Vardhman Special Steels Limited has been downgraded from Hold to Sell rating as of January 23, 2026, with its Mojo Score standing at 47.0 and a market cap grade of 3 within the Iron & Steel Products sector. The downgrade reflects concerns over flat recent financial trends, with the company's financial score declining from 7 to 5 over the past three months. While the company reported a healthy Profit After Tax (PAT) of ₹68.15 crore over the last six months, representing robust growth of 44.14%, the quarter-on-quarter performance has plateaued. The stock's recent performance shows significant underperformance with a one-week return of -8.90% and one-month return of -14.03%, lagging the Sensex's respective declines of -2.43% and -4.66%. As per MarketsMojo reports, the downgrade comes amid concerns over the company's ability to maintain growth momentum in the current market environment.
The primary catalyst for the downgrade lies in declining capital efficiency metrics despite revenue growth. Returns on capital employed (ROCE) hit a low of 11.09% in the half-year period, notably below the company's historical highs and industry averages. Profit Before Tax excluding other income (PBT less OI) for the quarter stood at ₹31.62 crore, marking a 32.1% increase compared to the previous four-quarter average. However, this growth has not translated into improved capital efficiency, raising concerns about operational challenges. The company's return on equity (ROE) stands at 8.9%, reflecting subdued performance despite the recent growth trajectory. MarketsMojo analysis indicates that the disconnect between revenue growth and capital efficiency remains a key concern for investors evaluating the stock's prospects.
Vardhman Special Steels Limited filed its quarterly monitoring agency report for Q3 FY26 ended December 31, 2025, prepared by CRISIL Ratings Limited. The report details utilization of proceeds from the company's preferential issue completed on July 4, 2025, which raised ₹3,849.09 crore. During Q3 FY26, the company utilized ₹191.48 crore specifically for existing plant capex requirements. The proceeds were originally allocated for capital expenditure for a greenfield steel manufacturing plant at Ludhiana (₹1,349.09 crore), capital expenditure at the existing plant (₹1,000.00 crore), and repayment of working capital borrowings (₹1,500.00 crore). The working capital borrowing repayment was completed in earlier quarters. According to ScanX Trade reports, CRISIL Ratings confirmed that all fund utilization during the quarter was in accordance with disclosures made to shareholders, with no deviations reported.
Despite operational challenges, Vardhman Special Steels maintains a strong liquidity position with cash and cash equivalents at the highest recorded balance of ₹251.39 crore in the half-year period. The company has deployed unutilized proceeds of ₹2,157.61 crore across various investment instruments, including an ICICI Bank Fixed Deposit of ₹499.09 crore at 6.00% return rate and multiple mutual fund investments totaling over ₹1,658 crore. Total earnings from these investments as of December 31, 2025, amounted to ₹38.72 crore, bringing the total value of invested funds to ₹2,196.33 crore. The company's low Debt to EBITDA ratio of 0.73 times further supports its ability to manage financial obligations effectively. ScanX Trade reports indicate that the company's conservative investment approach has helped preserve capital while generating steady returns on surplus funds.
Despite the downgrade, Vardhman Special Steels maintains a fair valuation profile with a Price to Book Value ratio of 2, modestly discounted relative to peers' historical averages. The stock delivered 11.27% returns over the past year, outperforming the Sensex's 6.56% gain, while longer-term performance remains exceptional with five-year returns of 338.74% and ten-year returns exceeding 1,420%. However, year-to-date performance shows the stock down 12.07% compared to the Sensex's 4.32% fall. CRISIL Ratings confirmed that all fund utilization during the quarter was in accordance with disclosures made to shareholders, with no deviations reported. Multiple reports from MarketsMojo and ScanX Trade suggest investors should monitor upcoming quarterly results closely for signs of renewed growth before re-entering the stock, particularly focusing on whether the company can reverse the declining ROCE trend while maintaining its strong liquidity position.
