Gallantt Ispat Q1 FY27 PAT Drops 29% YoY as Raw Material Costs Spike; Capex Program Advances Without Debt
Gallantt Ispat, the largest producer of rebars in Uttar Pradesh with a 25% market share in its core regions, reported a 29% year-on-year decline in net profit to ₹123.7 crore for the June 2026 quarter. Revenue from operations rose 2% to ₹1,146 crore, but a sharp increase in raw material costs—aggravated by a maintenance shutdown at its pellet plant—compressed EBITDA per tonne by 21% to ₹8,787. Even so, the company’s ₹3,000 crore capex program continues to be funded entirely from internal accruals, with cumulative spending of ₹775 crore as of June 30, 2026, and no incremental debt. The plan aims to structurally lower costs through captive iron ore mines and renewable energy, while expanding steel capacity by year-end.
Q1 FY27 Financial Snapshot
Revenue was barely changed from a year earlier, as flat sales volumes were offset by better realisations. However, the jump in raw material costs pushed profit sharply lower.
| (₹ crore) | Q1 FY27 | Q1 FY26 | YoY | Q4 FY26 | QoQ |
|---|---|---|---|---|---|
| Revenue from operations | 1,146 | 1,128 | +2% | 1,205 | -5% |
| EBITDA | 203.4 | 253.7 | -20% | 208.9 | -3% |
| EBITDA margin | 17.8% | 22.5% | -470 bps | 17.3% | +50 bps |
| Net profit (PAT) | 123.7 | 173.8 | -29% | 122.8 | +1% |
| PAT margin | 10.8% | 15.4% | -460 bps | 10.2% | +60 bps |
The cost of raw materials consumed surged 10% YoY to ₹882 crore, while revenue grew only 2%. This reflected higher coal prices and the need to buy iron ore from the open market because in-house pellet production fell 49% quarter-on-quarter due to an annual maintenance shutdown at the pellet plant . The EBITDA bridge per tonne quantified the hit: raw material costs reduced EBITDA by ₹2,269 per tonne YoY, overwhelming a ₹777 per tonne benefit from improved net sales realisation .
Operational Volumes and Capacity Use
Sales volumes were essentially flat. Total TMT bar sales stood at 191.8 thousand tonnes (KT), unchanged from Q1 FY26 . Billet and sponge iron sales volumes were also stable, though captive pellet output and captive power generation were impacted by the shutdown and seasonality.
| Production Volumes (KT) | Q1 FY27 | Q4 FY26 | QoQ | Q1 FY26 | YoY |
|---|---|---|---|---|---|
| Pellet | 112.3 | 221.6 | -49% | 174.5 | -36% |
| DRI – Sponge Iron | 236.4 | 244.5 | -3% | 234.5 | +2% |
| Billets | 231.4 | 235.2 | -2% | 229.1 | +1% |
| TMT Bars | 196.2 | 210.2 | -7% | 196.5 | 0% |
Capacity utilisation, after climbing to 89.3% in FY25, eased slightly to 85.7% in FY26 . The company is operating close to its current 1.0 million tonnes per annum (MTPA) finished steel capacity and expects a meaningful volume lift when the ongoing expansion to 1.23 MTPA commissions in the second half of FY27.
Raw Material Pressure and the Mine Integration Promise
The single biggest drag on profitability in Q1 was the cost of raw materials. Management attributes the 9% YoY increase in input cost to elevated coal prices and, critically, the forced procurement of merchant iron ore after the pellet plant maintenance hit in-house availability . The company’s long-promised remedy is the development of two captive iron ore mines—Sonbhadra in Uttar Pradesh (51 MT reserves) and Todupura in Rajasthan (85 MT reserves)—which are part of a ₹1,500 crore allocation within the larger capex programme.
Once operational—management targets FY28—these mines are expected to deliver an EBITDA improvement of approximately ₹2,000 per tonne . This alone could add over ₹240 crore to annual EBITDA at current volumes, assuming full replacement of purchased ore. Combined with a ₹300 crore investment in 78 MW of solar power (expected to save ₹30–40 crore yearly) and debottlenecking at the Gujarat plant, the company sees a clear path to “somewhere around 20%” EBITDA margin from the current 15–17% range .
Capex Programme: Funded Without Fresh Debt
Gallantt Ispat has maintained a debt-to-equity ratio of just 0.1x while growing its gross block from ₹1,247 crore in FY21 to ₹2,293 crore in FY26 . The ₹3,000 crore capex plan is being financed entirely from internal cash flows.
| Capex Component | Allocation (₹ crore) | Status |
|---|---|---|
| Steel capacity expansion (1.0 → 1.23 MTPA) | 1,200 | Commissioning H2 FY27 |
| Captive iron ore mines (Sonbhadra, Todupura) | 1,500 | Development ongoing, target FY28 |
| Solar power (78 MW) | 300 | 18 MW in Q2 FY27, 60 MW in Q4 FY27 |
Premiumisation and Market Position
Despite the near‑term commodity headwinds, Gallantt’s branding efforts are providing a buffer. The ‘Gallantt Advance’ line of higher‑grade TMT bars (Fe 550D, Fe 600) commands a 2–3% price premium over unbranded peers, supported by a 3,000‑plus dealer network and brand ambassador Ajay Devgn . Brand awareness has risen ~35% in core markets, and the company retains its 25% addressable market share in Uttar Pradesh and a stronghold in Gujarat . With demand for steel in India expected to grow 8–8.5% in FY27, the capacity expansion will allow Gallantt to capitalise on volumes once the current input‑cost cycle stabilises.
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