NMDC Steel’s Profit Rally Short-Lived as Q2 Loss Triggers 7% Stock Slide

Swings Back to Loss: NMDC Steel Ltd reported a net loss of ₹115 crore for Q2 FY2025-26, reversing from a ₹25.6 crore profit in the previous quarter ^[1] ^[2]. It had posted its first-ever quarterly profitin Q1 FY26, but Q2 fell back into the red.
Flat Revenue, Crushed Margins: Revenue for the July–September quarter came in at ₹3,390 crore, up a mere 0.7% year-on-year ^[3]. However, operating earnings plummeted – EBITDA dropped ~50% to ₹207 crore, and the EBITDA margin shrank to 6.1% from about 12% earlier ^[4]. Higher costs and softer steel prices eroded profitability.
Stock Tumbles ~7%: Investors reacted sharply. NMDC Steel’s stock fell as much as 6.9% intraday after results and closed down 6.36% at ₹44.64 on BSE ^[5] on Oct 29, significantly underperforming the Nifty 50 (which rose ~0.5% that day ^[6]). The decline pared the stock’s earlier gains – shares are now up only ~3.6% year-to-date and down ~1.2% over the past 12 months ^[7].
Compare to Last Year: Despite the sequential setback, Q2’s loss is far smaller than last year’s – NMDC Steel had lost about ₹547–595 crore in the same quarter a year ago while still ramping up operations ^[8]. Revenue has more than doubled since then, reflecting the Nagarnar steel plant’s ramp-up. The company produced 2 million tonnes of hot metal in FY2024-25, double the output of the prior year ^[9].
Outlook – Cautious Optimism: Management remains optimistic that the steel venture will be EBITDA and PBT positive for full FY26, with ambitions of robust margins as capacity utilization rises ^[10]. “We expect margins to hover around 40% in FY26,” NMDC & NMDC Steel CMD Amitava Mukherjee has claimed ^[11]. But analysts caution that domestic steel prices could soften amid higher imports, posing a headwind ^[12]. The government’s plan to privatize NMDC Steel is on hold for now due to roadblocks ^[13], removing an immediate overhang on the stock.

Q2 Earnings: From Profit to Loss in One Quarter

Just a quarter after celebrating its maiden profit, NMDC Steel Ltd swung back to loss in the second quarter of FY26. The state-run steel maker — recently spun off from iron ore mining giant NMDC — posted a net loss of ₹115 crore for Q2 (July–Sept 2025) ^[14]. This is a stark turnaround from Q1 FY26 (Apr–Jun), when NMDC Steel had earned a modest ₹25.6 crore net profit ^[15], its first profitable quarter since inception. According to the company’s exchange filing on Wednesday, the bottom-line was dragged down by a sharp drop in margins even as sales held steady.

NMDC Steel’s revenue from operations for the quarter was ₹3,390 crore, which is virtually flat – only 0.7% higher year-on-year ^[16]. Sequentially, revenue was also roughly unchanged (Q1 FY26 revenue was ₹3,365 crore). This tepid top-line growth marked a slowdown from Q1, when revenue had jumped ~66% YoY to ₹3,365 crore thanks to a post-demerger ramp-up ^[17]. In Q2, steel demand and pricing momentum cooled off, and NMDC Steel’s operating profit took a hit.

The company reported EBITDA of ₹207 crore in Q2, down by 50.4% from prior levels ^[18]. For context, EBITDA was ₹408 crore in Q1 FY26 ^[19], so roughly half of that in Q2. The EBITDA margin collapsed to 6.1% in Q2 – about half the level of the previous quarter (12.1% margin) and the year-ago period ^[20]. Clearly, input costs and lower steel prices ate into profitability. NDTV Profit notes that operating earnings fell steeply despite the stable revenue, indicating severe margin compression ^[21]. By comparison, in Q1 the company enjoyed high realizations and improving economies of scale, which had lifted the margin to ~12% ^[22].

Bottom-line, NMDC Steel swung to a net loss of ₹115 crore in Q2 FY26 ^[23]. This marks a setback after the surprise profit of Q1. However, it’s worth noting that Q2’s loss is dramatically smaller than the losses the company incurred a year earlier. In the quarter ended September 2024, when the Nagarnar steel plant was still in early ramp-up, NMDC Steel had posted a loss of about ₹547–595 crore (with revenue only around ₹1,535 crore) ^[24]. The latest results thus indicate a much narrower loss year-on-year, reflecting the company’s growth in output and improved cost structure even if profitability hasn’t been sustained. As a newly commissioned 3 MTPA integrated steel plant, NMDC Steel is still on the steep learning curve of optimizing operations.

From Q1 High to Q2 Lows: What Changed?

The abrupt reversal from Q1’s profit to Q2’s loss has raised questions about what went wrong in the span of three months. Q1 FY26 (Apr–Jun 2025) was a milestone quarter: NMDC Steel turned profitable for the first time, with ₹26 crore net profit versus a ₹547 crore loss in the year-ago quarter ^[25]. Revenue had leaped to ₹3,365 crore (up 66% YoY) in Q1 ^[26], as the Nagarnar plant in Chhattisgarh moved toward full capacity. According to Moneycontrol, the Q1 performance was “aided by higher steel prices, capacity ramp-up, and improved operating leverage,” which together boosted profitability ^[27] ^[28]. Simply put, robust steel market conditions and better economies of scale allowed NMDC Steel to finally cover its fixed costs and break into the black in Q1.

By Q2, however, those tailwinds subsided. The monsoon season in India often brings weaker construction steel demand and softer prices, which appears to have impacted realizations. While NMDC Steel’s sales volume was likely higher year-on-year (the plant’s output is steadily rising), average steel prices in Q2 FY26 were lower than earlier in the year, compressing revenue growth to almost zero. At the same time, input costs – including coking coal and other consumables – remained elevated, and there may have been maintenance or inventory factors that hit quarterly earnings. The result: operating leverage turned negative in Q2, with expenses outpacing the slight revenue gain, hence the drastic drop in EBITDA and profit.

Notably, EBITDA turned out ₹210 crore lower than in Q1, roughly matching the ₹141 crore swing from +₹26 crore net profit to -₹115 crore net loss. This suggests the entire profit swing was due to operational deterioration, not one-off extraordinary items. The EBITDA margin falling to 6.1% indicates NMDC Steel barely made any cash profit on its steel sales this quarter ^[29]. For a steelmaker, such thin margins can occur if steel prices drop suddenly or if cost inefficiencies creep in.

Industry-wide, other Indian steel companies also felt margin pressure in the September quarter. Many producers saw profits shrink due to price corrections and higher raw material costs (for example, imported coking coal prices were up earlier in the year). So NMDC Steel’s experience is in line with a broader sector trend, though its swing was more extreme given its small base and ramp-up stage.

Market Reaction: 7% Slide as Investors Reassess

The stock market penalized NMDC Steel for the disappointing Q2 figures. On October 29, shortly after the results were announced, NMDC Steel’s share price plunged nearly 7% intraday ^[30]. It touched a low around ₹44.4 and finally closed at ₹44.64, down 6.36% on the day ^[31]. This was a sharp move considering the broader market (Nifty 50) actually rose about 0.5% that day ^[32]. Clearly, the earnings miss and return to losses caught investors off guard, triggering a selloff.

For NMDC Steel’s stock, which only listed in early 2023 after the demerger from NMDC, the Q2 drop was one of the steepest single-day declines in recent months. It wiped out a chunk of the gains the stock had accumulated following the Q1 profit news. Back in mid-August, after the Q1 results, NMDC Steel shares had skyrocketed 17% in a single sessionto around ₹41 ^[33] ^[34] – the best day in 18 months for the stock. That rally was fueled by euphoria over the turnaround story. In fact, as of August 13, the stock was up about 20% year-to-date (having jumped from ~₹35 to ₹42 in 2025).

However, after this Q2-induced pullback, NMDC Steel’s year-to-date gain stands at only ~3.6% ^[35]. Over the last one year, the stock is roughly 1.2% lower ^[36], essentially flat and underperforming the broader market. The volatility reflects the market’s struggle to price the company’s earnings trajectory amid unpredictable quarterly results.

It’s worth noting that trading volumes spiked on result day, indicating heavy churn of shares. Some investors may have taken profits or cut losses given the uncertain outlook. Still, the stock remains above its 52-week low (₹32.13) and below its peak (~₹50) ^[37], suggesting a middle ground as the market waits for more clarity on sustainable earnings.

One relief for investors: the government’s divestment plan for NMDC Steel has been delayed, which removes a near-term risk of supply overhang. The Indian government owns the majority of NMDC Steel and had earlier intended to sell a stake to strategic/private players as part of its privatization program. However, reports indicate that the disinvestment won’t proceed in FY26 due to multiple roadblocks ^[38]. This means no immediate dilution or ownership change is on the horizon. Had an aggressive stake sale been pursued at current valuations, it could have pressured the share price. The pause gives management more time to prove the company’s value through performance rather than forcing it via stake sale.

Outlook: Ramp-Up Continues, but Can Profits Rebound?

Going forward, NMDC Steel faces a dual challenge: scaling up production to full capacity and achieving consistent profitability in the face of market fluctuations. The Nagarnar steel plant, with 3 million tonnes per annum capacity, is now fully operational ^[39]. In FY25, the first full year of operations, it produced ~2 million tonnes of hot metal (crude iron) ^[40] – ramping up from under 1 million tonnes the prior year. This ramp-up will continue to drive revenue growth. In fact, even in H1 FY26, NMDC Steel’s cumulative revenues and output are substantially higher than in H1 FY25. So the growth story remains intact on the volume front.

The key question is profitability. NMDC Steel’s management is optimistic that the company will deliver improved financials in the coming quarters. Amitava Mukherjee, who is the Chairman and Managing Director of both NMDC Ltd (the parent) and NMDC Steel, recently stated confidence that NMDC Steel will be EBITDA-positive and PBT-positive for the full FY26 ^[41] despite the Q2 hiccup. He has even cited an ambitious target: “Expect margin to hover in the range of 42% in FY26,” Mukherjee said in an interview ^[42]. Achieving anything close to a 40% operating margin in steel would be extraordinary – likely feasible only at high capacity utilization and elevated steel prices. It implies management is banking on significant efficiency gains and perhaps a rebound in steel pricing or product mix improvement.

Analysts are more cautious. Market experts point to external headwinds that could constrain NMDC Steel’s recovery in the near term. Global steel prices have been volatile amid concerns about China’s demand and surging cheap imports into India. Citi Research, for example, recently took a bearish stance on NMDC Ltd (the mining parent) citing expectations that domestic steel prices will correct as import pressures build ^[43]. If steel prices do soften further, NMDC Steel’s realizations would be under pressure, making it harder to regain margins. The company does not have the benefit of upstream raw material integration (it buys iron ore from NMDC at arm’s length), so it is exposed to commodity price swings on both revenue and cost sides.

On the other hand, some analysts remain positive on NMDC Steel’s long-term prospects. The massive ramp-up and modernization mean that once teething issues are resolved, costs per unit could drop. There is also scope for product mix enhancement – for instance, moving to higher value grades of steel or specialty products which yield better margins. Macquarie analysts reportedly see margin expansion ahead for NMDC Steel as operating leverage kicks in with higher volumes ^[44]. The company’s Q1 showed what is possible under favorable conditions: a 12% EBITDA margin and net profit in just the first full quarter of operations ^[45]. If the steel cycle turns up or if NMDC Steel can further improve efficiency (its plant uses modern technology and is relatively new), profitability could scale up quickly.

Another factor is debt and interest – NMDC Steel was carved out debt-free, which is a big advantage. It doesn’t have hefty finance costs draining its earnings, unlike some private steel firms that carry large debts. This means any improvement in operating profit should flow through more fully to the bottom line. In Q2, for instance, finance costs were minimal; the loss was purely an operating issue ^[46]. As volumes grow, fixed costs (staff, overhead, depreciation) get spread out, boosting operating leverage. The Q1 to Q2 swing illustrates that NMDC Steel might be at a tipping point – small changes in price or cost have an outsized impact on profit due to the high fixed-cost base of a steel plant.

What to watch: The upcoming quarters (Q3 and Q4 FY26) will be crucial. The second half of the fiscal year usually sees stronger steel demand in India (post-monsoon pickup in construction and infrastructure). If NMDC Steel can capitalize on that with steady or rising steel prices, it could return to profit, vindicating management’s optimism. Additionally, any updates on the government’s divestment plan or strategic investor entry will be important for the stock. For now, the government has pressed pause on selling its majority stake ^[47], meaning NMDC Steel will continue as a public sector enterprise for the near future. This could be a double-edged sword: on one hand, it means stability in ownership; on the other, the market often assigns lower valuations to PSU companies due to governance and efficiency concerns. Investors may remain wary until the company proves a track record of profits.

Lastly, parent support is a factor. NMDC (the parent) supplies iron ore to NMDC Steel and holds a stake. In the Q2 results of NMDC Ltd, the mining company noted stable iron ore sales and even implemented price cuts on ore to ensure offtake ^[48]. Any preferential pricing or support from NMDC could help NMDC Steel’s cost base. Moreover, NMDC has a cash-rich balance sheet (as evidenced by its recent dividend and profit rebound ^[49] ^[50]), so the parent’s health is reassuring in case NMDC Steel needs financial backing during its stabilization phase.

Bottom line: NMDC Steel’s Q2 FY26 stumble shows that the road to consistent profitability may not be smooth. The company has undeniably achieved tremendous growth in production and revenue over the past year, narrowing its losses dramatically ^[51]. Yet, this quarter highlights the fragility of margins in the steel business – especially for a new player finding its footing. The stock’s post-earnings slump reflects a sober reassessment by the market. Going forward, if NMDC Steel can combine its growing scale with cost discipline and catch a favorable turn in steel pricing, it still has a chance to deliver on the promise seen in Q1. For now, stakeholders will be watching Q3 results and management’s execution closely. As one expert put it, “ramp-up is on track, but sustaining profits will require favorable winds” – NMDC Steel needs to prove that Q1’s profit wasn’t a one-off and that it can navigate the headwinds that Q2 revealed.

Sources: NDTV Profit ^[52] ^[53] ^[54] ^[55]; Moneycontrol ^[56] ^[57] ^[58] ^[59]; CNBC/Analyst Commentary ^[60] ^[61]; HDFC Sky/Exchange Filing ^[62].

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