Rathi Steel's melting shop is running at half capacity, not the 80% it promised.
Revenue surged 41.7% in FY26, but the steel mill that drove it is only 50-52% utilized, well short of the earlier 80% target.
What's new
- FY26 revenue grew 41.7% to ₹716 crore, driven by a restart in TMT bar production in April 2025.
- Steel melting shop utilization fell to 50-52%, far below the previously guided 80% target.
- Company expects ₹4,000/ton cost savings from new direct charging technology.
Why this matters
The top-line story is strong, but the operational reality is softer. A melting shop running at half capacity while management had guided 80% is a credibility gap that questions the quality of the growth and the timeline for margin benefits from new technology.
What we're watching
- Management's next update on closing the 50-52% vs 80% utilization gap.
- Whether the ₹4,000/ton cost savings materialize as the new technology comes online.
- The pace of the pivot to premium green-certified steel products.
The full read
Rathi Steel & Power grew revenue 41.7% in FY26 to ₹716 crore, a jump fueled by restarting its TMT bar mill last April. The concall, however, reveals the story beneath that headline is more complicated. The core steel melting shop is running at just 50-52% utilization, a level management itself contrasted against an earlier 80% target. Execution challenges have stalled the ramp-up. The company is betting on a new direct charging technology to save ₹4,000 per ton and a pivot to premium green-certified steel for better margins, but neither is proven yet at scale. Management also sidestepped specific margin guidance, focusing on volume recovery instead. For a nano-cap, the granular operational data is telling: strong topline growth is masking an underutilized asset base, and the path to the promised cost savings is not yet clear.
Questions answered
- Why is the steel melting shop utilization so much lower than the 80% target?
- The call cited execution challenges that have delayed the ramp-up. Management did not specify the exact bottlenecks, but the gap between the 50-52% actual and the 80% target is significant.
- How did the company achieve 41.7% revenue growth despite the operational issues?
- The growth came from restarting its TMT bar production mill in April 2025, which boosted sales volume. The revenue figure of ₹716 crore for FY26 reflects this restart, not full operational efficiency at the melting shop.
- What is the direct charging technology and what savings is it expected to deliver?
- Direct charging is a process change in the steel-making flow. Management stated it should cut costs by approximately ₹4,000 per ton, but it is still being implemented.
- Why did management avoid giving specific margin guidance on the call?
- The summary indicates management focused on volume recovery and the green product transition instead of providing specific margin numbers. This suggests near-term profitability is still uncertain and tied to resolving the utilization shortfall.