFO = 108 Cr
  • Capex = 47 Cr = 43%
  • Dividend = 28%
  • Debt repayment = 39 Cr = 36%

Nice summary, thanks for this.

Any idea who are these 5 players?

From HDFC brokerage report - “In the Indian market, it competes one of the steel casting making company belonging to Sanmar group in South India which has a similar foundry capacity, however it is operating at a much lower capacity utilization catering mainly to Oil & Gas industry. Apart from Sanmar, it faces some competition from Simplex Castings, Gujarat Intrux, PTC Industries, Magna Electro Castings, Bhilai Engineering Corporation etc.”


32% revenue from same customer. Do we know who is this customer and how long they are their customer?

Caterpillar & Komatsu

Conference call -

Moderate y-o-y, light on q-o-q, 27% margin due to cost savings in power expenses due to Solar plant, lower input cost, better productivity.

Q2 and Q3 will also be soft.

Util - 52%

Demand - 4L tons/year. Dominant share in railroad (US) - 75-80%, India 1-2%. Brazil, east Europe rest.

Modular expansion of 10K tons ? - statement of intent. As in when demand picks up. At least a few quarters away. 2027 - additional capacity. 2 years to create new capacity. Mid-24 maybe trigger that.

Quarterly passing of raw material cost

During this quarters, 2 more customers added - railroad - cannot share name

Defence - track for combat equipment… got approval recently. 5 more in works for delivery by Mar 2024.

25% lower cost that global competition

Ground engaging tools - In talks with 2 major players in globe

10% in rail road, 10% in ground engaging tools - Next 2-3 years

New plant fully automated , old one semi-automated - We do only high volumes in new plant line.

Current order book breakup - exports - 55%, domestic - 45%

October 2023 - Start US railroad supply

Q1 - Volume growth was soft. No growth.

Q1 - 10cr employee cost after revision on minimum wages from Gujarat govt. it should remain around the same for the year.

Will try and maintain margins going fwd (20%-22% base + 3-4% based on power savings etc)

50%, 60%, 75% - Expected Utilisation for next 3 years , 20% y-o-y growth

10 cr short term debt left on books. Effective 01 October, no debt on books will be left.


From the earnings call transcript for Steelcast Limited’s Q1 FY24, here’s a detailed summary-


  1. Diversified Customer Base: Steelcast has expanded its customer base, adding two more customers during the quarter. They have also diversified their order book across various industries, including Mining, Earth Moving, Locomotives, Transport, Construction, Railways, Ground engaging tools, Cement, Steel, and Defense.

    • Example: The company has entered into a long-term supply agreement with a prominent OEM in the USA specializing in the railroad industry.
  2. Strong Financial Performance: The company achieved a revenue of Rs. 119.5 crores, a YoY increase of 3.3%. EBITDA reached Rs. 32.3 crores, a 34% YoY increase, with an EBITDA margin of 27%. PAT expanded by 43.4% YoY to reach Rs. 20 crores.

    • Stats: EBITDA margin of 27%, PAT margin of 17%.
  3. Cost Advantage: Steelcast continues to have a cost advantage, being 20%-25% cheaper than European peers.

    • Example: Despite global gas price fluctuations, Steelcast’s cost advantage remains consistent.


  1. Moderate Revenue Growth: Despite strong financial metrics, the company reported only a 3.3% YoY revenue growth.
  2. Dependence on Global Conditions: The company’s performance is influenced by global geopolitical conditions, which can lead to unpredictability.
    • Example: The management mentioned potential softness in demand during Q2 and Q3.


  1. Strategic Investments in New Sectors: Steelcast is focusing on newer industries such as defense, railways, and ground engaging tools.

    • Example: The company has been making track systems for combat vehicles and received approval for a repeat order of 5 more track systems to be delivered by March 24.
  2. Cost Savings through Power Plants: The company has commissioned a 5 MW Solar Power Plant and a Hybrid Power Plant, which are projected to yield annual power cost savings in the range of Rs. 10 crores to Rs. 11 crores.

    • Stats: Expected annual savings of Rs. 10-11 crores from power plants.


  1. Global Uncertainties: Geopolitical situations and global economic uncertainties could impact the company’s performance.

    • Example: The management acknowledged the ongoing global uncertainties and the need to work through them.
  2. Competition: The company operates in a competitive industry, and aggressive pricing strategies by competitors could pressure margins.

    • Example: The management mentioned that trying to increase margins beyond the current levels might invite competition.
  3. Dependence on Specific Markets: The company’s performance in specific sectors, such as defense and railways, could be influenced by changes in those markets.

    • Example: The company’s growth in the defense sector is moving at a slower pace, and the North American railroad industry is progressing as planned.

Comparison with Previous Quarters/YoY Growth:

  • Revenue: Achieved a revenue of Rs. 119.5 crores, reflecting a YoY increase of 3.3%.
  • EBITDA: Saw substantial growth, reaching Rs. 32.3 crores, a 34% YoY increase.
  • PAT: Expanded by 43.4% YoY to reach Rs. 20 crores.

The management’s tone during earnings call was characterized by confidence in their financial achievements, transparency about global challenges, and a cautious approach to future growth. Investors, on the other hand, displayed an inquisitive attitude, probing into key areas of the company’s performance and future prospects.

Steelcast Ltd appears to be in a strong financial position with clear strengths in cost efficiency and debt management, but it also faces challenges from global uncertainties and competition.

Disc: Invested.


Here are my quick notes on Steelcast Ltd

Steelcast - Quick Notes by Devesh.pdf (322.6 KB)

Disc: Invested


Sudden jump in Net block from 98Cr in FY21 to 142Cr in FY23, while the capacity is same as 30000MT. Can someone explain? Possibility of shenanigans?

Sorry, found it in concall, seems the jump is due to captive solar plant capacity.

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Extremely detailed presentation


Disclaimer: no transactions in last 30 days. Not a recommendation to buy or sell.


In latest quarter, although the revenue declined but the profit grew. The OPM grew from 23% to 28%. Stock price also corrected by approx 15%.

If we consider 3 or 5 years period, the current PE ratio & EV/EBITDA is less or around the median PE & EV/EBITDA.

It looks like still a decent entry point to me.

Disclaimer - Not invested just tracking

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Historically the company has struggled with its topline and the CU, so I think we should primarily be giving much importance to the topline.
Significant topline reduction in this quarter and lower guidance for the year, is definitely negative (reason why having cheap valuations)

*Disc: had some position earlier but sold off now.


North America while specific customer names cannot be disclosed due to confidentiality, the company currently serves three customers in the North American railroad industry. Confident of substantial market size of the North American railroad industry and anticipates substantial increase in supplies to this industry, foreseeing a reasonable ramp-up starting from Q4 onwards. The focus is on further penetration into the North American railroad market, Fy 25, contribution 8% of revenue.
Annual saving of 11cr/yr by using hybrid power
Domestic market - Didn’t do very well in the domestic market mainly due to the end users liquidating inventories. But things should be better from the next financial year onwards.
On cycle peak - for past couple of months is the excess inventories which
were there which is being liquidated so, the volumes are lower. So, once this is sortedout should start seeing some moderate growth.
Defence Orders - the first trial tracks have been approved, waiting for tenders next fy. As of now don’t see any big visibility in the Defense sector.
Future growth - there will be a degrowth of about 15% compared to last year so that should be the top-line and from the current year’s number at least 10% better next year. Present capacity utilisation 44-46%. >50% next FY.
Caution - “The world is going through turmoil so there will be some kind of pause happening not only in our industry, but across all industry sectors” Chetan Tamboli, Chairman and MD.