Steamhouse India Limited (Neutral)

Highlights

Steamhouse India Limited (SHIL) incorporated in 2015, specializes in the generation and centralized distribution of industrial gases, including steam and nitrogen, through its pipeline network. SHIL is pioneer in community boiler system in India, through which gas to various industrial customers are provided, instead of each individual customer having their own infrastructure.

SHIL’s industrial gas business comprises three key offerings: (i) generation and distribution of steam through its community boiler system and pipeline network, (ii) purchase and distribution of steam produced by other entities through its network, and (iii) separation, compression and distribution of nitrogen, extracted from atmospheric air.

SHIL owns, operates and maintains a pipeline network spanning 60,151-metre connecting its facilities to customer premises, serving nearly 202 customers across diverse set of sectors, including pharmaceuticals, chemicals, agro-chemicals, textiles, tyres, dyes & pigments, polymers, paints and other industries.

Out of the total proceeds of Rs. 4,140 mn, Rs. 1,800 mn would go towards funding repayment or prepayment of all or a portion of certain outstanding borrowings, Rs. 760 mn would go towards funding capex in relation to capacity expansion, Rs. 382 mn would go towards capex in relation to the setting up of manufacturing facility, and Rs. 588 mn would go towards funding general corporate purposes. Additionally, Rs. 610 mn would go towards promoter selling shareholders of the company.

Key Highlights

• India’s total process steam requirement is expected to grow from 2,03,472 TPH in FY26 to 3,18,853 TPH in FY31, translating into a CAGR of 9.4 pct, with pharmaceuticals being the largest consumer of steam. Considering an average steam cost of Rs. 2–2.5 per kg, the addressable market potential for the Steam-as-a-Service model in India is estimated at Rs. 3,663 bn for FY26.

• SHIL operates seven community steam boilers in Gujarat, strategically located near ports and customer clusters. In addition, they distributes purchased steam and has entered into five-year steam purchase agreements, with operations expected to commence within the next 12 months. SHIL also operates a nitrogen generation and distribution facility, expanding into industrial gases.
• SHIL promotes eco-friendly solutions through centralized community boilers that improve fuel utilization and reduce emissions, supported by scientific coal handling, controlled ash management, hydrated lime treatment and optimized combustion to reduce SOx and particulate emissions. Its distributed pipeline-based nitrogen supply reduces carbon emissions and fire risks associated with cryogenic cylinders, while co-generating electricity to support boiler operations and reduce reliance on fossil-fuel-based power.
• SHIL is planning eight new community industrial gas facilities, among these planned facilities three of them are expected to use non-fossil fuel for generation of steam. These expansion of operations will enable it to service a broader customer base and reduce dependency on specific regions, additionally will facilitate better market penetration, risk distribution and enhanced business resilience.
• SHIL adopts bulk coal procurement as a key cost-effectiveness measure, primarily utilized for in-house consumption in its steam generation operations. The surplus coal, after meeting internal requirements, is sold in the open market, forming an additional revenue stream for the Company.
• SHIL’s key growth strategies includes (i) To expand capacity by setting up new facilities in and outside Gujarat, (ii) continue to diversify business offerings, (iii) continue to focus on operational efficiency and reduction of operating expenses, (iv) improve debt profile, and (v) reduce its carbon footprint.
• The company have grown by 29.80 pct CAGR over FY24-26 and EBITDA/profit has grown 10.48 pct CAGR/19.22 pct CAGR over same year. In FY26 the company reported sales of Rs. 4,915 rose 24.40 pct YoY. EBITDA of the company rose 20.45 pct YoY to Rs. 835 mn. In FY26 the company posted profit of Rs. 386 mn, which increased 24.00 pct YoY.

Key Risk

• SHIL’s operations are geographically limited, as it supplies steam and industrial gases primarily to customers located near its facilities, restricting the customer base of each facility.
• SHIL’s business and profitability are substantially dependent on the availability of coal, any restrictions on procurement can adversely affect the business operations and results.

• SHIL relies on securing usage rights to lay and maintain the pipelines connecting its facilities to customers, any expiry of such usage rights and failure to renew them, could adversely affect the business operations.

Financial Performance

Source: – RHP.

Peer Comparison based on FY26 Financials.

Source: – RHP.

Valuation

Steam House India Limited (SHIL) is pioneers in the community boiler system in India, which was first introduced in 2014. Rooted in innovation and driven by sustainability, Steamhouse has introduced the revolutionary concept of community boiler systems-a game-changer in how industries source steam. By replacing traditional captive boilers with centralized community systems, SHIL help industries in achieving lower emissions and improved fuel utilization while enhancing their overall efficiencies. At the upper end of the price band of Rs. 339, the issue is priced at an PE of 58x its FY26 post issue capital. The issue appears to be fully priced.

Disclaimer: The views shared in blogs are based on personal opinions and do not reflect the company’s views. Investment involves risk, and it is advisable to consult a financial advisor before making any investment through the app. The decision to invest is solely that of the investor, and the company or its communication cannot be held responsible for it.