Sarda Energy & Minerals Limited (SARDAEN) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Sardar Energy and Minerals Ltd. Q2F527 earnings call hosted by Ilara Securities India Private Ltd. 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 Ravi Soda. Thank you, and over to you, sir.

Yeah, good evening. On behalf of Elara Capital, I welcome you to the Q2 FI 27 result call for Sarda Energy and Mineral Limited. From Sardai Energy, we have with us Mr. Pankaj Sardai, Managing Director, Manish Sardai, Deputy Managing Director, Padma Kumar Jain, Director and CFO, and Nile Joshi, Executive Director. I now hand over the conference to Mr. Pankaj Sardai for his opening remarks. Thank you.

Thank you, Mr. Ravi. Good evening, friends, and thank you for joining us on our Q2 and H1F527 earnings call. I hope you have had an opportunity to review the financial results and investor presentation available on the stock exchanges and our company website. H1 FY27 marked the milestone for SEML with a highest ever half yearly EBITDA of 1,326 crores, up approximately 4% year-on-year, and PAT of 799 crores, up approximately 5%. Total income stood at 3,221 crores, while cash profit increased to 1,225 crores. During Q2 FY27, we recalibrated captive power operations in line with market conditions, enabling us to optimize our portfolio mix. The flexibility supported EBITDA of Rs.564 crores and PAT of Rs.320 crores on total income of Rs.1505 crores. The performance, despite planned maintenance shutdowns and operational outages, reflects the strength of our underlying businesses and the benefits of our integrated operating model. Let me now take you through our operational highlights. A key operational highlight this quarter was our entry into Magenes-Ormaine, securing preferred bidder status for the Avagudam Magenes block in Andhra Pradesh. Operations are expected to commence in approximately 12 to 14 months. Once operational, the mine will strengthen backward integration, enhance raw material security, and improve cost competitiveness, supporting higher profitability in our ferrolois business. We are now focused on securing the necessary approvals to restart mining operations. On the production front, we achieve our highest ever half-yearly pellet output of 4,29,059 tons at Raipur. At Raipur, the replacement 30-megawatt turbo generator commenced operations in August 2026 and is operating smoothly at full capacity, supporting captive power generation and steel production. At our 600-megawatt thermal power plant, planned maintenance of one 300-megawatt unit was completed following a 47-day shutdown during the quarter. We had to take multiple maintenance shutdowns over the last two years since the takeover of this thermal power project asset, as this was a distressed asset and had not undergone proper maintenance care, which was restricting it from achieving optimum performance level. With the maintenance cycles of the last two years, we are now confident about the efficient functioning of the plant and expect both cost savings in the operation and higher generation going forward. Our hydropower operations recorded strong performance during the quarter despite lower rainfall in certain catchment areas and an 18-day shutdown of the 113-megawatt Sikkim plant from 18th June to 5th July following a transmission tower collapse. Alongside thermal power, hydropower remains an important part of our long-term energy strategy. Let me now update you on our expansion plan. On the 600-megawatt thermal power project, the Ministry of Environment, Forest and Climate Changes has approved the terms reference for expanding capacity from 600-megawatt to 1,200-megawatt. We expect to receive environmental clearance within the current financial year. This brownfield expansion remains one of our most capital-efficient growth opportunities, supported by existing land, water availability, material handling systems, and power evacuation infrastructure. The approval process for our three small hydropower projects in Chhattisgarh with an aggregate capacity of 74 megawatt is progressing as scheduled. Our 50-megawatt captive solar project is expected to be commissioned in the next quarter, subject to resolution of right-of-way issues affecting the transmission line. The project will add to our captive renewable energy capacity. For our recent acquired 66 MW hydro power project in Arunachal Pradesh, most key statutory approvals are in place, and critical land acquisition has been completed. Work on the approach road has commenced, and we remain confident of meeting the planned project timelines. On mining, development of the Sharpur West high-grade coal mine remains on schedule, with commissioning targeted before the end of the current financial year. The Bartunga Hill coal mine also remains on schedule and is expected to be opened by the end of the next financial year. Regulatory approvals for the Garepalma 4x5 and Sindhuri coal blocks continue to progress as planned. We remain prudent in managing our balance sheet with all ongoing expansion projects funded through internal accrual. We remain net debt-free on both a standalone and a consolidated basis with liquidity exceeding Rs. 2600 crores as of 30th September 2026. Our financial strength was further reflected in an upgrade of SEML's credit rating by one notch from AA- to AA and a two-notch upgrade in SADA Metals and Alloys Ltd rating from A to AA- by Chrysler. This strong financial position gives us the flexibility to execute our growth plans while maintaining financial discipline. Looking ahead, our priorities remain timely project execution and deeper integration across mining, energy, and metals. Our greater emphasis on energy reflects its earning potential, while our integrated operations allow us to respond to market conditions and allocate resources towards better returns. We believe this approach will strengthen earnings, visibility, and support sustainable value creation. With that, I'll hand over to Mr. Manish Sarda to take you through the industry environment and outlook.

Good afternoon, everyone, and thank you, Pankaj. India's expanding energy requirements continue to create opportunities for businesses with reliable generation assets and access to domestic resources. During the quarter, the country's power generation grew 11% year-on-year to around 536 billion units. Peak power demand increased 18% to 270 gigawatts, a new high for the second quarter. As India adds renewable capacity, the requirement for dependable power across different hours of the day remains important. Solar generation increased 39% year-on-year during the quarter. Reflecting the pace of renewable energy development, we believe a diversified generation portfolio supported by few security and efficient operations is well placed to serve the country's evolving energy requirements. Government's continued focus on domestic resource development strengthens the opportunity for integrated mining and energy business for SML. Expanding our mining capabilities alongside our power portfolio will deepen this integration and strengthen the operating foundation for future growth. Our entry into manganese ore mining adds a further opportunity to improve raw material security and cost competitiveness in ferrolois. Domestic steel consumption also continues to grow. Supported by the country's industrial and infrastructure requirements, we remain focused on the contribution of our metals and federal oil business with the integrated portfolio with operating decisions guided by profitability and efficient use of our resources. Against this backdrop, we believe SEML is well placed to its integrated presence across mining, energy, and metals. Energy's contribution of more than 75% of H1 EBITDA demonstrates its importance to our earnings profile. Our emphasis on this business is supported by existing generation assets, mining capabilities, and expansion pipeline. At the same time, our diversified operations allow us to capture and AAPMA NIRBAR Bharat continue to support investment across manufacturing and industrial infrastructure. Our plans to quadruple mining capacity and double energy generation capacity are aligned with these opportunities. Our priority is to convert these investments into dependable operations, stronger earnings, and sustainable returns. We remain confident that our integrated model and continued execution focus will create enduring value for all stakeholders. With that, we would be happy to take your call.

Thank you very much.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers 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 Malika from Agarwal Investment. Please go ahead.

Hi, sir. This is Malika. Thank you for the opportunity. My question is that how will the Eva Gooden Manganese mine strengthen raw material integration and what proportion of captive Okay,

so the Awagudam mines we have recently won, and it will take some time for it to start as we are filing all the paperwork that is required, and we expect that we will be able to save 200 to 300 rupees per ton. The total mine is 450,000 tons extractable reserves. So, we typically require very low amount of low-grade ore to economize our high-grade ore, which we import from Australia, from Gabon, and from South Africa. We expect that security for our low-grade ore.

Okay, got it. Sir, I just had another question. What is the investment like?

So, it was already operating mine. Somebody was already operating it. The lease has expired, and we have acquired it through the auction route, and we will be ascertaining all the costs. We know the rough estimates. On that basis, we did the auction, and we participated in the auction, but it would not be prudent to comment right now until unless we ascertain the realities on ground.

Are you looking for more such things?

Yes, we are continuously looking for mines which can add raw material security to our entire operation because we have our ferroloise plants in Raipur and in Vishakhapatnam both. So we are actively looking in Maharashtra, which is logistically closer to Raipur, Madhya Pradesh, Maharashtra, all the regions which are closer to Raipur, and in Andhra, Orissa, the regions which are closer to our Andhra plant. So, we are continuously on the lookout, and if there is an international opportunity for manganese as well, we are looking out for that.

Got it, sir. Thank you so much, and congrats on this quarter.

Thank you.

Thank you very much. Ladies and gentlemen, in order to ask a question, please press star and 1 on your touchtone telephone. I repeat, in order to ask a question, please press star and 1 on your touchtone telephone. The next question is from the line of Deepak Kumar, an individual investor. Please go ahead.

My question is, what is the difference between two shutdowns? One you have taken in December and January for 300 MW and just you have completed for 600 MW. So what is the difference and what is impacted in the top line?

We have two power-generating units of 300 MW. Alternate years, generally, shutdown has to be taken for every unit. Last year, we had taken for one unit, we have taken for another unit.

So, is there any impacting top line? We have said it is a very stress unit and we have developed, so it will impact our top line?

No, no, it will not impact last year's generation. If we further improve our generation capacity, yes, for the quarter, it has impacted, but on the year as a whole, we will exceed last year's generation.

Okay, then this quarter, there is no need of any shutdown?

No, there is no need for any shutdown. Now, this quarter and next quarter, we won't require any shutdown in normal course.

Okay. Now, my second question is, you have taken 47 days shutdown for 600 MW, even though you have generated almost good unit, power unit, only 200 million units you have differed from actual. So why this happened? This is a half shutdown, half?

No, this is only shutdown of only one unit of 300 MW. One unit was operating at full capacity.

Okay, okay. You have written in pamphlet that is a 600 MW to mention, that's why I...

No, actually it is 300 MW unit was closed. As I told them, every year we have to take shutdown of one unit for 30 days to 40 days, depending upon the condition of the unit. Generally, it is in the range of 30 days.

And what generation and profitability levels are achievable in H2FY27?

In case of hydro, definitely in the IH2 profitability on lower side because of the seasonal conditionalities. And in thermal, it will be substantially higher because of the improved market conditions as well as higher generation in the second half.

Okay.

Thank you. Thank you very much. Ladies and gentlemen, in order to ask a question, please press star and one on your touchtone telephone. The next question is from the line of Athar from An Individual Investor. Please go ahead.

Thank you so much, sir, for the opportunity. My question to you is, following record at one per year production, what scope exists to increase capacity utilization for those? And how do you see pellet demand, materialization and margins involving in H2FY27?

The capacity utilization is concerned in thermal power plant, ITP thermal power plant, it will improve in the second half as already stated. Because in the first half, capacity utilization was on lower side. In rest of the other plants, it depends in case of steel plants. I don't know, pellet, it will remain more or less in the same line. Sponge iron also, it should remain in the same line. In case of billet and wire, it will depend upon the market conditions at what price we are able to sell the power. If we are selling power at remunerative prices, there may be a lower production. If we are getting normal price of our relation, then we may have a higher production from in steel billet and wire.

All right. Thank you. I had another question. My second question is, how is the realization in steel, and what do you expect in few quarters? My question is on the realization in steel, and what do you expect in the next quarters?

So, steel, if you look at it, overall is buoyant right now, and especially the flat section is more buoyant compared to the long sections. And we are hoping that, you know, in the coming quarter also steel will remain strong and realizations will be also decent. But we are facing a severe issue in terms of the logistics costs, you know, because of high crude prices. The demand remains strong.

Okay. Can you quantify the logistics costs?

How do I quantify the logistics costs? Because different, like all the imported coal that is coming from South Africa, the usual freights are normally around $18 to $22, you know, for a 50,000 ton vessel. And currently, the freights are close to $36, $38 in terms of bulk freight. So you can imagine, you know, the increase. So coal has become a little more expensive in terms of production of, you know, steel. Coking coal has become very, very high from Australia, the Jan period. A bit of a squeeze on the raw material side, because I think the steel cycle looks to be good.

So I just want to add here that the mining facilities in India as well are flooded because of the heavy monsoons that we got. So because of that also, the production capacities of most of the mines are at the lowest of their phases. So that's why the raw material prices have really gone high in the country. Because of that. We should ease out in the coming two to three months.

If you have looked at the prices of flat steel, they are close to 75,000, 77,000 rupees. And if you look at the long product pricing in Mumbai, in some places they are even close to 54,000 rupees. So we have seen a significant increase in terms of pricing, but we all have to assess in the next quarter How much the squeeze will be, whether the West Asia tensions would ease, because that will ease a lot of pressure in terms of logistics.

But we are meeting part of our coal requirements from our capital coal mines.

Yeah, we do. We do have our own coal mines and we do meet our own requirements, so we are somewhat isolated.

Thank you, Samut, sir, and congratulations on the success of this one.

Thank you very much. The next question is from the line of Kamlesh Bagmar from Lotus Asset Managers. Please go ahead. Mr. Kamlesh, please go ahead.

Thanks for the opportunity, sir. Just one bookkeeping question. So, what was the realization in the hydro power series and the thermal power series on SKS which we booked in this particular quarter? And going forward, where do we see our realization? What realization we can factor in for our agendas?

The thermal power realization was about 5 rupees 30 pesa in this quarter.

Okay, and with regard to hydro power?

In case of hydro power, it was about 6 rupees.

And going forward the way, like we are buying the power, doing the PPA binators, all those PPAs, we are going to next year or in the second half, what

generations we can expect here?

Because there is so much involvement in the market.

Your voice is not clear. Yeah, the voice is quite muffled.

What options we can tackle in the coming year? Both the ITO as well as the thermal.

In the second half prices should be much better than what we have achieved in the first quarter. Because the power demand scenario is much different.

Sir, in thermal, what percentage of capacity we have tied up now?

We have tied up 60% of our sellable power.

In hydro, I believe, Sikkim and other parts are still untied there.

Yes, Sikkim is untied.

Okay. And we want to do some time.

But apart from Sikkim, all the other hydro projects are tied up.

Okay.

Thank you very

much.

The next question is from the line of Deepak Kumar, an individual investor. Please, go ahead.

Sir, my question is that why do we need to take this peak season without intimation? When people are making a lot of money in the peak season, we are taking the peak season. That's not the reason?

No, this is not the price. The price is more than the price. So, this is not the case. And the shutdown of the unit condition is taken. And the prices are better than what we were getting in the month of July and August.

Thank

you very much.

Okay, thank you.

Thank you very much. The next question is from the line of Vivek Sharma from K&M Advisor. Please go ahead.

Hi, good evening. First of all, congratulations on the results, and since you have now achieved the highest H1 EBITDA figure of north of 1,300 crores, I want you to ask something on the line of what are the key growth drivers that could sustain this momentum? That is why. And what would be the revenue and data growth target that you expect for entire FVAC to be serving? Thank you.

Improved realization, particularly from the hydropower and thermal power, have been contributing factor in the improved profitability. And we expect the same to continue in the second half also. Quantification will be very difficult because the situation is very dynamic on the pricing side in all the segments.

Just opening questions, can you do over 2500 crore by 27th?

We don't give any forward guidance.

Sure, sir. That's very speculative, actually. So we don't do any forward guidance on numbers.

That was it from my side. Thanks so much.

Thank you very much. The next question is from the line of Priyansh Lapotia, an individual investor. Please go ahead.

Hello. Am I audible?

Yes.

Okay. So, my first question is, if we compare quarter and quarter segment by revenue, then revenue from steel is down by approximately 49 crores, and power sales is down by 138 crores. So, to make Apple-to-Apple comparison of actual performance across these segments, I think it is necessary to exclude the impact of shutdown of the 300 megawatt power unit and 30 megawatt turban deplacement in steam. So, could you please advise that how much was the loss of revenue in the power segment during Q2 that was attributed to the shutdown of this 300 megawatt plant, and how much loss of revenue during Q2 was attributed to turbine replacement? This is for the 300 MW?

Yeah, 300 MW.

Okay, so approximately 120. And for the steel segment?

Steel segment, we have not operated billet and billet plant and wire rod plant because we were selling power in the market. That was the reason for shortfall in the revenue.

Okay, and then in continuation, do you foresee any more plan shutdown in the next 12 months? If yes, then which quarter and how much capacity should we be considered for these three segments, across that two segments?

So far as current year is concerned, next half year, we do not foresee any shutdown in the thermal power plant.

Okay.

Next year, definitely, one unit will again be shut down for 30 days in normal, 30-40 days, depending upon the condition of the unit. For the financial year, there is no major shutdown.

Okay, got it. My second question is, what was the average realization of power per unit in the spot market for the Sikkim hydro power project during Q1 and Q2, and what was the average realisation per unit in what market for the Sikkim hydro power during the October month?

Superfigures may not be readily available, but for 6 months we earned more than 6 rupees a unit from Sikkim hydro power project.

More than 6 rupees per unit. This was for Q1 and Q2?

Yeah, put together Six months.

Okay. Six months. Okay. And what was the same average realization power per unit in sports market for SKS power thermal plant? Similarly, for Q1, Q2 and October.

Sorry. SK power budget, we had 5 rupees 42 paisa in the second quarter.

So, for the SKS power thermal plant?

Yeah, yeah.

It was also 5 rupees, he said.

More than 5.50. In between somewhere about 5.20 to 5.50.

5.20 to 5.50. Okay. And my final question is, what was the average realization of iron ore pellets during Q1, Q2 and during the October month?

Quadra 1, it was about 10,000 rupees, and in the second quadra, it was slightly below about 9,800 rupees a ton.

Okay. Okay. Got it. That's it from my side. Thank you.

Thank you very much. Ladies and gentlemen, in order to ask a question, please press star and one on your touchstone telephone. I repeat, in order to ask a question, please press star and one on your touchstone telephone. The next question is in the line of Hina Parek from Star Investments. Please go ahead.

Hi, thank you for the opportunity. My question was on the SKS plan. So, with the maintenance program completed at SKS, what utilization levels and incremental generation can the 600 MW thermal power plant achieve in the coming year to 4S by 27?

Can you repeat your question, please?

It's a metal generation.

Sorry, you want me to repeat the question?

Yeah, yeah, please.

Yeah, so this is probably SKS plant, so with the maintenance program completed in SKS, what utilization levels and incremental generation can the thermal power achieve in H2?

In the 202 crore units, for the whole year, we expect to cross 450 crores.

400 and?

70 crores for the whole year.

Okay, gorgeous, gorgeous. And I have one more question. What is the update on the SKS environment clearance?

As mentioned in my opening remarks as well, we have received TOR, Terms of Reference, from the MOEF, and we are expecting to get the environment clearance in this financial year.

Okay. Well, I think that's what I mean. Most of them is covered. Thanks a lot and all the very best.

Thank you very much. As there are no further questions, I would now like to hand the conference over to Mr. Jain for closing comments.

Thank you, everyone, for participating in today's earning call. We closed the first half with record EBITDA, higher profitability and progress across our strategic priorities. Energy continues to anchor our earnings. Record pellet production reflects the capabilities of our operating assets. And our entry into magnesium mining strengthens our opportunity for further integration. We remain focused on executing our expansion plans while maintaining financial discipline and strong balance sheet. Thank you for your continued support. If you have any further questions, please reach out to us or our investor relations team. We look forward to speaking with you again next quarter. Have a great evening. Thank you.

Thank you very much. On behalf of Sardar Energy and Minerals, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.