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Steel vs Software: Food for thought

Jul 29, 2000

If you were asked, which was the best performing sector this quarter (i.e. quarter ended June 30, 2000), what would your answer be? If your answer is Software (it most probably will be), then you are not quite right. In a study we took a sample of companies in each sector and analysed their quarter ended June 30, 2000 performance comparing it to the corresponding quarter in the previous year. The results were quite revealing. While software did emerge as the No. 1 sector in terms of turnover growth, but it was the steel and related sector, which came out trumps in net profit growth.

Software
30-Jun-99 30-Jun-00 % Growth
Gross Sales 8,339 13,409 60.8%
Operating profit margin (%) 36.5% 38.6%
Net Profit 2,327 4,061 74.5%
Net Profit margin (%) 27.9% 30.3%
* Software sample: Aptech, Infosys, Mastek, Satyam, NIIT, DSQ,
Visualsoft, BFL, Global Tele and Pentamedia.

Steel
30-Jun-99 30-Jun-00 % Growth
Gross Sales 26,280 32,893 25.2%
Operating profit margin (%) 13.7% 15.2%
Net Profit 308 1,174 281.2%
Net Profit margin (%) 1.2% 3.6%
* Steel sample: Tisco, Jindal Iron, Jindal Strips,
Hindustan Copper, Hindustan Zinc, Tata SSL, Kalyani Steel and Vesuvius.

Though realistically, there is no comparision between the two sectors, but the above does point to improved scenario for the steel industry. Rising steel demand and buoyancy in steel prices has led to a sharp turnaround for this beleagured sector. Its as if the steel sector has risen from the dead.

This performance seems to have gone unnoticed by the bourses till now. But as more results pour in, this sector might be in for a re-rating.

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