Helping You Build Wealth With Honest Research
Since 1996. Try Now

MEMBER'S LOGIN

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Is steel heading FMCG way?
Fri, 8 Nov Pre-Open

The domestic steel industry is passing through a challenging time, saddled with increased cost of production due to the relentless fall in rupee amid a sluggish demand; the industry could witness more pressure as the worst doesn't seem to have ended. Rather, the road ahead for the industry looks tougher with thin hopes of steel demand revival coupled with unpredictable trend in rupee amid stressed balance sheets due to high debt and poor investment climate.

Apart from the slowing economic growth in the country and abroad that is weakening steel demand, high debt levels are keeping the balance sheets of most steel companies under stress prompting them to lower expansion and focus more on repayment of loans.

To beat the impact of the depreciating rupee on their margins, top domestic primary steel producers are contemplating to focus on increasing exports and lowering the inventory build-up period of coking coal. Further, focusing on higher penetration in the rural areas of the country is another area where steel companies are looking at to improve sales. The current per capita consumption of steel in rural areas of India stands at 13-14 kg, far lower from the 47-50 kg per capita consumption in urban regions. It is this gap producers could tap in the coming quarters to improve their top-lines.

According to Mint, JSW Steel is planning to open nearly 5,000 shops in the next five years to sell custom-made steel to tap demand in rural and semi-urban India, where rising incomes have boosted construction of homes and non-food spending. In-fact JSW is planning to create a unique experience. Apart from the traditional steel grey, customers can choose bright colours and vibrant patterns of steel. In addition, the shops will have consultants to help shoppers buy products in the right size and shape.

Given that the near-term outlook for the steel industry seems grim due to the factors mentioned above, and the urban demand not picking up in the past few years, there seem to be increased expectations from rural India. Especially given the good monsoons this year! Thus focusing on rural India could be the right strategy to increase profits for steel companies.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

View all commentaries | Archives

Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "Is steel heading FMCG way?". Click here!

  
ABOUT EQUITYMASTER

Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.

PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
TRENDING TOPICS
FREE NEWSLETTERS
EQUITYMASTER SUPPORTS
  • HelpYourNGO
  • You Tube
  • Linkedin
  • Twitter
  • Telegram
  • Google Play

Copyright © Equitymaster Agora Research Private Limited.

Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap

Phone +91-9136015013

Equitymaster Agora Research Private Limited (Research Analyst)
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Email: info@equitymaster.com. Website: www.equitymaster.com.
CIN:U74999MH2007PTC175407

Name of the Compliance & Grievance Officer: Ms Sonal Ramachandran
Telephone: +91-22-61434003 | Email: compliance@equitymaster.com

LEGAL DISCLAIMER:
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.