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In the present work, the formation of ultrafine grained ferrite has been studied by applying suitable thermomechanical treatment. A high amount of deformation (∼80%) at varying strain rates (0·01–10 s−1) was applied in the temperature range of Ar3 to Ac3 followed by water quenching. This treatment resulted in a two-phase ferrite–martensite microstructure as compared to fully martensite structure after quenching without deformation. The formation of ultrafine ferrite (⩽3 μm) during deformation was favourable at a lower temperature and a slower strain rate. A maximum ∼50% ferrite formed during deformation at 780°C with a strain rate of 0·01 s−1. Experimental rolling with a high strain (∼1·3) with finish rolling temperature just above Ar3 (∼750°C) resulted in fine ferrite–pearlite of ⩽3 μm, and the properties showed a high value of strength as compared to steels rolled in a conventional way. Dual phase microstructure (ferrite and martensite) was produced after partial austenisation to 780°C followed by quenching in water, and this resulted in an excellent combination of properties (high ultimate tensile strength, low yield strength/ultimate tensile strength, high elongation and high n values).