Steel Stock That Is Quietly Building A Renewable Energy Business While Focusing On Cash Flows

Synopsis: A steel manufacturer with a growing renewable energy arm is choosing profitability over volume, backing a capital-light solar project while its value-added product mix keeps margins steady despite raw material swings.

A steel manufacturer that has spent nearly two decades building its core pipes and tubes business is now steering its strategy in a new direction. Rather than chasing volume growth at any cost, the company is prioritizing profitable, cash-generative expansion while simultaneously laying the groundwork for a renewable energy business that could become a meaningful earnings contributor in the coming years.

With a market capitalization of Rs. 1,239 crore, the shares of Hariom Pipes Industries Limited were trading at Rs. 400 per share, with a 52-week range of Rs. 572.20 to Rs. 268, and they are trading at a P/E of approximately 16x.

Shift Towards Profitable Growth

The company’s FY26 performance reflects a conscious pivot. Management has repeatedly emphasized that growth must be profitable and cash-generative rather than volume-led. Revenue from operations for FY26 came in at ₹1,667 crore, up 23% YoY, while EBITDA grew 19% YoY to ₹209 crore. 

Sales volume crossed 2.89 lakh MT, registering an 18% YoY rise. Profit after tax jumped 23% YoY to ₹76 crore. Notably, volume growth in FY26 came in below the company’s earlier guidance of 30%, a gap management attributed to a deliberate choice to avoid low-margin, credit-heavy business, particularly in the scaffolding segment.

Building A Renewable Energy Business

Beyond steel, the company is executing a 60 MW AC solar power project through its wholly owned subsidiary, awarded under a Power Purchase Agreement with Maharashtra State Electricity Distribution Company Limited (MSEDCL). Of the 13 planned locations across Maharashtra, land acquisition covering roughly 123 acres has been completed for eight sites, with construction underway at six. 

Capacity tied up currently stands at 38 MW out of the total 60 MW, and commissioning of the first 10 MW is expected within the coming month. This gives the company a fixed, long-term revenue stream that is largely insulated from steel price cycles, priced at approximately ₹3.21 per unit apart from capital subsidy support.

Capital-Light Solar Expansion

What makes this initiative notable is how little capital the parent company is putting in. The total project cost is estimated at around ₹241–245 crore, of which roughly ₹195 crore will be funded through bank term loans. The company’s own equity contribution is expected to be limited to just ₹25–30 crore, with the balance reimbursed through central government capital subsidies. As of March 2026, cumulative equity infused into the solar subsidiary stood at ₹22.90 crore, alongside project advances of ₹38.85 crore. This structure allows the company to build a new energy vertical without significantly stretching its balance sheet.

Products Aligned With India’s Solar Growth

The company isn’t just investing in solar as a power producer; it is also supplying the ecosystem. It has developed high-strength, pre-galvanized tubular sections designed to replace traditional HR steel channels in solar mounting structures and has established OEM partnerships to supply these value-added products to the renewable energy sector. This dual exposure, as both a power generator and a component supplier, gives the company two potential avenues to benefit from India’s solar buildout.

Higher-Margin Product Mix

On the core steel business, the shift towards value-added products continues to define the margin story. Value-added products accounted for 96% of sales volume during the final quarter of FY26, completing a massive structural pivot from a 68% value-added mix in FY22.

Blended EBITDA per tonne stood at ₹7,258, while quarterly EBITDA per tonne for Q4FY26 touched ₹7,768, a level management believes is broadly sustainable rather than solely a function of rising steel prices. EBITDA margin for the year held at 12.56%, largely stable despite raw material volatility 

Strong Cash Flow And Lower Debt

Perhaps the most compelling part of the FY26 story is the balance sheet improvement. Operating cash flow surged to ₹192 crore from ₹79 crore in FY25, translating into a 92% EBITDA-to-cash conversion ratio. Net Debt to EBITDA improved to 1.65x on a standalone basis from 1.99x a year earlier, while the Debt-Equity ratio stood at a comfortable 0.54x. Return ratios also held up well, with ROCE at 20.7% and ROE at 11.7% on a standalone basis.

Multiple Long-Term Growth Drivers

Taken together, the company’s strategy rests on several pillars working in parallel: a disciplined approach to steel volumes that protects margins, a capital-light renewable energy project that adds a new fixed-income stream, a product portfolio increasingly tilted towards specialized, higher-margin applications, and a balance sheet that is deleveraging even as the business scales. Management has also flagged plans to raise backward integration levels from around 40% to nearly 80%, pending an environmental clearance, which could further support raw material security and cost control.

Investor takeaway 

The company is steadily transforming its business by prioritizing profitability, stronger cash flows, and operational efficiency over aggressive expansion. Its growing focus on renewable energy, value-added products, and balance sheet discipline provides additional avenues for long-term growth. Going forward, consistent execution of these strategic initiatives and sustained margin performance will be key factors for investors to monitor. 

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