Sarthak Metals Ltd (NSE: SMLT) Q4 2025 Earnings Call dated May. 28, 2025
Corporate Participants:
Unidentified Speaker
Muthukumar K — Investor Relations
Sagar Shah — Vice President
Analysts:
Unidentified Participant
Presentation:
Muthukumar K — Investor Relations
Okay. Ladies and gentlemen, good afternoon and thank you for joining the Q4FY25 earnings call of Sarthak Metals Ltd. I am Muthu Kumar representing Wisdom IR. It is my pleasure to introduce a key member of the company’s leadership team Mr. Shagar Shah, Vice President and a valued member of the promoter group. Before we proceed, I’d like to remind everyone that this call is being recorded. The audio visual recording will be made available on the company’s official website shortly. Additionally, a complete transcript of today’s discussion will also be published on the website after the session ends. For this webinar.
All participants will remain in listen only mode during the presentation. Once the management has concluded their remarks we will open the floor for a Q and A session. As we begin, I’d like to highlight an important disclaimer. Some topics discussed in today’s call may include forward looking statements about the company’s market opportunities and business prospects. These statements involve risks and uncertainties and actual outcomes may differ significantly from those anticipated. The company assumes no obligation for actions taken based on such statements.
With that said, I now hand over the proceedings to Mr. Sagar Shah of Sarthak Metals Limited. Over to you, Mr. Sagar.
Sagar Shah — Vice President
Good evening everyone. Thank you Muthu. And thanks to all of you for being here today to discuss Sartik Mittal’s financial performance for the fourth quarter of fiscal year 2024 to 2025. I’m Sarvar Shah, part of the company second generation promoters. Let me begin with a brief overview of our core business which has historically been the backbone of Sartic metals global trade. Uncertainties and unpredictable tariff policies have created challenges for many industries including ours. While India’s economic growth remains resilient the slowdown does impact sectors like steel which directly affect our sales. Our core business of Codewire is remains fundamentally strong though it is closely tied to India’s steel production trends.
However, aluminium flipping coil business is facing major challenges with prices, mismatch and unethical business environment. The rising import and increased production capacity of steel units have put pressure on domestic manufacturers leading to reduced market share and capacity utilization in the steel industry. The company as you know, is actively participating in deleveraging its dependence on the steel sector with rapidly growing footmark in the welding industry. With our new products in flux Codewire segment I will share a lot more details when we get to that section of my remarks. Another Exciting buildup within the company are the latest experiments with the biotechnology space.
The sustainability and immense growth drivers it offers is beyond measures. Progressive, innovative and technological powerhouse is what we call this venture. I will share the latest updates from this space when we get to that section. We remain committed to navigating this challenging yet evolving landscape. By building on our strength to ensure sustainable growth. We are confident to deliver results with our long history of experience in building businesses and our solid executional force is at display again. Muthu, can you take us to slide five? Yeah. So this slide showcases the operational highlights of the company. A positive trend is emerging in our industry.
During 2021-2023, the steel consumables market faced intense price competition with new entrants offering low cost but substandard products. Manufacturing codewire is a highly specialized process requiring precision, consistency and uniform density attributes that many of these competitors failed to deliver. While this influx of lower quality products initially impacted our volumes, we remained steadfast in our commitment to quality and innovation. By late 2024, steel manufacturers began returning to trusted partners like us recognizing the long term value of reliable high quality Solutions. With over 20 years of expertise, we are now witnessing a strong recovery in trust and dependence of our clients on us reinforcing our leadership in prioritizing quality and service.
Specifically, in quarter four, our codewire business demonstrated robust growth with revenue rising 26% year on year to 36.5 crore and realization increasing by 3% to 2.62 lakh per metric ton. Strong volume growth of 16% helped in posting a strong revenue growth for the quarter on a year on year basis. Turning to our aluminium flipping coil business, revenue declined by 80% year on year to 6.4 crores with volumes falling 84% to to 253 tons. This business showed signs of positive EBITDA in the domestic market only due to sharp increase in aluminium prices due to tariff tensions.
Having said that as soon as the prices stabilized, the price imperity is again reflected with scrap prices unrealistically high and competitors offering substandard qualities at a cheap price. While we are scaling cautiously, global supply chain disruptions and low grade business environment have significantly compressed margins across this industry. Rather than engaging in unprofitable price competition, we’ve chosen to scale down operations to protect profitability. Our focus remains on value creation and we will exit businesses that do not align with this principle. We expect greater clarity of the aluminium business outlook by the end of June 2025 and we remain committed to making strategic decisions in the best interest of our long term growth.
Muthu, can you take us to slide 6 which showcases the profit and loss statement. Yeah. So. Our revenue for the quarter stood at approximately 48 crores reflecting a growth of 9% on a quarter on quarter basis. However, on a year to year basis revenue was down by 32% compared to 70 crore in the same period last year. This decline is attributable to our strategic decision to temporarily exit the unprofitable aluminium flipping coil business. Our EBITDA, excluding other income and extraordinary Items stood at 1.36 crore for quarter four. A decline of 48% year on year. Consequently, EBITDA margins for the quarter were 2.84% compared to 4.67% in the preceding quarter.
Profit after tax for the quarter was 67 lakhs representing a 61% decline year on year. This reduction was largely due to the fall in revenue and the scale of our operations. Despite these challenges, I am proud to emphasize that we maintain a robust financial position with a debt free balance sheet and a cash reserve of approximately 29 crores. This financial flexibility positions us well to navigate current challenges and seize future growth opportunities. Muthu, can you take us to slide nine? Yes. So this slide showcases our new venture in the Flux Code wire segment. So today I’m excited to share updates on our growing welding business which is rapidly gaining traction and becoming a key contributor to our future growth.
In quarter four, our welding division achieved revenues of 2.4 crores. With volume growing an impressive 39% quarter on quarter to 201 tonnes. Our price realization stood at 1.18 lakh per tonne. Currently, we are selling approximately 70 tons of flux Code wire per month and we have plans to scale this to 100 tonnes in the coming months. With this momentum, we aim to achieve annual sales of 25 crores within the next two years. We have currently three lines with a total capacity of 250 metric tons per month. Enough room for growth. For growth. A significant milestone for us was the recent approval from the RDSO in April.
As a technical advisor and consultant to Indian Railways RDSO sets stringent structure standards and specifications for railway equipment. Securing this approval not only opens up exciting opportunities with Indian Railways but also positions us favorably as we engage with major construction and engineering companies. We are actively working to obtain the necessary approvals and certifications to collaborate with these new partners. Likewise, we have added more credits to the segment with the shipping industry too recognizing our product with IBR and IRS approvals. With boiler Inspectorate and the renowned Thermax also recognizing our products as approved for making heat exchangers.
We are now eyeing various industrial applications opening up like shipbuilding, railways of course oil and gas, chemical, heavy steel fabricators for infrastructure building like bridges, telecom towers and other equipment. Even steel Authority LNT now recognizes our products for usage in building large furnaces and other uses. Additionally, our Flux code wire products hold BIS certification reflecting our unwavering commitment to quality and industry standards. To support this growth, we have recently expanded our distribution network and established a dedicated welding team. Reorders from our active dealers have already started coming in underscoring the positive response to our products.
Currently we are managing approx. 10 dealers across 5 states and we plan to expand this network rapidly. Our product portfolio includes application via three categories Carbon steel, stainless steel and hard facing. I’m proud to share. Recently we have accomplished successful trials of five new products in carbon steel application and two new products in stainless steel application. Motu, can you take us to slide 10? Yes. So this slide showcases our latest venture into the biotechnology space. Our biotech business has achieved remarkable progress marking a transformative step forward for our company. The Solid State Fermentation Pilot facility with a fermentation capacity of 14 kg in one batch is now operational and we successfully commenced the first production batch in May 2025.
The milestone lays the groundwork for our ambitious expansion plans in the biotechnology sector. A key element of our strategy is our partnership with the Council of Scientific and Industrial Research CSIR through which we are developing industrial bioenzymes. This collaboration grants us access to specialized microbial cultures for producing enzymes such as cellulase and beta glucosidase which are critical components in enhancing efficiency for bioethanol and biogas production. We are in continuous trials and development phase where our key focus is to achieve maximum quality at the maximum efficiency. We have already achieved tenfold activity of the product from where we started only in a single digit per ML of product and we are confident to take this to another tenfold activity.
The fermentation cycle has been reduced from six days to now four days and we are looking at strategies to bring it down to three days. All of this has happened in one month. So in the slide you can see there are four pictures. Two pictures on the up shows the two Kogi rooms where the fermentation activity takes place. The two pitches down on it. One is the harvesting room on the left and the packing room on the right. Muthu, can you take us to the slide 11? Yes. So this picture shows the outside structure of our 600 square feet facility.
We’ve also strengthened our capabilities by onboarding an industry expert whose initial assessment of our 600 square foot production facility has been highly encouraging. His confidence in our ability to produce high quality bioenzymes is a testament to our robust infrastructure and innovative approach. Our exclusive partnership with CSIR is a cornerstone of our strategy positioning us as a leader in sustainable enzyme technologies. This collaboration underscores our commitment to innovation and and eco friendly solutions in an industry poised for exponential growth. Notably, we are proud to be among the first companies in India and the first in Nagpur to make the pioneering transition from the metal industry to biotechnology.
This shift not only reflects our vision for diversification but also demonstrates our adaptability in embracing opportunities in emerging industries. To date, we have invested around 50 lakhs primarily for establishing a pilot RD facility that you all can see on the screen in Nagpur. This includes essential equipment and salaries for our expert advisors. With these advancements, we are charting a new path in biotechnology. One that promises both growth and sustainability for the future. With this, I’ll take you to the last slide. Slide 31 Muthu please. Looking ahead, we have taken deliberate steps to mitigate the risks associated with the cyclical nature of our core business through a comprehensive diversification strategy.
By venturing into new industries, expanding into different geographies and introducing varied product lines, we aim to achieve greater stability while unlocking new avenues for growth. Our transition from being solely a steel consumable supplier to a diversified player now encompassing Flux, Code Wire and biotechnology reflects our commitment to balancing investment driven and consumption driven sectors. This dual focus not only helps us manage risks and effectively but also strengthens our ability to deliver sustained growth in shareholding value. We remain optimistic about the company’s future. While the core steel business will always be subject to cycles, our diversification efforts have strategically positioned us to navigate market fluctuations.
With resilience. Backed by a strong financial foundation and a clear strategic direction, we are confident in our ability to drive long term value creation for all our shareholders. Thank you. With that, I’ll open the floor for the question and answers. Mutu, you can take over.
Muthukumar K — Investor Relations
Thank you, Sagar. Hope I’m audible.
Sagar Shah — Vice President
Yes.
Questions and Answers:
Muthukumar K
So, we will now commence the Q and A segment. For those who wish to ask a question directly, please use the raise hand feature. To do so, click on the microphone icon in the participants list. Once unmuted, kindly introduce yourself before asking your question. To ensure everyone has a chance to participate, we request that you limit your interaction to two questions at a time. You are welcome to rejoin the queue for further questions if needed. Alternatively, you may submit your question in the chat box as well by typing the question. As a quick reminder, let me reiterate, you can use the raise hand option.
You will be unmuted and you will be able to ask the questions. So let’s get started. So as you wait for the questions to. For people to put in the questions. So there are some questions that have come through email as well. So I will post that question to Sagar. Sagar, the first question is how is the new welding consumable business progressing from a perspective of revenues in FY26 and beyond?
Sagar Shah
So as I mentioned in my opening presentation, we are quite confident in this space. We are already gaining a lot of traction and having said that, the new approvals that we’ve just received, we are hoping to gain a lot of traction in this space and this year should be exciting and as we have set a target of 25cr in two years, I think we are very comfortable in achieving that.
Muthukumar K
Yes, there’s one question that has come on the chat box from Mr. Ajay. What is the. Just one second. Yeah. What is the likely export demand scenario for code wires in FY26? I’m repeating, what is the likely export demand scenario for code wires in FY26?
Sagar Shah
The Middle Eastern countries are. They do possess some, some level of inquiries. We do keep getting some level of inquiries. We are currently executing a few orders of export as well. But having said that, we’re always more focused on the local demand. India is the second largest steel producer and it just makes a lot of sense for us to be focused in the domestic market. But export always adds some more value and the pricing power is a little better when it comes to export, but there’s also competition. So we’re very optimistic. We’re optimistic with our products and with our quality.
We do keep on getting repeated orders, but it’s a wait. In what situation?
Muthukumar K
Okay, so to just reiterate, if somebody wants to ask participant want to ask a question, you can use the raise hand feature. Just click on the microphone icon in the participant list. So once you’re unmuted you will be able to introduce yourself and ask the question. So other question that has come up on the chat box is what is the when will the biotech revenue start coming in and what is your competitive edge in the biotech business?
Sagar Shah
So as I said again in my opening remarks, we are in a continuous R and D phase right now. We’ve built a 14 kg per batch capacity of space which we are standardizing and our target is to immediately take this 14kgs to 50kgs 50 50kgs and from those 50kgs once we will standardize the product and once we get the ideal activity of the product, that’s when I’ll be able to tell you the revenue scenario. But we’re confident with the amount of work that has been done in this one month. We’re quite confident that I’ll be able to guide on revenues very soon.
Muthukumar K
One more question from the.
Sagar Shah
I just like to add something more on it. So that space of biotechnology where fermentation. We’re undergoing fermentation technology. There’s no guaranteed sop even when we’ve had the technology transfer from the Government of India, an institute institution based research report and the SOP that we’ve received from there we’ve had to go a lot of amendments and tweaks and changes in that SOP as well to standardize our procedure depending on our environment and temperatures and humidity. So what I’m trying to tell you is there’s no guaranteed SOP where we’re in a continuous R and D phase and once we are able to where we manage to standardize the procedure and get a product that that holds a good activity which can be used industrially, that’s when I’ll be able to guide which will be very soon.
Muthukumar K
Question that has come up is could you give us a perspective on the CAPEX requirements for your various businesses over the next two to three years?
Sagar Shah
So CapEx requirement for Flux code where I would say where we’re currently hosting three production lines and we plan to go ramp it up with three more productions lines in the near future. Three more production lines will approximately cost us 3 crores. Having said that, the infrastructure we built for the Flux code wire segment is totally capable of handling more than nine production lines. So the infrastructure part is already done. We only need to invest in the production lines which cost approximately 1cr per line. So in the near future 3cr in the flux Code wire segment.
And when I talk about biotechnology space, Biotechnology space are our pilot facility hosts some of the best preparation machines which are needed in a pilot facility and in a scaled up facility. So once our procedure is standardized, that’s when I’ll be able to guide on the CAPEX required for the biotech space.
Muthukumar K
Few more minutes for participants to ask their question. I’m reiterating. For those who wish to ask a question directly, please use the raise hand feature. Just click on the Microphone icon you see on the once unmuted. Kindly introduce yourself before asking your question.
Sagar Shah
I can see one more question that has come up.
Muthukumar K
Yes, yes.
Sagar Shah
Aman, can you, can you just.
Muthukumar K
I’ll just. Yeah, yeah. In which welding applications are your flux code wires finding acceptance? Are they being used in several types of welding? How is the company generating incremental demand? This question is from Mr. Aman. I’m just repeating.
Sagar Shah
Okay.
Muthukumar K
In which welding applications are your flux code wires finding acceptance? Are they being used in several types of welding? How is the company generating incremental demand?
Sagar Shah
Okay, so. Hi Aman. Currently our products were widely being used in, in spaces where prefabrication structures were being made. Other than that, as I said in my opening remarks, we’ve received, we very recently received a lot of approvals from the shipping industry, from the railway industry, from the Thermax which they build boilers and heat exchangers so that even from Steel Authority who, who keep requiring furnaces. So when we received the approval from steel. So that simply means that all the fabrication industries that are supplying the furnaces to the steel industries now have like they’re open for us to do our business.
So our application until now was very limited, but now the horizon has completely expanded and now we’re looking at a lot of traction flux code wires. Are they being used in several types of welding? Yes, of course they’re being used in several types. So the different products that I just mentioned that we finished trials of which. So they’re being used for different applications, one for different angles and different steels, even stainless steel is being used in circular motion in 90 degree angles and all these technologies are in continuous welding space. So flux code wires are the latest technology in this space.
And how is the company generating incremental demand? I don’t know what exactly you mean by that. Our only focus is to maintain the quality and get the appropriate approvals from different industries to generate the demand for us.
Muthukumar K
If you want to ask the question and clarify on the question which you have raised, you can do that directly.
Sagar Shah
With Sagar, even, even maintaining the dealers network. It’s a, it’s a new avenue for us. We’ve always been in the direct OEM space but dealing with the dealers and maintaining our relationships with them has been exciting and we’ve been managing it well. We’re well positioned with continuous reorders by our existing dealers and we have a list of new dealers who we want to work with and some who they want to work with us. So it’s an exciting space. We’re looking forward to.
Muthukumar K
Last question from the email that has come is basically do you expect the Codewood code wired volumes to growth to continue in the year and the year beyond?
Sagar Shah
So the the steel capacities that had been all our customers in the steel sector that had been incurring a lot of huge capexes, a lot of them have now come live. Having said that, we’re not very sure if they if the steel companies in India have the right demand as of now even though their capex and the steel expansions have gone live. I don’t see that rush in production as of now. Since we keep moving in the industry, I keep traveling to to our customers to maintain our relationships. I don’t see a specific rush happening around them to increase their production as of now.
It can change overnight. It can change overnight. So if steel production is moderate and not growing, I don’t see our cold wires also doing too great. Like a single digit growth is still expected due to the trust and the dependence that I mentioned which is coming back to the existing players, the veteran players. I see that happening now and which is why I can see a single digit growth in code wires.
Muthukumar K
So we would wait for two more minutes for any questions that participant would like to address to the management. Okay with no further questions. Thank you participants everyone for joining for today’s Q4 earnings call of Sartak Metals Limited. Thank you Sagar for joining for this event and thank you so much. Have a wonderful evening.
Sagar Shah
All right. Thank you. Bye bye.