Shankara Building Products Limited delivered a robust performance in the first quarter of the financial year 2025-26 (Q1FY26), marked by strong volume growth, margin expansion, and substantial profit improvement. The management, during the earnings call held on 29th July 2025, provided insights into the company's performance metrics, strategic focus areas, and upcoming developments including the anticipated demerger of its marketplace and manufacturing segments.

Strong Performance Metrics:

The company achieved a record steel volume of 2.38 lakh tons, representing a 35% year-on-year (YoY) growth, which set a historic high for any Q1 in Shankara's operating history. The non-steel segment, though affected by sluggish demand, posted a modest 5% YoY growth, supported primarily by plumbing products.

EBITDA for the quarter stood at ₹59 crores, up 43% YoY, translating to an EBITDA margin of 3.58%, a sequential and annual improvement over 3.20% in Q4FY25 and Q1FY25. Net profit for Q1FY26 came in at ₹32 crores, more than doubling (102% growth) over the same period last year.

The company’s strict working capital discipline, maintaining an average of 29 days compared to 30 days in FY25, allowed it to manage finance costs effectively. Retail sales remained strong, with same-store sales growth (SSSG) reaching 22%, up from 14% in the previous financial year.

Key Growth Drivers:

1. Steel Business Expansion:
   The steel segment drove the bulk of the growth. Sub-segments like flat products saw 65% YoY growth, followed by roofing (35%), and pipes and tubes (32%). This focus on flat products—highlighted as a strategic priority last year—has begun to yield positive results.

2. Retail & Fulfillment Network:
   Shankara inaugurated two new fulfillment centres in Q1FY26, located at Jabalpur (Madhya Pradesh) and Gannavaram (Andhra Pradesh). These additions enhance the company's service capabilities in central and southern India, respectively.

3. Omnichannel Strategy:
   With 126 fulfillment centres (including 93 operational stores), and a strong presence across 10 states and 1 Union Territory, Shankara's hybrid retail model continues to deepen its presence in Tier-2 and Tier-3 cities. The platform’s unique multi-brand and multi-vertical proposition enables last-mile delivery and high customer reach.

Demerger Update:

Management confirmed that all requisite formalities with NCLT (National Company Law Tribunal) have been completed, and the final hearing is scheduled for end-August 2025. Upon receiving NCLT’s approval, the company expects to complete the demerger by Q3FY26.

The marketplace business, branded as Buildpro, and the manufacturing arm, producing steel tubes, precision tubes, purlins, and other industrial steel products, will function as independent entities post-demerger. This strategic move is intended to unlock value, improve operational focus, and enable customized capital allocation for both businesses.

Segmental Margins & Financial Outlook:

• The enterprise segment achieved 2%–2.5% sustainable EBITDA margins, helped by stable inventories.

• The marketplace segment’s EBITDA margin was approximately 3.3%, with aspirations to reach 4% in the next two years.

• Inventory gains during Q1FY26 amounted to ₹5 crores, mostly realized during April 2025. Steel prices plateaued in May, declined in June and July, indicating neutral inventory effects in upcoming quarters.

• Interest costs were around ₹12 crores, with ₹9 crores attributable to the marketplace and ₹3 crores to manufacturing. Depreciation costs stood at ₹4 crores, equally split.

• The company’s total current debt is around ₹550 crores, of which ₹125 crores pertains to manufacturing, and the balance to marketplace operations.

• Working capital days remain under tight control at ~30 days, with non-steel segments requiring around 40 days, and steel around 17 days.

Retail & Store Expansion Plans:

Management reiterated that while recent years saw slower expansion of physical stores, Shankara now plans to add around four new stores in FY26, primarily focusing on western and central India. The current strategy emphasizes maximum utilization of existing stores, pushing for higher throughput per outlet. However, to sustain high SSSG rates, the company acknowledges the need to accelerate store additions in coming years.

Non-Steel Business Outlook:

The non-steel business, especially ceramic tiles under the 'Fotia' brand, continues to face headwinds amid a sluggish market. While customer feedback on Fotia remains positive, management expects meaningful growth only once the broader ceramic industry recovers. The recent UK-India Free Trade Agreement (FTA) could revive export-led demand in the ceramic segment and may indirectly benefit domestic players like Shankara.

Volume & Revenue Guidance for FY26:

Shankara is on track to achieve its annual target of 1 million tons in steel volumes for FY26. The Q1FY26 contribution of 2.38 lakh tons accounts for about 24% of the target. While Q2 could be impacted by the monsoon, the management remains confident about strong volume push in H2FY26.

Steel volume growth is projected at around 20% YoY for FY26, with non-steel expected to grow between 15%–20%. For the Buildpro marketplace business, a 20%–25% annual revenue growth is projected, driven by product mix enhancement, regional penetration, and incremental store additions.

Investor Sentiment & Q&A Highlights:

Several institutional investors, including NV Alpha Fund, InVed Research, Fusion Capital, Turtle Capital, and others, participated in the Q&A session. Key investor queries revolved around:

• Sustainability of high margins in enterprise segment

• Working capital cycles across steel and non-steel

• Store addition roadmap and SSSG sustainability

• Demerger timeline and implications

• Ceramic tiles business under Fotia

• Impact of steel price movement on inventory and margins

• Segment-wise EBITDA contribution and debt allocation

The management responded with clarity, reiterating strategic focus, conservative margin projections, and confidence in achieving FY26 operational and financial goals.

Conclusion:

Shankara Building Products has kicked off FY26 with strong operational metrics, robust volume growth, and significant profit improvement, demonstrating resilience in a challenging macro environment. The expected completion of the demerger in Q3FY26 is likely to usher in a new phase of strategic clarity and value unlocking.

With its unique blend of a steel-heavy business, expanding non-steel operations, and a pan-regional omnichannel model, Shankara continues to position itself as a market leader in South India, with sights set on wider national growth.

As India’s infrastructure and real estate sectors continue to stabilize post-monsoon and with potential policy support from the RBI, Shankara seems well-poised to sustain its upward trajectory through FY26 and beyond.

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