Vardhaman Special Steels–Quick Notes from QIP Placement Document

Starting a new series on quick notes from the QIP Placement Document shared by the companies. We find this document to be more detailed in comparison to the Annual Report. The most detailed document is the DRHP but that comes out only for new listings.

This is not a Buy/Sell Recommendation. We may only post on companies we track.

All QIP documents generally updated on this link – 

Vardhaman Special Steels Placement Document


· Dependent on one manufacturing facility located in Ludhiana, Punjab

· Derive a significant portion of our revenue from a few major customers.

· Volatility or fluctuations in prices of raw materials

· If purchases of new vehicles decline, it could significantly decrease the demand for our products

· plans to have a major shift towards electric vehicles by 2030, may adversely impact the demand for alloy steel in light of the lower consumption of alloy steel in electric vehicles

Plants and Warehouses

· Manufacturing facility located in Ludhiana, Punjab and Warehouse in Bilaspur, Haryana. Also leased six warehouses across other key locations in India, and engaged one bonded warehouse in Bangkok, Thailand. (Our warehouses are responsible for receiving and dispatch of goods to our customers)

· The lease rent expenses recognized for the Fiscal 2017 and Fiscal 2016, were Rs. 87.13 lakhs and Rs. 78.21 lakhs, respectively.


· Over 350 full-time staff members and over 550 permanent workmen.

· R&D team comprised of over 50 individuals as on December 31, 2017

Client Concentration

· For the nine months ended December 31, 2017, and Fiscal 2017, our top 10 customers contributed 46.71% and 46.33%, of our total revenues from operations, respectively.

· Top five customers accounted for 36.92% and 32.86% of our total revenues in Fiscal 2016 and Fiscal 2017

· in Fiscal 2017, we had over 200 customers

Principal Raw Materials

· The principal raw materials we use to manufacture our products include shredded scrap, directly reduced iron, pig iron, sponge iron, bundled scrap, forging flash, mil steel turning boring and various types of ferrous alloys

· The volume of our imported materials has reduced significantly over the past fiscal years.

Capacity and Utilization

· At the aforesaid facility, we have set up an advanced electric arc furnace, a rolling mill and a bright bar shop. As on December 31, 2017, we had an installed melting capacity of 1,80,000 MTPA, rolling capacity of 1,80,000 MTPA and bright bar capacity of 36,000 MTPA

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· Also invested in equipment with a relatively small heat size (about 30 MT) as it provides it with the flexibility to meet urgent client demands


· We specialize in the manufacture of steel bars in a variety of sizes, ranging from lower diameters such as 16 mm to higher diameters such 90 mm to 110 mm. Our current product portfolio comprises alloy steel bars and bright bars of various specifications, and finds applications in the automotive, engineering, bearings and allied industries. These products find end-use in crank-shafts for 2Ws, rear-axle shafts and gear shafts for 4Ws, drive-shafts for LCVs, MHCVs and other vehicles

· Based on the application needs of tier-1 suppliers to automotive OEMs, we customize the grades of our steel products. Currently, we are well-equipped to produce diverse steel grades, including basic carbon steel, high alloy steel, bearing steel, micro alloy steel and other special steels.

· A significant portion of our products are sold to tier-I suppliers(such as 2W, 4W, LCV, MHCV and other vehicle manufacturers.) that cater to the raw material requirements of major global and Indian automotive OEMs in India

· Sale of special and alloy steel products that find end-use in the 2Ws and 4Ws space constitutes the largest portion of our products sold, both in terms of value and volume

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Manufacturing Process

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Domestic vs Exports

· In the nine-months ended December 31, 2017, and in Fiscal 2017, we derived 94.20% and 94.74% of our revenue from operations from our sales in India

· We also supply special steel with forging applications to the international markets of Thailand, Taiwan, Turkey, Russia, Italy and Spain

· Revenues from exports decreased from Rs. 4,250.67 lakhs in Fiscal 2016 to Rs. 3,953.28 lakhs in Fiscal 2017, the volume of exports of rolled products was significantly higher in Fiscal 2017 as compared to Fiscal 2016

Pending Clearances

· We have submitted an application to the Punjab Pollution Control Board, and are awaiting its approval in respect of the recent increase in the production capacity of the melting shop and rolling mill at our manufacturing facility.

Debtors and Creditors

· For the nine-month period ended December 31, 2017, 2017, and Fiscal 2017, our trade receivables were Rs. 18,731.25 lakhs and Rs. 18,897.16 lakhs, respectively, which constituted 28.80% and 24.90% of our total income for the same periods

· Our credit terms vary according to market practices and typically, the credit period ranges between 7 days to 90 days.

Contingent Liabilities

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Industry Overview


· A sector-wise break-up for finished steel in India is as set out below:


· Automobile production in India expanded at a CAGR of 8.76 per cent during FY10–17


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