SG Mart Ltd (NSE: KRL) Q1 2026 Earnings Call dated Jul. 28, 2025
Corporate Participants:
Unidentified Speaker
Anamika Gulati — NA
Anubhav Gupta — Group Chief Strategy Officer
Analysts:
Unidentified Participant
Kumar Saumya, — Analyst
Vivek Patel — Analyst
Garvit Goyal — Analyst
Aryamaan Agarwal — Analyst
Akshit Gupta — Analyst
Vikas Mistry — Analyst
Dharmil Shah — Analyst
Mehul Panjwani — Analyst
Sneha Talreja — Analyst
Chirag Shah — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the SG Mart Limited Q1FY26 earnings conference call hosted by Ambit Capital Private Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your Touchstone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Kumar Somir. Thank you. Hand over to you, sir.
Kumar Saumya, — Analyst
Thank you, Anushka. Good afternoon everyone and thank you for joining us today. We at Ambed Capital are pleased to host SGMart’s Q1FY26 result conference call. We have with us today Mr. Amit Thakur, Director B2B Metal Trading. Mr. Suraj Kumar, Chief Financial Officer. Mr. Naman Rastogi, GM Strategy. Mr. Archie Thora, VP Service center and Distribution Business. This is Anamika Gulati, GM Renewable Business and Mr. Anva Gupta, Group Chief Strategy Officer. I will now hand over the call to the management for an opening remark post which we will open the floor for a Q and A. Over to you sir.
Thank you.
Anubhav Gupta — Group Chief Strategy Officer
Thanks Kumar. And thanks to embit for hosting Sgmart for its quarter one FY26 earnings call. I welcome all the participants who have joined onto this call. We are a young team. That’s why you see all the business heads are here to attend this call and address any queries which you may have. And we also have Mr. Shailinder Arora who heads our TNT business. It’s been two years since we conceptualized SGMart and started the business with the vision to become India’s leading B2B trading platform. Over the last eight quarters we have been able to create four business verticals to achieve this goal.
Number one business vertical is B2B metric trading. Second is establishment of network of service centers in the country and abroad. Third is the distribution business which comprises of TNT and other downstream steel products. And number four vertical which we added recently is the renewable business. Over this time we have been able to create a network wherein we have 2,313 customers which are on board and almost 246 suppliers are onboarded with us. So that’s the strength of our marketplace. What we have created in the last two years. The competence here is to buy bulk steel from the steel mills and either to trade it to gain sales volume or to do some value add to gain on the profitability.
Interestingly, if I elaborate on this in FY25 the service center business contributed 33% to our volume but in terms of EBITDA the contribution was 50%. Similarly in Q1 the service center business contributed 50% to the revenue and the contribution to EBITDA was 60%. And we added renewable business just to continue on this strategy wherein you keep on adding multiple product lines which are highly profitable and it shall improve the profitability for the company and ultimately improve the ROC roe profile. Empty business is now on pure royalty model which is right now breaking even. It may require some minor investments to to acquire more customers and get more partners on board.
Now coming specifically to Q1 performance, there was a miss on B2B trading volume due to poor steel availability in India in the first three months of the current financial year. This is evident from the sales volume data of top three steel producers which has come out. The Q1 volume for them declined by 11% versus Q4FY25. So this also impacted SGFart because right now almost 95% of business is coming from steel. So steel availability did impact our business as well. But coming to service center business, the monthly run rate is now 40,000 ton a month. From five operational service centers which are one in Ghaziabad, second in Raipur, third in Bangalore, fourth in Pune and the fifth one in Dubai.
We have acquired land for two new service centers which are under construction. One in Jaipur and second one in Ahmedabad. And we are scouting for three more parcels. One in Indore, second in Punjab and thirdly in South India. It could be the Chennai or Hyderabad. Meanwhile we are creating our positioning of Pan India and we are excited the way this business model got scaled up which is backed by our brand equity. So what we have done is that we have taken two service centers on lease as well in the second quarter. One in Indore and second one in Ahmedabad.
So the volumes from these lease out service centers will start flowing from Q2 onwards. This goes on to adding to the asset line model where we believe that one city may have more potential to do more volume. So rather than investing into second service center better is to take on the lease ones third vertical tmp it is scaling up pretty well. The Q4 volume was 39,000 tonnes versus 33,000 tonnes in Q4. We added one partner in Chennai in Q1 and in next nine months we are going to add three more, maybe four. One in West Bengal, second in Andhra Pradesh, third in Gujarat and fourth one to cater to the east market.
Right now there are 11 partners franchisee partners which are operational. Lastly on the Solar Business we started on a strong note with the current order book of around 285 crore rupees. Now this is executable over the next six months and we expect similar worth of orders to book in next one to two months. So for the full year we shall be doing around 4 to 500 crore worth of business from renewable business on the distribution business which is non TMT which are steel downstream products. Here also the revenue for the quarter one was 196 crores which was a significant scale up versus Q4 where the revenue was around 12530 crore rupees.
So that business is also doing pretty well as we continue to scale that up. Now in quarter one when we saw that the steel supply is going to become a challenge. So we focused on the profitability. So whatever steel we bought, we ensured that we do some value add, we do some processing and we generate profits out of it. That’s why despite such a low volume and such a low revenue, our EBITDA margin increased which surpassed 3%. So this also suggests that, I mean on how lean cost model we are working despite decline in revenue.
I’m talking about qq. We are able to improve our EBITDA margins now coming how we see the next nine months. We are not at all disappointed by our Q1 performance. Because what we see is that almost 7 million ton of new steel capacity is going to get added in the second half with Jindal steel and power blast furnace and Jindal stainless blast furnace getting fired up. And this will almost add 10% to the existing steel capacity in the country. And what we also saw was that the imports also opened up for next 34 months. So there is no risk to our FY26 guidance of 200 crore worth of EBITDA.
We are 100% maintaining this guidance. You shall see the ramp up from Q2 onward itself. And quarter on quarter you will see improvement in the revenue and absolute ebitda. Now coming on the balance sheet front, our working capital days came down to 15 days which was always the sustainable case, right? In Q4 it was slightly bloated because of the advance to steel suppliers ahead of the tariff which were imposed by the government. But now things are back back on track and our working capital days is 15 which will remain at similar levels. This helps us to generate ROC of 21% on annualized basis.
This ROC will improve further as our profits improve from Q2 onwards. So full year RoC shall be upward of 25%. We now have almost 1000 crore worth of cash on our balance sheet for which we believe that the mainly deployment will be for opening of warehouses and service centers. This will only be like 150, 200 crore worth of capex. We don’t anticipate more than that. And the good part is that we are generating similar cash flows also on annual basis. So mainly the cash will be used to fund the working capital as we scale up our business quickly.
It’s just that one roadblock we saw in quarter one because of short supply of steel. But as things improve we are highly geared up to double our turnover in next two years. So that whatever verticals, whatever ecosystem we created we are able to leverage that on full basis. That’s all from our side. Soumya. We can now have a floor open for Q and A.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star in one on their touchstone telephone. If you wish to remove yourself from the question queue, you. You may press star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Vaibhav Mishra from Freen Allies. Please proceed.
Unidentified Participant
Sir, my question is regarding the.
operator
I Mr. Vaibhav, could you please unmute yourself and then.
Unidentified Participant
Ma’, am, I have already unmuted myself. Hello. I’m audible now. Hello. Sir, I’m audible now. Hello. Am I audible? Am I audible?
operator
Ma’, am, you will proceed with the next question. Please come back in the queue. We take the next question from the line of Vivek Patel and individual investor. Please proceed.
Vivek Patel
Good afternoon everyone. I’m hoping I’m audible. So firstly just had a quick question in terms of. Is there any specific reason why our B2B material trading segment suffered a much sharper decline than the industry than 11% downfall that was seen in the primary stage producers. Anything like internally that has happened which has led to this. Thank you.
operator
We take the next question from the line of CA Garvid Goyal from NVIST analytics llp. Please proceed.
Garvit Goyal
Hi. Am I audible? Hello. Am I audible? Hello. I think there is some issue in this con call because previous participants were audible and you said they are not audible. Hello.
Anubhav Gupta
Anushka, is it that there is some problem at your end that participants are not able to hear their voices?
Garvit Goyal
Hello. I think there is some problem at the moderator end.
operator
Yes sir.
Garvit Goyal
Hello. I’m audible.
Anubhav Gupta
Yeah. Please go ahead.
Garvit Goyal
Thank you. Thank you for the Opportunity. So in the last few quarters we have been seeing the divergence in actual results from the commentary where we have missed our guidance multiple times. And in addition to that promoter holdings is also getting reduced consistently over the quarter. So last time when we spoke it was already middle of the quarter and you guided for 50 crore EBITDA for Q1. And that growth will be in line with the EBITDA growth only. But we did not achieve that. So my question is like I want to understand from you, why are we giving so much aggressive targets every time to the investors and falling away behind of them if, if.
If the environment is so much out of our control, particularly into the B2B metal trading side. Because last time also you mentioned like you have arranged or secured the availability of the steel. But this time we are seeing availability is not there was not there in the particular quarter. And secondly, if the opportunity is so big for the as per the management, then why the promoter holdings getting reduced? So these are my two questions. Thank you.
Anubhav Gupta
Thanks Mr. Goyal. So coming to the first part of it, see. I mean coming. So number one is that full year target of 200 core EBITDA in FY26. Right? Now we are into fourth month of current financial year. So what I can tell you is that there is not going to be any miss on this. Of course steel is a volatile business. Trading is even more volatile, right? So quarter on quarter there could be some misses and hits. Okay. Now while we are confident of 200 crore EBITDA or to achieve another 165 crore of EBITDA in the next few quarters, which is a hundred of around 55 crore on quarterly basis, the groundwork, the ecosystem which we have built right. In last two years, whether it is related to the service centers which are now operational or the new service centers which we are going to open or the leased ones which we started.
The renewable business which we started and the order book what we have in hand, right? Or the TNT business scalability, right. The distribution products for downstream steel products, that scalability, right. So it’s just that B2B meter trading which is a highly voluminous and it appears high on revenue in terms of value. But rest other businesses are doing pretty well, right? And the contribution in earnings from B2B Metal Trading is definitely lower than what it looks on the revenue side. So that’s why we are confident that 200 crore EBITDA number shall be achieved. And we understand that.
I mean we have been aggressive, right. In terms of creating the business model. And similarly you want to articulate the same strategy to our investors and analysts, right? That this is what we are capable of. It’s just that I mean Q1 things were not in our control but things are improving. And it is highly visible that how we are going to achieve our numbers for rest of the three quarters. Coming on to the second question. See I mean promoter holding right now is 51%. Okay. And it is not going to get changed. I know maybe on website there could be some SEBI related classification.
We are, we shall rectify. But what I can tell you is the family owns 51% and it is not going to go below this number at any cost.
Garvit Goyal
Understood. And so lastly on the pad growth last time you mentioned pad growth will be in line with the EBITDA growth only. But our finance cost is increasing significantly which is hampering our pad growth. So when we say a 200cr for EBITDA for full year what kind of pack growth are we anticipating?
Anubhav Gupta
See, I mean the interest cost shall be also offset by the other income which comes, right? So that’s why we believe that pat growth will match the EBITDA growth.
Garvit Goyal
So like last last year we did around 100cr pad. Right? So we will be doing 200 cross that this year.
Anubhav Gupta
Yes. I mean you can do the math. Right? Again I’m saying that the EBITDA growth will flow down the pathway.
Garvit Goyal
Okay sir. Understood sir. All the best for the future. Thank you.
operator
Thank you. The next question is from the line of Aman. Sorry to address that participants has been went out from the queue. The next question is from the line of Dev Jatia from Seven Rivers Holdings. Please proceed. I would request Mr. Dev to unmute themselves and then speak. As there was no response from the participant we would like to move to the next participant. The next question is from the line of Aryaman Agarwal from Money Stories Asset Management. Please proceed.
Aryamaan Agarwal
So you had given a guidance of what?
Anubhav Gupta
Slightly echo. If you can speak.
Aryamaan Agarwal
Is it better now?
Anubhav Gupta
Awesome. Go ahead please. Perfect.
Aryamaan Agarwal
So you had given a long term guidance of 18,000 crores in 2027. So when are we still intact with that guidance? And also what sort of guidance are. We looking at for this year?
Anubhav Gupta
See, I mean in terms of value, right? It also depends on how the steel prices are behaving, right? No one knows, right? Steel was like 48,000 rupees per ton six months back. It went up to 52, 53,000 rupees that time. And now again it may go back, it may go up, right? So 5 to 10% price variation is a very normal thing in steel business. Right. So that’s why we are now giving guidance on the absolute EBITDA front. Right. Because we know that our EBITDA spreads are protected in terms of volumes. We do. Right. It doesn’t depend on how the NSR is moving.
NSR is net selling realization. So that’s why we are saying that FY26 we shall do 200 crore EBITDA which shall go up to 400 crore EBITDA in FY27. Now for that the revenue could be either 16,000 crores or 20,000 crores. Tough to say. It depends on like how the steel price is behaved.
Aryamaan Agarwal
Got it. And in the service center bit, how. Do you see the service center ramping. Up over the next two, three years?
Anubhav Gupta
Yes. So we are pretty. We are pretty happy with the performance of this business vertical in particular. Okay. I mean we are already doing a 40,000 ton on monthly basis. Right. Which was. Which was despite the fact that steel availability was low. Right. If steel was there, we could have touched 50, 60,000 tonnes also on monthly from the five service centers which are currently operational. We want to keep on adding five new service centers on our own which will be owned by SGMART every year. And two, three, four service centers we may add on lease basis as well which will further improve our roc and it will help us faster scalability.
Because if we have to go and put up center, although it’s a small one, but still it requires some timelines. Right? So that’s why we are more excited to take this model on lease basis as well. So. Yes. And in terms of margins we are easily making 3.54% EBITDA margin. Right. Which is also like how we expect it.
Aryamaan Agarwal
Thank you.
operator
Thank you. The next question is from the line of Rajiv Thakur from Algonex Capital. Please proceed.
Unidentified Participant
To two things. One is related to the employee cost that has increased. So is there increasing the employee count in the recent past? And since you intend to increase and scale up the various businesses outside metal trading, is it certainly to require a lot of increase in the same speed? So what’s the plan in terms of, you know, having the increase in the headcount over the upcoming quarters. That’s the first question.
Anubhav Gupta
Right. So there are two reasons to this. One is like small, small portion of like notional ESOP expense which gets accounted in P and L, but that’s a bit small. Second, in quarter one, we hired a team for renewable business. Right. The benefits will start flowing in terms of revenue data from Q2 onwards, as you would see. And of course TNT business also got scaled up. So some addition to sales being there. So this employee cost increase is in line with the scalability of these business verticals over the next two to three quarters.
Unidentified Participant
So my next question is more related to the duty that was applied, you know, of 12% and you know, in the various commentary and news information that we observed that that is also not something which is causing the overall, you know, barrier that the Indian industry was kind of expecting. So is that kind of going to be having any impact on the overall steel availability point which you are referring to?
Anubhav Gupta
You see, I mean such incidents or such situations are always short term basis, right? I mean, yes, there was safeguard duty which came in and imports stopped in the country. Then the steel mills went for maintenance shutdowns, right? That’s why in quarter one, the sales volume of the top three steel producers was down 11%. I’m talking about Q1 versus Q4, right? So but this situation will not prolong, right? I mean at some point China prices came down so sharply that even imposed became viable. And we saw that traders booking imports in Mandok for June and July.
Right. So and then from the third quarter, like I said, the Jindal Steel Power Mill and Jimbal Stainless Mill, right. Those dark furnaces will be operational and we may see almost 10% increase in the, in the flat steel supply. Right? So yes, Simon, whatever happens, it’s always like short term driven, long term. Is India going to produce more steel? Answer is yes. Are Indian steel mills encouraged enough to put up more capacities? Answer is yes. Should India be having more steel supply? Answer is yes.
Unidentified Participant
So my last question is more about general themselves have kind of created a end customer kind of app where they can access and take the steam directly. So is that kind of a direct competition for us and since we are also kind of partner to jsw, is that some kind of conflict out there?
Anubhav Gupta
We don’t see any conflict there. Their business model is slightly different than what we do, right? I mean India having produced 150 million tons of steel every year and which is going to go up by 7, 8% year on year through FY30. I mean the portion of the size is quite huge, right? So each one of the players has has his own segment to operate into, right? Their model is pretty different than what we do.
Unidentified Participant
All right, thank you and wish you all the best. Thank you.
operator
Thank you. The next question is from the line of Akshay Gupta from Oakland Capital. Please proceed.
Akshit Gupta
Hello. Thanks for Giving me the opportunity. My question was on logistics cost. So earlier you have added that you will be set up one service center. But now you have revised down to 30. So because of this higher concentration at one place, won’t be there be a risk of average transportation distance which would have increased to the customer. So. So like the procurement discount that we get from steel suppliers, won’t that offset by transportation cost?
Anubhav Gupta
Akshay, when we said that we want to open 100 service centers in the country, okay. The. Our assumption was that one service center will not give more than 5,000 tons of volume on monthly basis. But having operated four service centers in India so far and having leased out two service centers, adding to those four operational, what we see is that one service center has the capability to. Capability to do monthly volume of 10 to 15,000 tons. Okay. So? So? So I mean that’s why the number of service centers came down by like two third. Okay.
Because earlier assumption was that service centers will be doing business from 4 to 5,000 ton. But what we are seeing is that one service center can do actually 10 to 15,000 tons. So you cannot build hundred service centers which are capable of doing 10 to 15,000 tons of monthly volume. Right. This much of demand is not there idea is that we open 20, 30 service centers which can do 10, 15,000 monthly volume. Right? And then we see that if we have to go to smaller towns and it should not cannibalize our service centers which are operational.
Right? So that part will start in like. You know, after two years. I would say if one service center were doing 4,5000 tonnes then we would have been forced to open more service centers. But once service center is given, is giving me more than what I expected. Right? Then like going into tier two, tier three towns. That will be CH2.
Akshit Gupta
Logistics first.
Anubhav Gupta
It is there, but it is manageable. Customer is ready to pay that.
Akshit Gupta
Okay. Okay.
Anubhav Gupta
Right. So just. Yeah, sorry. Just to. Just to conclude this that we may have reduced the guidance to open number of service centers. But the revenue, the volume from service centers will be similar. Right? So we have not cut the guidance on revenue or volume from the service center business.
Akshit Gupta
Okay. Okay. And we have now leased two new service centers. So in Q4, you have guided that each service center does an around of 20 crores of EBITDA. So. So considering that it will the new two service center which we have leased will be functional from Q2. So will that also add an extra 30 crores of EBITDA for the year?
Anubhav Gupta
I mean these service centers, obviously you need to pay a nominal rent. Right. To the owner. Okay. So if on our own service center we make 4% EBITDA margin here the margin will be say 3%. Right. Because we are not investing anything. And yes. So here the simple math is that assuming one service center does 10,000 ton on monthly basis. So full year is 120,000 ton. On that you make 1500-2000 rupees per ton EBITDA. Right. So which does give that number what you’re talking about? So yes, I mean idea to. To open more and more service centers either through own model or lease model.
The idea is to increase EBITDA which could be like 15 to 20 crore addition per service center.
Akshit Gupta
Okay. And in Q4 we have paid advances to the suppliers for the procurement of steel. And at that time steel prices were down. After that sales were increasing. Safeguard duty got activated in the country. So is there any reason that we have bought the like we have paid advantage to the steel at a cheaper price. That’s why our EBITDA margin has improved in this quarter.
Anubhav Gupta
Not really. Because in June month steel prices. Steel prices also came down. Right. So there is no inventory loss or gain in this 35 crore of Q1 EBITDA.
Akshit Gupta
Okay. Okay. And also like now Shiv Bansal has resigned from his position. So any reason that he resigned? And also he was. He used to work in B2B trading segment. And this quarter like B2B trading segment volumes do grow by 50%. So is there any relation on on or it is some other reason?
Anubhav Gupta
It’s not like that. Actually the B2B business is being handled by Amit Thakur who is a director on board as well. Right. So B2B business has no relation to Mr. Shiv Bansal. Shiv Bansal resigned because what he wanted was to have head office of SGFart in New Delhi. Right. Shiv Mansar operating from Pune office. So because of family reasons he could not shift to or move to Delhi. Right. And anyway in one to two years he was at his retirement age. So he decided to retire and move on. And now like we have business verticals like four, five, right.
Who are sitting with me as we speak now. And yes, there is no disruption what we see from this management.
Akshit Gupta
Okay. Okay. Thanks for answering the questions. I will get back in queue.
operator
Thank you. The next question is from the line of Vikas Mistri from Moonshot Ventures. Please proceed.
Vikas Mistry
Hi Anubhav. Thanks for the opportunity. So my question is on technology side. So we are already seeing multiple startups doing B2B digitalization chain. So in that context, do we see some bit of competition from that side? And what are our customer parameters like turnaround time and satisfaction on that part?
Anubhav Gupta
See like I said that I mean if one has to compete specifically in team trading, which is 150 million ton of annual market because every, every, every player, whether it’s a startup or it’s, or it’s, or it’s an established player, okay, like now hdmart we have been into operations for last two years. So everyone has created its own business model, right? What verticals we have created, what I can tell you is that no one is emulating that, okay? No one is investing resources in creating these service centers. No one has relationship with steam players. What SGMart has, okay, which is backed by the group sister company in terms of Steam performance.
No one has ventured into renewable business like how we did, right? Very few of them have their own private labels in TNT or other downstream products, right? So similarly other player may have other Strengths, right? What SGFart is doing, we are playing on our strengths, right? And based on that we have created these four business verticals. But what I can tell you is that no one is comparable to SGMart. If you look at these four verticals.
Vikas Mistry
Yeah, that’s pretty understandable. But my question is specifically to B2B trading because these people are trying to give bundling of other services like software for them, transparency in terms of pricing and some other parameters also. So is there any threat to this B2B trading which we thought that that will scale up to maybe 6,7,000 crore in couple of years. Can we able to do that? Or is there any threat to that part of business?
Anubhav Gupta
Again see, one has to compete in B2B metal space, right? One, that player must be carrying the relationship with Steam mills similar to what SG Mart is having today, which we believe that none of the players has that capability as on date.
Vikas Mistry
Okay, okay. But one of the players is also doing $1 billion of revenue from that. So.
Anubhav Gupta
$1 billion is what? Like when steel sector is like what? 50 billion, $50 billion on annual basis?
Vikas Mistry
More than that.
Anubhav Gupta
Yeah, yeah.
Vikas Mistry
Extension of that question is that. So in last quarter we have some shortages. So do we have to say no to some of our customers and what are their reactions after that and how we try to reduce that? Although it looks like that a lot of supply of Steam is becoming. But in that case. So in last quarter if we have said no to some customers, so how they have procured their requirements.
Anubhav Gupta
So definitely it’s a situation never wants to Come. But yes. So see, there are two parts, right? One is when you do the allocation customer wise, right? It’s not that you give zero tons to any customer, right? You allocate whatever you have. Because we have, like I said, 4,500, right? So you have aggregation, demand, aggregation from them. And whatever steel comes, say in Q1 it was lower. So then you do allocation on pro rata basis. The thing is that customers also understand that it’s not because of SG mark. It’s because of the steel industry where the production has been lower.
Right? And thirdly, Vikash, to be honest, Q1 in terms of business has also been slow, right? Because of the monsoon which came in like in June. Heavily construction activities halted big time. Auto demand, bikewood demand. Everything is like kind of a bit sluggish right now, right? So it’s not that. I mean our sales team had to face major flat because of steel shortage.
Vikas Mistry
Thanks. Continue to grow. Thank you. Thanks a lot.
Anubhav Gupta
Thanks Vikash.
operator
Thank you. The next question is from the line of Dharma Shah from Dalmas Capital Management. Please proceed.
Dharmil Shah
Hi. Thank you for taking my question. That’s one question. I mean for the B2B business you mentioned that steel mills were able to supply the 10% less than the previous quarter. But our volumes were down 55%. Just wanted to understand. I mean what is the missing part here? It should be some other reason apart from the lower supply. And it’s a Stark difference from 10% and 55% volume reboot.
Anubhav Gupta
There are two parts to it. Number one is overall steel supply shortage. Like I said, Indian steel Mills produced 11% lower steel what they produced in Q4FY25. Right? So this is the macro thing. Second is when there is short supply, right. When there is limited steel we want to use that steel to do validation, do some processing and sell it with higher profits, right? So we diverted all the steel which our service center and we generated more profits on that. That’s why our Q1 EBITDA margin is 3%. Right? Which is highest so far. Now once the steel availability is there, right.
We will start diverting steel for B2B metal trading also. So it’s a situational thing, right? Which we believe that will recover from quarter three onwards with the commencement of two blast furnaces. One from jspl, second from Jindal Stainless.
Dharmil Shah
Got it. That’s it. Thank you so much.
Anubhav Gupta
Thanks.
operator
Thank you. The next question is from the line of mehul Panchwani from 40 cents. Please proceed.
Mehul Panjwani
Hello, sir. Thank you for the opportunity. I am New to this company. So can you write on what do.
Anubhav Gupta
You mean by renewable business?
Mehul Panjwani
Sure.
Anubhav Gupta
So. So. So. So. So in. In. In renewable business, the first product, what we are working on solar structures which are ground mounted solar structures which are being used in the solar parks. Right? So there are like three, four types of steel sections which are used to install these solar panels.
Mehul Panjwani
Okay. And sir, whom are you going to source it from?
Anubhav Gupta
Right. So here the raw material is coated steel which we are buying from steel mills again. And there is a mild processing to that coated steel which gets converted into an open section which actually goes on site for the installation.
Mehul Panjwani
Okay?
Anubhav Gupta
Yeah. So there are two strengths which we played on. Number one is our steel buying, right? So we are buying HR foil. We can also buy coated steel, right? From the same steel mill, right? So our sourcing power procurement power at the lower pricing. That is one second that mild processing what we are talking about, right? To make those open sections we are installing those small machines at our service centers only, right? So we already have a network of four service centers in the country, right? We are using those service centers to feed the demand, right? Normally the solar parks are coming in Gujarat, Rajasthan which we are feeding from our Gazia Bhat service center.
Then more mills will get installed in say our upcoming Hyderabad or Chennai service center. Or say Bangalore which can cater to South India demand. Because a lot of solar paths are coming in Andhra Pradesh and Tamil Nadu and Telangana, of course. And some machines will install in our rifle service center. Because some solar parts are also coming in Madhya Pradesh and Chhattisgarh belt as well. Right? So these were the two strengths on which we played. And we saw that there is a gap because this market is huge, right? And it was not being catered by Pan India national player.
So we jumped onto the opportunity and we just went the vertical, right?
Mehul Panjwani
Sir. So how much are they expecting? It will add roughly to the top line for FY26.
Anubhav Gupta
So we have 285 crore of order book which shall be executed in next three months, right? And similar to 80 crore we shall be getting more. So put together should be around 550 to 600 crores worth of revenue should come from this vertical, right?
Mehul Panjwani
Sir. And regarding your service center, do you. Since you mentioned about Gujarat, do we have any service centers in Gujarat?
Anubhav Gupta
Ahmedabad. We are spouting land. We have purchased land, right? The service center should be operational in seven, eight months.
Mehul Panjwani
Okay? That’s the only one we are planning.
Anubhav Gupta
Plus we took. Meanwhile we took one service center on lease already, right? And our Market is so big. We believe that our service center which will be owned by us plus the lease one. We can operate both together to meet the demand.
Mehul Panjwani
Right? Sir, thank you so much and all the best.
Anubhav Gupta
Thank you.
operator
Thank you. Before we proceed with the next question, ladies and gentlemen, please limit your questions as there are several participants waiting for the turn. The next question is from the line of Sneha Talre ja from Nuwama. Please proceed.
Sneha Talreja
Thank you for the opportunity. Questions from my end. One related to seasonality. You of course mentioned that availability of steel will improve in H2 which is where those two plants come into play. But how can we see a quarter on quarter journey? In terms of EBITDA movement of course. 45 odd corros clogged. You still have target of 165 odd crores. Can we see H2 be like, you know, far more stronger in Q2 to be, you know, gradually slower. So some kind of care would be helpful.
Anubhav Gupta
So Sneha, this is always the case, right? Even if you look at FY25 we did almost 70 crore of EBITDA. Right? In second half versus 103 crore for the full year. Okay. So second half will always be skewed. Plus our service centers, these one will be like you know, generating revenue. Plus our renewable business will be generating revenue. So yes, you can say that the. I mean the ramp up will be Q2, Q3, Q4. Every quarter we would be outperforming versus the previous quarter.
Sneha Talreja
Understood. And the solar order, if I’m not wrong, you said it has to be executed within the next three months. Is that understanding correct?
Anubhav Gupta
That’s right.
Sneha Talreja
I think that’s about it. Thanks. Thanks team.
operator
Thank you. The next question is from the line of Chirag Shah from Wide Fine Investment Management. Please proceed.
Chirag Shah
Yeah. Thanks for this opportunity. So I have a question on the scale of our operations. If you go back to the earlier interactions. Given the market share where we are and given the lineage that we have sequentially despite steel availability being an issue, our volume should have been down so much. Ideally we are in a phase where we should be growing our volumes quarter after quarter under the extreme seasonality. And if I looked at the presentation, our volume is down 50% sequentially.
Anubhav Gupta
So this is only because of the B2B business. Chirag. Right. Seasonality does come into play. But the bigger reason was a short supply of steam. Okay. Which is not in our control. As SGMart grows, we will add more products which are non steel. Right. So this impact will go down. Correct. Eventually. But see, I mean we are a company, we are a group which is always profit and ROC focused. Despite the volume going down by 50 as you mentioned, my EBITDA was almost flat, right? My ROC improved over last quarter.
Chirag Shah
My point is a bit different. Even when you look at network service center, even over there, the volume is lower. I’m trying to drive a point that. This is based on our earlier interactions that you had on the call that the scale of operations that we are the unorganized nature of market and small players. There is an open field for us to grow. Okay, so I understand growth could be slower or smaller in that sense. But this is a complete reversal of the thesis that you have been highlighting some time back. Okay, so either your learning, your understanding has changed change about the nature of business with competitive intensity at ground level, how efficient is the unorganized market or regional players? So because.
And this disappointment is happening on a. It’s not the first part of disappointment. We have been disappointing for some of the other operational. And I appreciate it’s a business, there are challenges. I’m not even discounting it with you but I’m trying to understand is easier understanding of the opportunity in the near term that we have versus the longer term opportunity. I’m not even debating but the scale versus the available opportunity for next to three years. There is a disconnect. So is there a rethinking on. On that side or based on your experience now of last 12, 15 months?
Anubhav Gupta
So Chirag, let me be very, very clear. There is no reversal of thesis, okay? There is no change of the business model. What we thought by starting SGMart two years ago, the disappointment in volumes, right? And obviously eventually it flows down to the profits as well is only because of the short steel supply in quarter one. Right now the customers which we have say 2500 on board. It’s a challenging business. But it’s not that we are not able to sell to those 2,500 customers or we are not competent enough to sell to those 2,500 customers who are, who are, who are, who are.
I mean, who are already on board with us. If there is no steam, right, which is there for trading, right. My trading volume will come down. It’s as simple as that. Unless we start adding newer products. So we are evaluating more product categories outside steel, but not very aggressively. Steel is something which we understand. Okay. So we want to be. We want to ensure that this 200 crore of EBITDA, 400 crore of EBITDA next year we are able to generate this much of cash Flow this much of profits from the existing business then we invest into learning for other product categories.
Right? Because to understand the one product segment is not easy, right? These are cyclical trading. Is trading of commodities always cyclical? Right. So learnings are very, very costly. We don’t. If we have thousand crore cash lying in the books, that doesn’t mean we take unnecessary risks on non steel products. Right? And like I mentioned earlier also we are a management which is highly focused on absolute profits and absolute return profile. Okay? We are doing our homework. We are establishing the customer base, we are opening new service centers. We are talking to more and more steam mills not only in India but outside India also to source steel.
Right? To ensure that the steel supply is smooth without any disruptions like what we saw in Q1. It may take 1, 2 more quarters to see that steel itself will be so much available in India in next six months that we may not have such quarters where we may come and tell you, hey, I mean we didn’t get enough steel to grow our business. So I guess, I mean you have been patient, right? With us. We request you to just keep on monitoring us, keep on evaluating us, our performance on quarter, on quarter basis. This enigma of disappointment will go away, I can promise you that.
Chirag Shah
No, I appreciate your honest answer. The only thing is my thought process was that once you scale up the business, cyclicality becomes the inherent part of the business. You are linked to industry. When you are in a form of scaling up, given the opportunity, irrespective of the market conditions, there cannot be a decline in value either be it service center or this. I understand, growth could be lower. Fair point. Absolutely. Accept point. Fair point.
Anubhav Gupta
Now just to give you volume, right? I could have given, I could have sold steel at expensive price. I could have sourced steel from imports even at much higher value and then I would have sold in the market, done losses, right? And a lot of startups are doing that, right? A lot of companies in similar trade, you will see, okay? You can look at their EBITDA margins which will be negative. Like I said, we don’t want to do any business at a loss, right? My, I mean we just don’t understand that how to sell a product at 99 rupees, when you buy that product at 100 rupees, we do not know that business and we do not wish to know that business ever.
Anything we buy at 100 rupees, it has to be sold above 100 rupees.
Chirag Shah
So you are in a sense, you are in a sense saying that you need A normalized business condition to really take advantage of the arbitrage opportunities or inefficiencies in each other.
Anubhav Gupta
We are not working on any arbitrage. We are working on a very solid business plan.
Chirag Shah
Okay.
Anubhav Gupta
Right. We are not working on arbitrage. We are trying to create. We have created an ecosystem for the steel industry in India wherein we are sourcing steel from. We are sourcing products from more than 250 suppliers and selling to more than 2,500 customers. And this number will keep on increasing quarter on quarter.
Chirag Shah
Can I just request one thing if possible. If it is not a competitive information. If you can put this number of. Number of customers in whichever form you either business wise or aggregate.
Anubhav Gupta
We’ll tell you the slide number as well. Slide number 10 +. I also gave these numbers in our opening remarks.
Chirag Shah
Slide number. I’m on 10. Slide number 10. So okay, we’ll take it offline. It’s a good data point for us to track on. At least in terms of addition of active customers. That would be a good data point. Business will automatically flow over a period of time.
Anubhav Gupta
Yeah, sorry. Slide number seven. You can look at it.
Aryamaan Agarwal
Great. Okay. Thank you. And all the best. Thanks.
Anubhav Gupta
Shara, can we have last question please?
operator
Thank you. The next question is from the line of Rahul Kumar from wecareer. Please proceed.
Unidentified Participant
Yeah. Hi. Based on this distribution business, other distribution business, how is the profitability and the share of non steel products moved here. From let’s say last quarter to this quarter? And what are the targets here for FY26.
Anubhav Gupta
Right. So see, I mean here the number of SKUs must be like more than 500. Okay. What we are trading, 90% is steel and 10% are some products in other construction material. Right. And we are slightly experimenting with other commodities. Right. But we wish to keep it small. Like I said, our risk management is very very strong. Where we do not want to. We do not want any sharp learning at a cost of our profits. Right. So 90% steel, 10% non steel. And margins vary from 1% to 3% based on the product.
Unidentified Participant
Okay.
Anubhav Gupta
And yes, I think portfolio this should be like thousand crore plus.
Unidentified Participant
Okay. Okay. And second question on the inventory. How much mark to market hit on inventory we will will have to take. Let’s say versus the spot prices versus the valuation which you had done at. As on June 30th.
Anubhav Gupta
There is no gain or loss. Rahul,
Unidentified Participant
this is the current spot crisis. That’s right. Okay. And last question. There is another regulation related to the. BIS norms for the import of steel related to the inputs. How is that? Is that impacting your business in any future?
Anubhav Gupta
So imports have reduced because of that, right? It did impact our volumes right in last two, three quarters. But we are super confident that internal steel supply in India itself will be so much that we need not rely on imports too much.
Unidentified Participant
Okay so let’s collect for this quarter how much of the steel which you. Had sold would have come from imports?
Anubhav Gupta
Zero.
Unidentified Participant
Okay. Okay. Thank you.
Anubhav Gupta
Thanks Rahul.
operator
Thank you. Ladies and gentlemen due to time constraints that was the last question for the day and I would now like to hand the conference over to the management for closing comments. Over to you sir.
Anubhav Gupta
Thank you everyone for joining onto our Q1 FY26 earnings for we shall see you during the next earnings call. Thank you so much.
operator
On behalf of Alara Securities India Private Limited. That concludes this conference. Thank you for joining us and you may now disconnect your lines.