According to newspaper reports, the Steel Authority of India Limited (SAIL) has posted a 12% rise in total steel sales volumes even as the growth in exports volumes topped 100%.
SAIL is the world's 10th largest and India's largest steel manufacturer. It operates 4 integrated steel plants and 2 speciality steel plants. The company has been on the brink of bankruptcy for some time now. It is attempting to raise resources by getting rid of its loss making units.
SAIL has recorded a total sales volume of 4.25 m tonnes with exports accounting for 420,000 tonnes. The company's exports comprise value-added goods like hot rolled coils and plates.
SAIL, like other domestic steel manufacturers, has successfully capitalised on the stronger demand and better realisations for steel in the global markets. Although, domestic markets, which account for a bulk of sales, have shown a pick up in demand, price realisations continue to languish. This is mainly due to the threat of undercutting by competitors that steel manufacturers have so far been resisting a price hike.
Things may be turning for the better now. Recently, steel manufacturers have effected a price hike, in the range of 3 – 5%, the first in more than a year's time. A sustained rise in demand growth and a firming up of prices will go a long way in improving the bottomlines of steel companies, especially SAIL. However, international dumping and undercutting of prices by competitors may prove spoilsport.
The stock is rated as a 'SELL' due the company's low employee productivity and the outdated technology. Moreover, with the steel demand yet to show a definite uptrend, analysts are skeptical of a turnaround in the near future.
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