NEW DELHI, April 6: The current rally has been a bonanza for Sail shareholders after a lacklustre performance, which saw the scrip dip to an all-time low of Rs 6.9 in February this year. The scrip has more than doubled in just 28 trading sessions on the Mumbai Stock Exchange and breached the Rs 14 level on Monday. The scrip has, thus, touched the Rs 14-level after a gap of six months. On the National Stock Exchange (NSE), the scrip hit the circuit breaker at Rs 12.70 with buy orders pending for 21.39 lakh shares.The turnaround in the Sail's fortune on the bourses has been attributed to three factors. With the new government being sympathetic towards the woes of the steel industry, the market expects sops for the industry in Budget 1998-99, which will be presented soon.
These incentives are expected in the form of some relief in sales tax as well as imposition of a higher import duty to check dumping of steel products.
The domestic industry has been crying hoarse over dumping, which has been a majorcontributing factor for the poor offtake of domestic steel products.
Infrastructure is also likely to get a major thrust under the new dispensation at the Centre. This, in turn, will give a boost to the demand for steel. Third, Steel Authority's strategy to cut cost and continue with its modernisation programme is likely to bear fruit in the next couple of years.
Sail has so far invested about Rs 12,000 crore to modernise its production facilities and achieve technical competence. Further, the company plans a modernisation programme on a regular basis with a capital investment of Rs 2000 crore per year.
The entire steel industry was under pressure as steel consumption registered a decline of 1 per cent in 1997-98 compared to about 5 per cent growth in 1996-97.
Sail registered a seven per cent growth in sale of total steel in 1997-98. It also saw a whopping 120 per cent growth in exports. However, profit for the steel major is expected to be lower for 1997-98 on account of higher input prices andsluggish domestic market conditions. Reeling under low demand, the company had recorded a steep fall in profit during the first half at Rs 48.53 crore, against Rs 361.45 crore during April-September, 1996-97. Although SAIL made much headway in attaining its cost reduction target of Rs 800 core, input cost hike of Rs 700 crore dampened the show, leaving it with a net gain of only Rs 100 crore.
With a turnaround in the sector expected in the second half of the current fiscal, steel scrips have emerged as hot favourites. Tata Steel scrip also gained on Monday. On NSE, Tisco moved up by 6.84 per cent to close at Rs 167.25. On BSE, Tisco closed at Rs 167 with a volume of 51 lakh shares.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
