Steel Strips Wheels Q4 FY26: Record Revenue, Stalled Profits

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1. At a Glance

The company clocked its highest-ever revenue of ₹5,183 crore in FY26, a 17% jump year-over-year. Operating leverage should have flooded the bottom line, but net profit flatlined at ₹202 crore, down 8% from the prior year—a puzzling gap that sits at the heart of the story.

Depreciation surged ₹28 crore because of the alloy wheel expansion and new knuckles capacity, absorbing much of the operational gain. The company delivered a record quarterly profit before tax in Q4 alone (₹86.5 crore), but full-year net income trails year-earlier levels.

ROCE and ROE both sit at healthy but single-digit-below-peer levels. The market pays 17.7x earnings here against a peer set that ranges from 28x to 78x, suggesting either deep undervaluation or a reason the market discounts the story.

The real question is whether capex-driven leverage is temporary—a price of scale—or permanent constraint on the bottom line. Management is guiding 15–20% PAT growth for FY27, contingent on utilization ramp and export recovery.

Alloy wheels are now 36% of the revenue mix and widening margins when isolated; that structural shift is real, though overshadowed by financing costs on the capex program.

2. Introduction

Steel Strips Wheels, incorporated in 1985 and operational since 1991, manufactures automotive wheel rims across steel and alloy categories for passenger vehicles, commercial vehicles, tractors, off-road, and two/three-wheelers.

The company operates four steel plants (Tamil Nadu, Jharkhand, Gujarat, Punjab), one alloy plant (Gujarat), and one backward-integrated facility in Jharkhand. Tata Steel and Sumitomo Metal Industries together hold roughly 12% and sit as strategic investors; their supply chain access and technical support provide a moat that competitors must replicate elsewhere.

FY26 was a capex and expansion year: the company brought new alloy capacity online, started aluminum knuckles production (a foothold in an adjacent segment), and acquired AMW Components in January 2024 to add commercial vehicle and tractor capacity. Deputy Managing Director Mohan Joshi resigned on 3 June 2026; no stated cause, though timing after a strong quarterly result raises no obvious red flag.

The company received €5 million export awards in recent quarters (one from US suppliers, another from European OEMs), signaling customer confidence in capacity and quality. A bank guarantee invocation in January 2026 triggered ineligibility for the PLI (Production-Linked Incentive) scheme and killed a planned JV with Redler; that’s a setback, though the core business remained unaffected.

3. Business Model: WTF Do They Even Do?

The company sells wheel rims: steel and alloy cylinders bolted to axles.

Steel wheels dominate by volume (158 lakh units, H1 FY26) and serve the price-conscious end: Maruti Suzuki, Ashok Leyland, Tata Motors (commercial), Mahindra tractors. They are low-margin, standardized, and vulnerable to pricing pressure. Management claims a recent repricing with a large OEM that broke two decades of “very, very poor pricing,” signaling a possible inflection; the payoff is lumpy and project-dependent.

Alloy wheels (33 lakh units, H1 FY26) are lighter, cost more to make, and command premium prices. Hyundai, Renault-Nissan, and Kia fit them as standard on higher trims, and customers trade on weight savings (fuel efficiency) and aesthetics (brand equity). This segment is where the margin and growth story lives: 36% of FY26 revenue, 50% YoY volume growth in March 2025, and a structural tailwind from vehicle premiumization (more customers opting for alloy fitments).

Aluminum knuckles (a steering component, entirely new) represent a toehold in a less commoditized adjacency. The company produces 0.3 million units and holds what management claims is sole-supplier status. Contribution to revenue remains “minuscule” today, but planned capacity expansions at Bhuj (new facility, 1.2 million unit greenfield) suggest conviction that the market is opening.

Exports have historically been 13–15% of revenue, skewing toward the US (44% of export mix, H1 FY26). The US tariff war of 2025 crushed export revenue by ~₹108 crore YoY, sinking exports 19% in FY26. Management is diversifying: Europe now represents 52% of the export mix, up from 20% three years ago. A five-year nomination from European OEMs for ~₹300 crore (starting calendar 2027) provides a contractual floor for recovery.

Geography is strategic: Chennai (near Renault-Nissan and Hyundai export hubs), Jamshedpur (next to Tata Motors and Tata Steel), Mehsana (Tata Motors alloy proximity) reduce freight and raw material costs and lock in share with domestic OEM powerhouses.

4. Financials Overview

Figures are consolidated, in ₹ crore. Result type: Quarterly. Latest period: Q4 FY26 (ended March 31, 2026).

Revenue exploded in Q4, driven by a ~19% tractor volume jump and a recovery in commercial vehicle demand (CV segment up 10% for the full year but volatile, with a demand cliff in Q2 followed by a “remarkable” rebound). Alloy wheel volumes climbed, and the mix shift—higher-margin products—lifted operating profit 28% YoY.

Quarterly EBITDA per unit hit a record ₹282 (management guidance for FY27: ~₹300). Reported margins are distorted by raw material pass-through (aluminum prices hit record highs in 9M FY26, then stabilized). Management’s preferred lens: EBITDA per wheel, not margin %, because “raw material prices skew the percentages.” On that metric, FY26 held at ₹262 (flat YoY), blamed on ~₹15 crore EBITDA foregone from lower exports and suboptimal utilization at the Chennai facility.

Net profit lagged revenue growth due to:

• Depreciation up ₹28 crore (alloy capacity, knuckles production, brownfield paint shops).
• Interest expense stable at ~₹31 crore/quarter, but full-year interest rose ₹19.5 crore YoY (debt availed for expansion).
• Tax rate at 25% (in line with statutory, manageable).

Management guides PAT growth of 15–20% for FY27, premised on 95%+ utilization and export recovery. No guidance on absolute revenue or EBITDA yet—a caution sign given the Bhuj facility’s OEM approval dependency.

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 17.7x trailing earnings here versus a peer median of 27.1x, a gap of 37%, suggesting the market is pricing lower growth or higher leverage ahead.

The company’s five-year average P/E of 15.4x sits just below the current multiple, meaning the stock is trading near its long-term valuation norm rather than at a structural discount. Peers—Bosch, Bharat Forge, Schaeffler India—trade at 47x–79x, but they are larger, higher-margin businesses with different end-market