NMDC Steel Ltd., a state-owned steel manufacturer, has captured the market’s attention with a remarkable 19% surge in its share price, reaching an intraday high of ₹42.70 on the BSE and 19.1% on the NSE on August 13, 2025. This rally follows the company’s impressive June quarter (Q1 FY26) earnings, announced post-market hours on August 12, 2025, marking a significant turnaround from last year’s losses. The stock witnessed heavier-than-usual trading volumes, with 6.13 crore shares traded, a staggering 41 times the average volume of 15 lakh shares, reflecting strong investor confidence. Here’s a deep dive into what’s driving this surge and what it means for investors.
Stellar Q1 FY26 Financial Performance
NMDC Steel reported a net profit of ₹25.56 crore in Q1 FY26 (April-June 2025), a dramatic improvement from a net loss of ₹547 crore in the same period last year. This marks the company’s first-ever quarterly profit since listing, signaling a robust operational turnaround. Key financial highlights include:
Revenue Growth: Revenue from operations soared by 66% year-on-year to ₹3,365 crore from ₹2,023 crore in Q1 FY25, driven by higher product prices and improved capacity utilization.
EBITDA Turnaround: The company achieved an EBITDA of ₹408 crore, compared to an EBITDA loss of ₹401 crore in the year-ago period, reflecting a strong operational performance. The EBITDA margin stood at a healthy 12.11%.
Market Response: The stock’s 17.9% gain by mid-day on August 13 outperformed the BSE 500 index, which rose by just 0.42%, underscoring investor optimism about NMDC Steel’s growth trajectory.
Factors Driving the Surge
Several factors contributed to NMDC Steel’s stellar performance and the subsequent share price rally:
Improved Operational Efficiency: The company’s 3.0 MTPA steel plant in Nagarnar, Chhattisgarh, has ramped up production, leveraging advanced technology to produce high-grade Hot Rolled steel (1mm to 16mm thickness) for key sectors. This has enhanced operating leverage, spreading fixed costs over higher output.
Higher Product Prices: Increased steel prices in Q1 FY26 significantly boosted revenue, aligning with favorable market dynamics.
Strong Trading Volumes: The 41-fold spike in trading volumes (6.13 crore shares vs. an average of 15 lakh) indicates robust buying interest, with 76.48 lakh shares traded on the BSE alone compared to a two-week average of 2.33 lakh shares.
Government Support: As a state-owned entity under the Ministry of Steel, with a 60.79% promoter stake held by NMDC Limited, the company benefits from strong institutional backing. The Life Insurance Corporation of India (LIC) holds a 14% stake, and Foreign Portfolio Investors (FPIs) own over 4%, further bolstering investor confidence.
Non-Convertible Debentures (NCDs) Update
NMDC Steel has borrowings of ₹523.80 crore in the form of non-convertible debentures (NCDs), issued on August 28, 2020, with a face value of ₹10 lakh each. These unsecured, non-cumulative, redeemable taxable bonds have seen adjustments in their interest rates due to rating changes post-demerger:
Initial Rate: 7.30%
Revised Rate (Feb 16, 2023): 8.80% after a downgrade from AAA to A-.
Current Rate (June 5, 2024): 9.05% following a further downgrade to BBB+ by ICRA (Rating Watch with Developing Implications) and A-/Negative by India Ratings & Research.
Redemption Date: August 28, 2025.
These NCDs reflect the company’s financial obligations but have not deterred investor enthusiasm, given the strong Q1 performance.
Why Investors Are Excited
The 19% share price surge is a testament to NMDC Steel’s turnaround story. Posts on X echoed this sentiment, with users highlighting the company’s highest-ever revenues and first-time PAT (Profit After Tax) as key drivers. The stock’s performance above its 5-day, 10-day, 20-day, 30-day, 50-day, 100-day, 150-day, and 200-day simple moving averages (SMAs) signals strong technical momentum, though its 14-day RSI of 69.61 suggests it’s nearing overbought territory.
The company’s strategic focus on high-grade steel production and its alignment with India’s growing steel demand (projected to grow at a 7-8% CAGR per Emkay Global) positions it as a key player in the sector. Additionally, recent recommendations for a 12% safeguard duty on steel imports by the Directorate General of Trade Remedies (DGTR) could further protect domestic producers like NMDC Steel, boosting investor confidence.
What’s Next for NMDC Steel?
With a market capitalization of ₹12,323.20 crore and a one-year beta of 1.2 indicating high volatility, NMDC Steel remains a dynamic investment opportunity. However, its negative P/E ratio of 6.84 and return on equity (RoE) of -12.55% suggest that profitability is still in its early stages. Investors should monitor the company’s ability to sustain this momentum, particularly as it approaches the NCD redemption in August 2025 and navigates potential rating upgrades.
Conclusion
NMDC Steel’s 19% share price rally post its Q1 FY26 earnings reflects a pivotal moment for the company. With a net profit of ₹25.56 crore, 66% revenue growth, and a strong EBITDA of ₹408 crore, the company has demonstrated its potential to thrive in India’s competitive steel market. The unprecedented 41-fold surge in trading volumes and strong institutional backing further amplify its appeal. As NMDC Steel continues to scale its operations and capitalize on favorable market conditions, it remains a stock to watch for investors seeking exposure to India’s steel and infrastructure growth story.
Disclaimer: Stock market investments are subject to risks. Consult a financial advisor before making investment decisions.
Comments
Post a Comment