For JSW Steel Ltd, India’s largest steel producer, things have been looking up recently. The company reported exemplary growth for a second quarter in a row, although from a low base in 2024-25 due to poor performing subsidiaries and low steel prices.
Also, as the legal overhang lifted over JSW Steel’s six-year-old acquisition of Bhushan Power and Steel Ltd after a special bench of the Supreme Court reversed an earlier ruling, utilization picked up at the now-profitable BPSL.
Supported by a ramp-up in production at JSW Steel’s Vijayanagar plant and resumption of manufacturing at its Dolvi plant, the company’s sales volume in the September quarter (second quarter of 2025-26) increased 10% from the preceding three months. Year-on-year, sales volume grew 20% to 7.3 million tonnes.
Sales in the second quarter grew 14% year-on-year to ₹44,560 crore, ahead of the industry. Ebitda growth was faster at 31%, which would have been even higher at 39% had it not been for foreign exchange losses due to the rupee’s depreciation.
Profit after tax jumped 270% year-on-year in the second quarter. But adjusted for the surrender of an iron-ore block that had pulled down JSW Steel’s profit in the year-ago second quarter, the company’s latest quarterly profit was 139% higher year-on-year.
Its profit was propped up by continued debt reductions, group structure consolidation, higher operating leverage, and consequently falling interest expenses (as a percentage of Ebitda). Higher other income, at ₹1,623 crore, also contributed.
A better product-mix, enhanced efficiencies on higher capacity-utilization, and lower raw-material costs resulted in Ebitda margin expanding from 13.7% in Q2FY25 to 15.8% in Q2FY26. Ebitda per tonne increased 9% year-on-year.
Mixed outlook
JSW Steel’s management expects a recovery in steel prices in November and December on the back of robust domestic demand. Steady capital expenditure spending by the government and housing demand are expected to keep domestic demand resilient.
Domestic steel prices have been supported by the 12% safeguard duty imposed by India for 200 days starting April. Anticipated production cuts in China are also expected to help, even if the management’s expectation of a three-year extension on the safeguard duty does not materialize.
But the resulting higher realizations—average selling price per unit of steel—in the third quarter are expected to negate only some of the impact of the mixed trends seen in raw-material costs. Iron-ore costs are expected to moderate, while coking coal costs would likely rise.
The writing’s already on the wall—raw-material costs have expanded sequentially from 49% to 51.6% of JSW Steel’s revenue, resulting in Ebitda margin shrinking from 17.6% in the first quarter (April-June) to 15.8% in the September quarter.
Making matters worse, potential retrospective application of state-levied taxes on mineral rights can erode JSW Steel’s margins further.
Still, the company’s margins were supported to an extent by higher operating leverage, thanks to capacity-utilization improving from 87% to 92% quarter-on-quarter.
Valuation woes
Following ₹6,535 crore of capital expenditure in the first six months of FY26, JSW Steel’s capex plans amounting to ₹62,000 crore between FY25 and FY28 have been affirmed. While this promises healthy growth prospects, it could weigh on investor sentiment if net debt escalates beyond the management’s target ceiling of three times Ebitda.
Furthermore, exports constitute only 10% of JSW Steel’s volumes. This has allowed the company to report overall expansion in profitability despite erosion of Ebitda per tonne in its international operations.
Compared to peer Tata Steel Ltd, which derives about 40% of its consolidated revenue from Europe, JSW Steel’s operations are more focused on India. The company derives only 2–3% of its total sales from Europe. This has protected it from the higher operational and decarbonization costs in Europe that have plagued Tata Steel recently.
That said, JSW Steel commands a premium valuation of 7.5 times its enterprise value/Ebitda for September 2027, based on Centrum Broking’s estimate, which prices in recent outperformance and domestic tailwinds.
This leaves limited room for further outperformance in the stock. Following its earnings announcement on Friday, the JSW Steel stock underperformed the broader metals index on Monday, declining almost 1%.
