steel sector: ICRA revises outlook on steel sector from ‘stable’ to ‘positive’


New Delhi: Thursday’s rating agency revised its outlook for the domestic steel sector from “stable” to “positive.” This is because all major listed steel companies achieved sound financial performance in the April-June 2021 quarter. After the COVID-19 pandemic in 2020, ICRA is “negative” in the sector, expecting a record 20% decline in domestic steel demand during the fiscal year ending March 2021. Assigned a prospect.

However, it has since upgraded its sector outlook to “stable” against the backdrop of rising demand and prices.

In a statement, ICRA said Thursday that it would forecast the steel sector after all major listed steel companies reported record quarterly results in the first quarter of fiscal year 2022 (April-June). Corrected from “stable” to “positive”. , And the earnings outlook for the remaining months of 2022 remains sound. ”

Steelmakers began aggressively unleveraging in the second quarter of 2021 in light of strong earnings growth and reduced capital investment (capital investment) following pandemic-related uncertainties. This trend is reflected in the industry’s consolidated debt level, which fell from Rs 260 million at the end of July 2020 to Rs 200 million at the end of July 2021 and recorded a sharp decline of over 21%.

Today’s industry’s consolidated borrowing is at its lowest level since March 2012. A closer look at the industry’s consolidated borrowing per ton of installed capacity shows that in July 2021, it was US $ 180 per ton, almost halving from US $ 350 per ton. Dominant ton in November 2008.

According to the ICRA, this suggests that domestic steel companies are significantly less leveraged than in 2009, when the last steel supercycle ended, following the global financial crisis.

Jayantaroy, Senior Vice President and Group Head of ICRA, said: This year ”

He added that the growth in steel production in 2022 is likely to be as high as about 14%, traction from the increasing trend of net exports of finished steel.

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