NMDC Steel FY26: Ramp-Up Year Turns Profitable, Multiple Frozen in Place

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1. At a Glance

A greenfield steel plant that started commercial operations in mid-2023 just posted its first full-year profit: ₹58.72 Cr on ₹13,641.81 Cr revenue. The trajectory is sharp—sales up 60.4% YoY, and operating profit swung from negative ₹1,788 Cr loss to positive ₹1,518 Cr. But the math remains tight: a 0.43% net margin, ROE of 0.45%, and ROCE of 3.06% mean the equity is still barely earning its cost of capital.

The stock trades at 242x FY26 earnings. The peer median P/E sits at 19.9x.

One anchoring question: does a ramping plant with a SAIL offtake agreement merit this multiple, or is the gap the cost of watching from the sidelines?

2. Introduction

NMDC Steel Limited emerged from the demerger of the Nagarnar steel plant from NMDC Ltd in October 2022. The entity is 60.79% held by the Government of India, with NMDC Ltd as parent. The plant is an integrated facility with captive iron ore supply from parent NMDC mines, a feature that was baked into the greenfield design from inception.

August 2023 saw first hot metal production. October 2023 marked commercial operations commencement. FY24 and FY25 were loss-making ramp-up years—the company burned through ₹1,560 Cr in FY24 and ₹2,374 Cr in FY25 as capacity utilisation inched upward. December 2024 brought a two-year offtake agreement with SAIL (Steel Authority of India) for 30,000 tonnes per month minimum, which has already driven 67% of 1HFY26 revenue.

The disinvestment clock is ticking. GoI has signaled intent to divest 50.79% to a strategic buyer, retaining the option to offer 10% to NMDC Ltd post-sale. No bids have been announced yet.

3. Business Model: WTF Do They Even Do?

The Nagarnar plant is a fully integrated steel mill, rare for a greenfield in India’s recent build wave. It runs:

A 3 MTPA crude steel capacity driven by a 4,506 m³ blast furnace. Two 175-tonne BOF converters feed a thin-slab caster that produces hot-rolled coil (HRC) in thicknesses from 1mm to 16mm. A 2RM+4FM hot strip mill capable of 2.9 MTPA sits downstream.

The product mix centres on low-carbon, HSLA (high-strength low-alloy), and dual-phase grades. These roll into LPG cylinders, bridges, ships, large-diameter pipes, railway wagons, and pressure vessels. The plant is also positioned for eventual entry into automotive-grade and specialty steel, which sit three tiers above commodity HRC in margin.

Raw material is a closed loop. Iron ore comes from NMDC mines at assured cost structures; coking coal is procured via central PSU procurement channels; captive power generation covers 35–40% of load, the rest from the grid. MECON Limited oversees operations and maintenance.

The model is low-cost by design. But in a commodity market where pricing is set at the margin, low-cost is only a shelter, not a fortress.

4. Financials Overview

Figures are consolidated, in ₹ crore.

Annual Results (Full Year)

Quarterly Q4 (Mar 2026)

Revenue hit ₹3,879 Cr, the strongest quarter on record. Operating profit turned ₹805.75 Cr, a 20.7% operating margin—the cleanest unit economics since launch. Net profit came in at ₹391.91 Cr, catapulting the quarter to a 10.1% net margin. This reversal is visceral: from ₹758 Cr loss in Q3FY25 to ₹392 Cr profit in Q4FY26.

What changed? Capacity utilisation reached 76% by 1HFY26 (it was 50% in FY25, 29% in FY24). SAIL offtake began December 2024, locking in a 30,000-tonne monthly floor. Sales realisations (blended ASP) recovered to ₹35,462 per MT from a trough of ₹31,147 per MT in FY25. Volume scaled: total sales rose to 2.73 Mn tonnes from 753 k tonnes a year prior.

Cost absorption also improved. Fixed costs (interest, depreciation) are spread across higher volumes. Interest expense dropped to ₹486.64 Cr from ₹651.94 Cr—a 25% fall thanks to scheduled debt repayment (₹523.80 Cr of NCDs redeemed in August 2025).

The outlier: no dividend. Payout is 0%, retained entirely for debt reduction and working capital.

5. Market Expectations & Historical Multiples

This section describes how the market is currently pricing the company and how that compares with its own history and peer group. It is descriptive, not predictive.

The market currently pays 242x earnings here, versus a peer median of 19.9x. The gap—over 12x—is the largest in the sector.

What appears to be priced in: a two-year minimum offtake from SAIL; structural improvement in ROCE and ROE as the plant scales toward nameplate capacity; the public sector parentage and moat via captive ore; and the disinvestment as a potential re-rating event should a strategic buyer emerge with growth ambitions.

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