SG Mart Ltd (NSE: KRL) Q4 2025 Earnings Call dated May. 19, 2025
Corporate Participants:
Unidentified Speaker
Harsh Pathak — NA
Anubhav Gupta — Group Chief Strategy Officer
Amit Thakur — director
Archit Aurora — Vice President Marketing
Anamika Gulati — NA
Analysts:
Unidentified Participant
Rohan Baranwal — Analyst
Akshit Gupta — Analyst
Shiva — Analyst
Rohit Singh — Analyst
Amol Rao — Analyst
Ayush Vimal — Analyst
Riddhesh Gandhi — Analyst
Dharmil — Analyst
Rajesh — Analyst
Rahil S — Analyst
Akshat — Analyst
Nikhil Porwal — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Q4 and FY25 earnings conference call of SGMart Limited hosted by MK Global Financial Services 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 is being recorded. I now hand the conference over to Mr. Harsh Pathak from MK Global Financial Services. Thank you. And over to you sir.
Harsh Pathak — NA
Yeah. Thanks Pooja. Good afternoon everyone. On behalf of MK Global I would like to welcome the management of SGMart and thank them for this opportunity. I shall now hand over the call to Mr. Anubhav Gupta Group Chief Strategy Officer for the opening remarks. Over to you sir.
Anubhav Gupta — Group Chief Strategy Officer
Thank you Harsh. And thanks to MK Global for hosting SGMart for its Quarter 4 FY26 earnings call. Good afternoon everyone. I welcome all of you to our earnings call. Along with me there is a whole team of sgmart which got built over the last one and a half years since we started the business. I am glad to welcome Mr. Amit Thakur who is director and he heads our B2B metal trading. Mr. Archit Aurora who is Vice President Marketing and he heads our service center business. Ms. Anamika Gulati who joined recently to take care of our renewable business.
And Suraj Kumar who is our CFO and Naman who heads strategy and IR. And of course Mr. Shiv Bansal who is the Joint Managing director and he heads the distribution business of SGFart. Now coming to FY25 earnings call. This was first year of full year operations wherein we did around 5800 crore of revenue with 103 crore of EBITDA and 103 crore of net profit. We are excited to tell you that we could create this franchisee in last 18 months since we started the business in 2023. And today I’m proud to tell you that we will be amongst India’s largest trading house with 100% of this 5,800 crore revenue flowing through P and L.
There is no GMV. It’s 100% flowing through P and L. And today we are servicing 2257 customers and we are procuring raw material from 225 suppliers which consists of large steel mills, large mills for zinc and billets plus MSME and small manufacturers who are producing multiple products. I can tell you with full confidence that this EBITDA of 100 crore will grow to 200 crores in FY26 and 400 crores in FY27 as we double our business every year in terms of expansion in each of the verticals. And this will be coupled with minimum threshold of 25% ROCE like we have always maintained that for the first three years of SGMart we will be focusing mainly on steel trading as a product.
And the same is visible in our FY25 performance plus the guidance for FY26. Currently our goal is to buy steel in bulk and become largest buyer of steel in the country. So this will take care of the procurement part. Then comes the sales part. We have segregated our sales into three verticals for raw steel which we are buying from steel Mills. Number one is pure B2B metatrading. We buy in bulk, we sell in bulk to large clients. Second vertical is to sell through network of service centers where some mild processing is done for the steel and then steel is sold to multiple customers, multiple factories.
This will be done through a network of service centers which we are creating right now. The third vertical is to sell steel in form of solar structures. Again this is mild processing and we will keep on adding products to these verticals as we buy more and more steel. Idea is to process steel in some way and get extra margin over it because B2B trading always will have limited margin. But when we do mild processing and service the industry, the margins become 2x and 3x and it adds up to the ROC. The good part is that all steel mills, when we hear the commentary from them, they are bullish on the expanding steel volumes because more and more steel capacities are coming online.
Whether it is flat steel or long steel. Now coming to the vertical wise B2B business. We are doing around 50,000 tonnes per month volume and we expect sharp ramp up in second half as more steel comes online. This will grow by 50% next year. Then the service center business. Right now five service centers are operational. One in Raipur, one in Bangalore, third one in Ghaziabad, fourth one in Dubai and fifth one in Pune. Now this volume will double as we add five more service centers at the identified locations such as Jaipur, Kanpur, Patna, Siliguri, Ahmedabad, Indore, Bhubaneswar.
What we believe is that India lacks the network of service centers. Right now what happens is there are mom and pop unorganized service centers which are spread across industrial clusters. But we believe that formalizing the network service center throws up a massive opportunity wherein you buy steel and then process it and Sell to multiple user industries. Now the third vertical which we started is very interesting which is solar structures because again raw material availability is the most critical component here. Now that’s where SGMart strength comes into play. For the sales we have launched a brand called Sunstee and we have started selling to large independent power producers who are setting up massive solar utility parks.
And we already have 50,000 tonnes worth of order visibility which will be executed in FY26 and this will easily in FY27. Now the fourth vertical of SGMart is the distribution business which was established to leverage APL Apollo Group which is having massive network of downstream seal distributors. Now the products here, what we sell are TMT and light structural and other downstream products. If we come to TMT we are doing a monthly volume of 11,000 ton a month which will increase by 50% in FY26. And the other products which consist of light structural, mesh, net binding, wire etc.
These products we are right now doing 40 crore of monthly run rate which means around 500 crore of annual sales. But in FY26 we expect this revenue to reach 1000 crores so which is again doubling over the current run rate. Now if we add up to these numbers for all the four verticals our confidence is that we can hit 200 crore EBITDA in FY26. And solar is a new vertical, it will add up to the revenue. So we believe that any profits could be over and above 200 crore of EBITDA which which we believe will come from the three verticals which are B2B trading service centers.
And thirdly distribution business. Now coming to cash flow, our working capital for FY 25th March looks a bit stressed at 30 days. Now this is because of two main reasons. One is that we made a lot of advance payments to the steel mills towards the last week of March of 2025 ahead of the tariffs which were coming which were being imposed by the government for import of steel. So almost 10 days of working capital got stretched out of it. Now that has already got released in May. The working capital is already normalized and also because of good demand visibility in the last few days.
So some sales also shot up right which which increase our debtor days. But again that also got realized. So in June quarter we are confident that the working capital will come back to 10 to 15 days which has always been our target. Now lastly, just on the capex commitments which is mainly for the service center like I said earlier, one service center requires 30 to 40 crore of investment depending on tier 1, tier 2 cities and very minor investments to build solar capacity because that’s not capex intensive business. So for next two to three, four years we have taken board approval for the required CapEx commitment.
One thing I can assure you that whatever CapEx we do every year that will be fully funded from operating cash flows. We don’t need any external capital or even debt or even the fixed deposit which is lying in the banks. This CAPEX for service centers will be 100% funded from the internal cash flows. So all in all I would like to reiterate that we are proud of what we have created SGMart in the last 18 months and the verticals which have evolved and the tie ups with the steel mills for steel and the way we are selling steel in multiple forms catering to multiple sectors and the client base of 2257 base.
This will keep on getting increased as we expand our business by 100% year on year. With this I would like to open the floor for Q and A. Thank you so much.
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 and one on the touchtone telephone. If you wish to remove yourself from the question queue you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rohan Baranwal from Arihant Capital. Please go ahead.
Rohan Baranwal
Hello, I’m audible.
operator
Yes sir.
Rohan Baranwal
Can you please describe the recent like the recommended 12% restrictions on the import from safeguard duty from China and how it affects the company’s overall portfolio. Sir.
Anubhav Gupta
Rohan, see SGFart. The basis of SGFart was to capitalize on the increasing domestic capacities in India, right? Because what we know is that from 2019 till 2023 the domestic capacities were not expanding, it was like mainly stagnant. And from 2023 till 2027 there was almost 70, 80% increase in the steel capacity which had already got announced and the mills had started to come online. Right? So our focus was always to do long term tie ups with the domestic steel mills where the supply is more rational, it is more organized and imports, yes, imports are always like opportunistic, right? You can’t build your business model, sustainable business model on imports.
That’s why. And that’s why in India the largest steel trader used to be like doing volume of 25,000 ton a month, right? Because imports will always depend on the gap between domestic and international Prices which keep on fluctuating. As far as SGMart is concerned, it is not impacting the business model as such. Because our business model is standing on the thesis that in India itself the existing six steel mills are increasing capacities a lot. And we want to capture that volume rather than relying on imports where the sustainable supply is always a challenge. Okay.
Rohan Baranwal
And sir, in Q3 con call you said that you had issues with importing from China because of the 19 days like period to wait. And you were also building up tie ups with Indian manufacturers. So how this has been going forward, sir, and also one last question and after like this I’ll join the queue. The second question is like the previous like your guidance on adding up the service centers was around 10 to 12 service centers adding AR on your receipt. But it has been like while I was looking into your recent presentation, investor presentation, it shows you will be adding around five to six.
So is there any issues with adding up new service centers or like any difficulty in getting land acquisitions and all? So that’s it. So.
Anubhav Gupta
Right. So coming to the first part. Today we are buying steel from four out of six steel producers in the country. Right. So this captures almost 60, 70% of the supply. Right. So the tie ups with in mills are going ahead as per the plan. Imports. Like I said, it is opportunistic. Okay. But obviously after tariffs in FY26 the whole industry is not going to be dependent on imports and so is for SGMart. Coming to the second question, service centers. So see I mean earlier we used to feel that a service center can do volume of 3 to 4000 ton a month.
Right. And that’s why we wanted to open more number of service centers. But what we have learned by operating five service centers is that one service center now can do business of 8 to 10,000 tonnes. If you look at the capacity, capacity is around is around 12, 13,000 ton a month. Right. And you can easily get volume of 8 to 10,000 ton a month. So that’s why if you look at the volume from service center that we have not reduced but number of service centers we have reduced because from one service center you are able to capture more volume.
So there is no point putting CAPEX into into into service centers which will remain idle. Idea is to sweat the existing service centers to the fullest of their capacities and then go for new service centers.
Rohan Baranwal
Okay sir, thank you. I will join in the queue.
operator
Thank you. The next question is from the line of Akshat Gupta from Oakland Capital. Please go ahead.
Akshit Gupta
Hello. Congratulations on your good Set of numbers on margins and the growth. I have one question regarding the advances to steel producer. So like we have done advances to steel producers. Will that help with procurement efficiency and the pricing which could indicate like which could increase the margin in Q1 FY26.
Anubhav Gupta
So it should. Right. But. But the main idea was to book steel right ahead of tariffs imposition. So to answer the question, yes, there could be some benefit, right? But at least we had secured the supply, right? Because imports were going out of the country in Q1 and if you don’t have the steel supply to service your clients so that could impact your business. So our mindset was more to secure the supply of steel rather than going for short term benefits.
Akshit Gupta
Okay. Okay. And on the like I was seeing just the peers in this, in this segment they are entering a lot and all they have E commerce platform. So are we planning on the same line to build an E commerce platform so that a consumer can easily place an order on that?
Anubhav Gupta
Please understand that right now our customer base of 2257, okay. They are mainly B2B clients, right. Who are running factories, who are steel traders, who are operating small service centers, who are now independent power producers for solar. Such transactions are normally closed like you know, on the personal relationship with our salespeople. Okay. So I would say right now the business model is brick and mortar and that’s how this business is done at least in India. But we are using Tech stack, right? To ensure the efficiency in our systems. So the orders get punched online, right? The tracking of orders, our supply chain efficiencies due to Tech stack.
Right. So all those systems we are implementing but the end transaction is always done from sales, sales guy to the customer.
Akshit Gupta
Okay. And one question on the B2C segment that we do. So that segment I was seeing there is not much of the growth but we have guided for 6000 crore of revenue in FY27. So are we on the same line or is there any corrections in the guidance.
Anubhav Gupta
In distribution business, okay. Which consists of two verticals, TMT and non tmt. So what we were doing was that like for TMT we have done tie ups with the manufacturers who used to sell TMT on our behalf to their clients and to the network of APL Apollo Group distributors. That revenue was flowing through our P and L but now we have changed it to royalty based model wherein the revenue doesn’t get booked into my account neither the cost of material. It is only the royalty which gets booked into our account. So right now we are charging around rupees 500 per ton royalty from these TMT partners.
And as the brand gets established more volumes come into play. This royalty we expect it to increase to 750 and rupees 1000 per ton eventually.
Akshit Gupta
Okay. Okay.
Anubhav Gupta
Just to. Oh yeah. Just to. Yeah. Just to clarify that TMT we have given the volumes right which is around right now 33000 ton we did in quarter four. Right. And for full year the. The. The volume was around 100,000 tons. 107,000 ton to be precise. Now for FY26 our target is 180,000 ton. For TMT this will not. Now here only rupees 500 per ton royalty will get captured into revenue, right? And for non TMT because there are multiple products so volume doesn’t make sense. I’ll talk about the value of revenue, right? So in Q4 we did 130 crore revenue, right? And for the full year this revenue was 380 crore.
For FY26 our target is 1000 crore.
Akshit Gupta
Okay. Okay. So like. Like we have shifted to a royalty based model. So because of this we would be having a better EBITDA margin compared to the previous model. Right?
Anubhav Gupta
This is one. And second then the. The sale, the debtors, everything gets. Everything gets shifted to the. The franchisee partner. Nothing comes on the balance sheet of SGFart.
Akshit Gupta
Okay. Okay. Okay. I will come back in the queue.
Anubhav Gupta
Thanks.
operator
Thank you. The next question is from the line of Shiva from Poornartha Investment advisors. Please go.
Shiva
Hello. Am I audible?
operator
Yes sir.
Shiva
Good afternoon team. My question is with respect to the solar. If you could just explain slightly that 600 crore capex. Why are we. I mean how much is the breakup? Is it entirely capex? What are we putting in? What kind of revenue are we expecting? What kind of profitability? If you could just throw some data, understand it better.
Anubhav Gupta
I guess there is some confusion. I said that in my opening highlights that this 600 crore capex is for next three to five years which we took the approval from board, right? So every year is going to be like say 150 to 200 crores. Now. Now this majority of this capex is for service centers, right? Like I said one service center cost us around 30 to 40 crore in terms of fixed assets, right? Every year we open five to six service centers. So 250300 crore of capex will go into service center for three years. We will consume this 600 crore approval which we took from board for solar the capex is very very minimal, right? Our capacity for solar will be operational at 15,000 ton a month which is 200,000 ton a year.
Now the capex for this will be is very very minimal. Right. Because it is more of mild processing. And the best part is that these profile machines are being installed in the existing service centers. Right. So I need not invest into any land or factory sheds. Correct. So this 600 crore is not for solar, it is mainly for service centers. And this we will use in the next three to four years. And I am rehashing that. Any capex what we do annually it will be funded from operating cash flows. We don’t need any capital, any debt or even the current fixed deposit which are lying in our banks to fund the capex.
Whatever operating cash flow we make every year will use it for capex.
Shiva
Okay so to understand so the earlier thing of five service centers that is only. That is the only capex. There’s no Additional capex of 600,000 capex on solar.
Anubhav Gupta
That is right. That is right.
Shiva
Okay. And with respect to Dubai service center if you could throw what is the amount we’ve invested because it’s taken another loan I think given. So if you could just tell me what is the total amount of investment we’ve done in Dubai till date? What’s the kind of revenue we are earning and the profitability?
Anubhav Gupta
So Dubai capex is around 60 crore which is slightly higher than a service center you set up in India. Volume we are doing is around 10,000 ton a month. Margins are also a bit higher there. So that takes care of our threshold ROC of 25%.
Shiva
Okay. Because in the standalone numbers it looks slightly higher in the balance sheet. If I just. So what is covered in the investments and the loans? Part of this part.
Anubhav Gupta
Right. So so capex For Dubai
Shiva
it’s 167. Investments and 147 crores of loans.
Anubhav Gupta
So loans loan will be to fund the working capital in Dubai. Right. Which is slightly higher than India operations. And Capex gross block investment is 60 crores.
Shiva
Okay. So that’s 300. So what all consists of the investments and loans of 300 crores that we have on the balance sheet.
Anubhav Gupta
Okay.
Shiva
60 crore capex and another 40 crores of working capital. So that’s like thousand hundred crores.
Anubhav Gupta
So okay, so this amount consists of 110 crore of cash balance in Dubai entity.
Shiva
Also we have additional cash of 110 crores in that.
Anubhav Gupta
That is right. 60 crore of gross blocks investments and rest is short term loans for working capital.
Shiva
In the long term what is the kind of revenue that we’re expecting from Dubai and the profitability.
Anubhav Gupta
Like I said, we are doing 10,000 tonnes volume a month. Which translates into 60 crore. 650. 60 crore of revenue a month. Right. Yearly you can calculate 6, 700 crores. And margins are higher than what we earn in India. So in India we earn around 1800-2000 rupees a ton easily. Dubai is slightly higher than this.
Shiva
Okay. And just wanted to understand with respect to the PR like GSW1 also has the steel trading. Just wanted to understand how are we different from them in that particular segment of trading. JSW1 and us.
Anubhav Gupta
Honestly we have not. We have not analyzed the business model of our peers. Right? But what I can tell you is the opportunity what lies in the country for metal trading. Right? It is immense. And we believe you need at least 10 SG Marts. Right? To service only steel sector. Right? The way the capacities are getting built up by 2030.
Shiva
Understood. And just wanted to understand a bit about the trade. Yeah. I’ll get back. Okay. Sure. Thank you, sir.
operator
Thank you. The next question is from the line of Rohit Singh from Invest Analytics Advisory. Please go ahead.
Rohit Singh
Hello. I am audible.
operator
Yes, sir.
Rohit Singh
Thank you for the opportunity. My first question is. Earlier the target was. Earlier the revenue target was 18,000 cr for FY27. But now with the 50% CGR guidance over the next three years it appears to 18,000 milestone will be only be achieved by FY28. What is the reason for this delay? And has the growth trajectory changed? Or is this a strategic adjustment?
Anubhav Gupta
I told you that from 100 crore EBITDA in FY25 our EBITDA will be 200 crore in FY26 and 400 crore in FY27. Right? So which matches the earlier guidance of 18,000 crore revenue. Right. So what has happened is that the steel prices are down by 10 to 15% at the time when we gave the guidance. Right? But our EBITDA per ton and EBITDA is intact. So that’s why I’m saying that 400 crore EBITDA in FY27 is achievable and we will do it.
Rohit Singh
So my second question is in Q4, our margin declined mainly due to rising interest cost. As a result, despite top line growth, we are not seeing corresponding EPS growth. How do we expect this to evolve going forward for next year onward? What is the outlook on interest cost and margin recovery? And how do we plan to ensure EPS growth aligned with the revenue growth?
Anubhav Gupta
Interest cost is going up because we are using the funds which are lying in the. Which are Lying in the as a fixed deposit in the balance sheet. Right. That’s why the interest cost is to going up. When we guide for 100% growth in EBITDA same hundred percent growth impact also. You will see.
Rohit Singh
Okay sir. Thank you.
operator
Thank you. We’ll take our next question from the line of Amul Rao from one UP financial consultant. Please go ahead.
Amol Rao
Thanks a lot for the elaborate guidance and very very clear presentation. Two questions. Firstly, on this royalty based model, when we charge a royalty to these third party manufacturers for using our brand, is there a take or pay kind of an arrangement that is there or is there a minimum guarantee of sales that is there which is why we are able to charge this royalty or is there some other arrangement in place?
Anubhav Gupta
Of course. Amol. So we do have mous signed with our partners, right. We do tell them that you need to sell minimum quantity of tmt. Right. Every month, every quarter, every year. And based on the market mapping because we have our own team of salespeople which is also on ground so there is a clear visibility on the volumes, minimum volumes. What we must do every month with that partner and on that basis we get the royalty.
Amol Rao
Perfect. So we are basically guaranteeing them a certain minimum utilization on a rolling basis so that I mean they can take care of their costs and profits. And that’s why we get the royalty basically for our brand.
Anubhav Gupta
That’s right. That’s the.
Amol Rao
Yeah. Okay.
Anubhav Gupta
Yes, yes, yes. And just to add to it, the reason they are also doing this happily because before joining hands with SGMart their own utilization levels are very very low. Right. So their cost of productions were high. Their, their fixed costs were high. Because of that. Now that with SG Mart they can, they can visualize that, okay. Utilization level will go to 70, 80% from 50%. So their cost of raw material, cost of production, everything goes down. Right. So they don’t mind sharing that 500 rupees per ton right now. Right. And when APL Apollo SG TMT goes in the market so that also commands some premium compared to the peer brands which are available right now.
Right. So that royalty does not pinch them. Right. Either they derive it from the lower cost of production or it is from the premium what they get by selling in our brand.
Amol Rao
Perfect. Well taken. Second anubhav on this on the service center business. So I mean we’ve seen a very good ramp up. We’ve seen the margins also improve because of that. I just wanted to understand on the working capital side of this now we’ll be doing primarily CTL business Through this right. CTL and some cut to size also probably at some later date. Does this involve a slightly larger or slightly higher working capital cycle than our steel trading business? Maybe by a few days. Because the inward shipment processing and then outward shipment would, would require a slightly larger this thing because the other one is built to ship.
Right. So slightly larger working capital cycle requirement.
Anubhav Gupta
So definitely, definitely, definitely amul. Right. The working capital in service center will be slightly higher than B2B metal trading. But again, in B2B metal trading, if you are earning say one and a half percent EBITDA margin. In service center, we earn 4% EBITDA margin. Right. So what we ensure is that the service center business should generate minimum 25% rock. And the math says that say we spend 40 crore on gross block. Right. Investment center. It does 8,000 ton a month. Right. And having working capital requirement of 20 days. So it will need around 25 crore of working capital.
Right. So the total capital employment will be 40 plus 25 which is 65. And on that we will be earning ebitda of minimum 20 crore rupees.
Amol Rao
Yeah, so the math works out. All right. But, and, but my point is the increased working capital out here gets balanced out by the TNT business and the B2B metal trading business which is also growing. So confident of maintaining overall our cash flow conversion. I was leading towards the cash flow conversion cycle which because of whatever reasons went up to 30 days this year, could probably revert to 15 to 18 days by, by the end of next year. That’s that. That was what I was leading to
Anubhav Gupta
within June only. You will see this rationalization.
Amol Rao
All right, and may I squeeze in the last question please?
Anubhav Gupta
Yeah, yeah.
Amol Rao
For the, I mean this, the solar structure business is, is pretty interesting. So I mean, but this is a, this is, I mean compared to a lot of other metal based businesses, this would require some amount of, let’s say precision. Slightly more precision than other other metal activities, metal forming activities. So this is done in our service centers or are we, are we doing it slightly separately? I mean it’s, it’s, it’s been done only in our Ghaziabad facility right now.
Anubhav Gupta
Yeah, yeah. So we’re gonna do it in three locations. Amol. One in Ghaziabad, which is already operational. Right. Then we’re gonna install some mills in Pune because that will take care of Rajasthan and Gujarat belt. Right. And we’ll also install some machines in Raipur. Right. Where the raw material availability is better. So. And then we will also set up some lines in Our upcoming Hyderabad or Chennai service centers that will take care of Karnataka, Tamil Nadu. Right. So if you look at the maximum utility solar path coming they are majority in Rajasthan, Gujarat then then Tamil Nadu, Andhra Pradesh, Telangana.
Right. So. So yeah. So we have to see that from all these locations we are able to service our IPV clients efficiently.
Amol Rao
And this is only the module modular module mounting structure, the MMS part of it.
Anubhav Gupta
Right?
Amol Rao
Nothing else. We’re not doing anything else.
Anubhav Gupta
That is right. We are working on some new innovation products also for solar sector now that our interaction with ipps is very very intense because these structures although it accounts for only 3,4% of their total capex. But, but it’s a very critical element. Right. So. So we are just talking to some, some. Some solar panel manufacturers that how steel profiles can be used. Right. To bring down the costs for solar panels also. So maybe in next quarter call we’ll be able to tell you more in detail. But idea is to keep on working on these small profile machines.
Right. And expand the market.
Amol Rao
Perfect. Thanks arunav and wish you all the best. Thank you so much.
operator
Thank you. Participants, in order to ask a question please press star and one. Now the next question is from the line of Ayush Vimal from Clearview Capital. Please go ahead.
Ayush Vimal
Yeah. Hi. Thanks for taking my question. I had a couple of questions on the royalty model which we shifted to in the downstream distribution business. Now given that we are selling TMT bars and royalties, are we taking or resuming the credit risk on behalf of the small plants for whom we are guaranteeing minimum volumes or that’s something that we are not assuming. Now given that we are growing royalty and there is no working capital on our books.
Anubhav Gupta
Yes, there is no working capital on our books. Right. Royalty. Anyways, the, the. The. The. The agreement says that the day sales is completed he has to credit royalty in our account.
Ayush Vimal
Got it. So we effectively just connecting the seller and the buyer and we are not assuming any kind of credit risk.
Anubhav Gupta
Correct. So yes. So that is real marketplace. Right. The only difference is versus other fear that we don’t. We are not capturing this into our gmv. So there is no gmv. Right. Gross merchandise value because it unnecessarily confuses everyone.
Ayush Vimal
Got it. Got it. And given this TMT being quite a sizable business in the downstream distribution product chain, I would have expected a target ebitda margin of 2% to 2.5% that you’ve given to go up higher given the fact that you shifted from a revenue based model to a royalty based model. I presume earlier you were mentioning the target EBITDA from the stream of business to be 2.5. And this was when we were taking stock in our books and we were actually distributing TMP cards. Now given that we moved to royalty, shouldn’t this 2.5% increase rather than falling to maybe 2.
2.5 that you’ve given?
Anubhav Gupta
Yes. So definitely it will go up. But why guidance is a bit low for margin because we need to keep on investing on the brand building. Right. So idea is to keep on investing into brand building and take this royalty from 500 rupees per ton to 1000 rupees per ton. That’s our ultimate objective. So it’s just that for this year we’re going to be spending a bit more. Right. But once the brand is built then yes, margins will move towards 4 to 5%.
Ayush Vimal
Got it, got it. And just one last question on the receivable days. So I’ve seen the receivables have shot up in the March quarter and you’ve seen much of this has been reversed in June. And this was more of a one off. Which segment has been driving this receivable days? Is it the downstream distribution business or the B2B metal trading business?
Anubhav Gupta
It was mainly like B2B. Okay.
Ayush Vimal
From what I recall you were very clear that you didn’t want to give credit days in the B2B business given the thin margin. Has something changed in that policy?
Anubhav Gupta
No, no, no. Nothing change changed. It is just that 3, 4 days credit you offer to client. Right. And like I said, this last week was quite voluminous. Right. So the money came into account within first week of April.
Ayush Vimal
Okay, got it. So we should see this normalizing June end.
Anubhav Gupta
You will see 10 to 15 days of WC by the 30th of June.
Ayush Vimal
Yes, thank you.
operator
Thank you. We’ll take next question from the line of Ritesh Gandhi from Discover Capital. Please go ahead.
Riddhesh Gandhi
Hi. Congratulations on your results. So we’ve got reasonably ambitious and aggressive good targets going ahead of doubling the two years in a row in terms of ebitda. Just wanted to understand the risks involved in this and how we are able to get the confidence over this kind of growth.
Anubhav Gupta
Fair question. See, I mean the confidence comes from the two things. One is the number of customers, what we are servicing right now, the new customers, what we are adding every day. Now the second part is the products what we are selling and new products what we are adding every day.
Right. And if you look at our business model, it’s built with the thesis that you have steel as raw material available. Then you sell it into like sell it through multiple verticals. So the only risk to this could be non availability of steel which we don’t see as a challenge. Right. Other risk. We don’t have any debt. We don’t have debtors on books as such. Right. 10 to 15 days debtor cycle is very much manageable. We don’t carry high inventory which. Which the fluctuating steel prices could impact. Right. So in that way we have created a business model which is shock proof.
Right. From any of the global uncertainty or any massive swings in the steel sector. Right. Our focus is that what all small mild valuations we can do in steel sector and grow our market share, capture new markets.
Riddhesh Gandhi
Sir, I get that. Just given how we are structured, our relationships across the industry, both on our customer and our supplier side, we are all faced. Well, but in terms of what’s. What is. And that the downside is low. But I mean what is giving us the confidence on. On. On. On the. On. On. On the growth angle of things. Because these are quite, you know, large numbers we’re talking about.
Riddhesh Gandhi
Right. So okay, so see. So this year FY26. Right. Let’s talk vertical to vertical. So number one vertical is service center. Right. So FY26 will be full 12 months of five service centers which will be operational now. Five service centers, one service center will give us 8,000 ton volume. So 40,000 ton monthly volume will come. Which means 500,000 ton per year. And on service center we do make 2,000 rupees per ton EBITDA. So 100 crore EBITDA will come from service centers.
Next year more pipes service centers will get add up. Right. That will. That will bring additional 5 lakh ton of volume and incremental 100 crore of EBITDA in FY27. Second vertical is B2B. Right. So B2B we did volume of around 3,22,000 ton in FY24. Sorry. And 632,000 ton in FY25. So it has already doubled. Right. For FY26 we have. We are projecting mild growth because like I said, more of steel will be coming in second half. Right. So we will see very sharp ramp up in second half of B2B metal trading. Now TMT we are doing around 11,000 ton a month.
Right. The current run rate in FY25 we did 107,000 ton in total. And our target for FY26 is 180,000 tons. Right. Solar structure is 50,000 ton. Of totally incremental volume which will come in FY26 non TMT distribution business. We did revenue of around 400 crores. 380 crore to be precise in FY25. And for FY26 our target is 1000 crores from this particular.
Riddhesh Gandhi
Got it. Okay.
Anubhav Gupta
Right. So. So. Yeah. So. So. So this guidance of 100% increase yoy is after a lot of thought process, right? A lot of work. What we have done in each of the verticals. Right. The raw material tie ups what we have with like I said, four of the top six mills in the country assuming no import is coming. Right. And then selling that steel through each of the verticals into multiple forms.
Riddhesh Gandhi
Got it, sir. Thank you. And all the best. Thank you so much.
operator
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference please limit your questions to two per participant. The next question is from the line of Dharmal from Dalmas Capital Management. Please go ahead.
Dharmil
Hi. Thank you for taking the question. The question was more on the TMT segment. So you mentioned that 500 per ton of royalty, right? Now if we compare it to the GM it comes to only 1%. And even if we assume at 1000 per 10 few years later, but the only 2% and assuming some employee cost, some marketing cost, this comes to a very low margin business than what we had earlier anticipated. Is there any misunderstanding on my part or. Hello.
Anubhav Gupta
Yeah, so you are right. That. See, I mean that 2%, that 2% EBITDA margin that was on the NSR of TMT. Okay, that was on the NSR of tmt. But when you calculate the EBITDA margin on 500 rupees per ton royalty that will be much. That will be much higher. Because. Because the fixed cost here is only these sales people, what we have given to these franchisee partners and our spends on the branding.
Dharmil
Understood. Yeah, I get that point. That reported EBITDA margins would be much higher. Much higher. Because we are only recording the royalty. But just looking from a business perspective, I mean is it a low margin business? Maybe 1.5 to 2% on GMV at best.
Anubhav Gupta
Yeah, that’s right. But then GMV we are not capturing anywhere. Right? So on 500 rupees per ton royalty the margin will be much higher after deducting the brand expenses and the sales people cost.
Dharmil
Thank you. Thank you.
operator
Thank you. The next question is from the line of Rajesh from KRS Investments. Please go ahead.
Rajesh
Yeah, so I had couple of questions. One, I wanted to know is from the listing perspectives you are right now trading on your bse, wouldn’t it be be a good idea to also list yourself for NSE so that you know there is more participation in SGFart.
Anamika Gulati
So that process is already on.
Rajesh
Okay, the second question was, was with regards to your projection that you intend to hit a target of around 8,500 crores. Which means, and since we are almost like, you know, halfway through this particular quarter, do you see that hdmart will be able to cross, you know, at least a minimum target of 2000 crores so that they are able to hit the profit of 48 to 50 crores to stand a fighting chance to get that 200 minimum profit that we’re looking at this year.
Anubhav Gupta
What I can tell you is that we’ll be near about 50 crore of EBITDA in Q1 of FY26 revenue. Very difficult to predict because of fluctuation in steel prices.
Rajesh
Okay. One of your competitor in the unlisted space is basically into a similar business and had clocked around 24,000 crores revenue last year with a profit of around 600 crores. And they are kind of planning to go with an IPO later in the second half with a valuation of around 60,000 crores to 80,000 crores as per news. Which basically kind of reflects that SGMart being in the similar kind of business is quite undervalued with the kind of targets that you are mentioning over the next couple of years. Do you think that this basically is something which will show interest in the overall investor community going forward?
Anubhav Gupta
Our job is to is to deliver on the guidance what we are giving to you, right? Valuations. Obviously investors and analysts are smart enough to value these businesses, right? As management, what I can promise you is that day and night, 24 7, our goal is to ensure that we are able to achieve these numbers which we are promising and these numbers are.
Rajesh
Conservative in nature or like the minimum that you are going to target or is it negative target you will have given to yourselves?
Anubhav Gupta
So 200 crore EBITDA target in FY26 does not capture any profitability from solar.
operator
Thank you. Sir, we request you to rejoin the queue for follow up questions. The next question is from the line of Rahil S from Krone Capital. Please go ahead.
Rahil S
Hi sir, good afternoon, can you hear me?
Anubhav Gupta
Yeah, go ahead.
Rahil S
Yes, hi. Did I hear you correctly when you said that you’re also looking at 100% growth in your PAT or is it just for the EBITDA?
Anubhav Gupta
No. So PAT will flow in the same way as EBITDA.
Rahil S
If you can, you know explain how that’s going to happen.
Anubhav Gupta
So see I mean the cost below EBITDA is interest and depreciation, right? Depreciation will be mild increase, right? Because capex which will be live for this year is 200 crores. 250 crores, right. Which could entail depreciation of 10 crore rupees. Right? And other income should remain high because of. Because of like you know any Capex which will be funded from the operating cash flows, right? And the fixed deposit should remain where it is. Plus There is around 250 crore which is coming in the company in next 10 days on the conversion of warrants. So the cash position of the company should remain high what it was in FY25.
Rahil S
Things will lead to the pad.
operator
Sorry to interrupt you sir. Request you to rejoin the queue for follow up questions.
Anubhav Gupta
Yeah, yeah, just to. Just to. Yeah just to end the last one. Yes. So. So. So bad growth will match the EBITDA.
Rahil S
Group by 527 as well.
Anubhav Gupta
That’s right.
Rahil S
Okay, thank you. I’ll join the queue.
operator
Thank you. The next question is from the line of Akshat from rsp, RSP and Ventures. Please go ahead.
Akshat
Hi. Thanks for the opportunity sir. My question is on a bookkeeping question. So from the previous March 24th we have increased our gross margins by around 700bps. But our EBITDA margins have fallen by 200bps majorly because of increase in other expenses. So can you throw some light on this? Why is this happening and how do we see this trend going forward?
Anubhav Gupta
So percentage margin is a bit deceptive in our business, right? Because NSR keeps on changing as the steel prices fluctuation number one. Number two other expenses are a bit high because of. Because of expansion of service centers which is going on, right? So once we get. We start getting income from service centers which we got in Q4 Q1 it will ramp up further. Q2 it will be further ramped up. So that will nullify the higher other expenses. So going forward I mean in terms of percentage it becomes a bit difficult, right? But what I can tell you is that on B2B metal trading right we should be doing around 752,000 rupees per ton of EBITDA on service center.
We should be doing around 2000 rupees per ton EBITDA on solar business. Anyways we have not captured any earnings in FY26 but it should be like minimum 34000 rupees per ton EBITDA business. Then on TMT we are getting 500 rupees per ton royalty. Right now we are building brand right. So margins will be slightly lower but they will expand in FY27, FY28. Then the non distribution business, non TMT distribution business where we will do thousand crore of top line in FY26. There I can give you EBITDA margin guidance because it is including multiple products. So there we should make minimum 2, 2 and a half percent.
2 and a half percent EBITDA margin.
operator
Thank you sir. We’ll take our next question from the line of Nikhil Porwal from Perpetual Capital. Please go ahead.
Nikhil Porwal
Yeah. Hi. Thank you for the opportunity. All my questions have been answered Anubhav. Only one question is between the rest of the service center business and the solar business that you’re getting into is the ROC profile more or less the same or is solar a more attractive business?
Anubhav Gupta
Solar is a. Is a bit attractive because the investment are very very minimal. Anyways we have land and infrastructure available at our current service center right. So. So in if at all like you know the idea to and 200,000 ton capacity we have already like you know ordered right. Which will be live by August, September of 2025 calendar year. I mean next two, three years there could not be more than 5060 crore of further investment into solar. So. So yeah so solar is, is. Is better in terms of roc.
Nikhil Porwal
Okay. And in terms of working capital is. It the same for both?
Anubhav Gupta
Yeah. It will fall into 1520 days of cycle. Okay.
Nikhil Porwal
Okay. That is it. Thank you so much and all the rest.
operator
Thank you. Ladies and gentlemen in the interest of time this is our last question. I now hand the conference over to the management for closing comments.
Anubhav Gupta
Thank you everyone for joining to this earnings call. If anyone is left you please reach out to our investor relation team and we will get back to you immediately. Thanks so much.
Unidentified Speaker
Thank you.
operator
Thank you on behalf of MK Global Financial Services limited That concludes this conference. Thank you for joining us and you may now disconnect your lines.