Fundamental Analysis of SAIL Share

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Steel Authority of India Limited (SAIL)is the largest steel-manufacturing company in India and holds the status of being one of the seven Maharatnas among the country’s Central Public Sector Enterprises. But before we dive deep into SAIL’s business, let’s get a clear understanding of the Indian steel industry.

India stands as the second-largest global contributor to crude steel production.In the fiscal year 2023, this industryproduced 125.32 million tonnes of crude steel and 121.29 million tonnes of finished steel. Looking forward to 2024, we can expect a growth of 4% to 7%, reaching a range of 123 to 127 million tonnes.

By the fiscal year 2030-31, we can anticipate an annual production of over 300 million tonnes.

Steel Authority of India Limited’s Evolution Over the Years

Remember, we talked about how SAIL is a big player in the steel industry and earned a special title called ‘Maharatna’ in the world of government-owned companies. This title is not easy to get. To be called a Maharatna, a company has to make a net profit of over ₹5,000 crore for three years in a row, have an average annual turnover of ₹25,000 crore for three years, or have an average net worth of ₹15,000 crore for three years.

Surprisingly, SAIL was established on January 24, 1973, and it wasn’t initially a fully operational company. But started the journey as a holding company, mainly responsible for overseeing government-owned steel plants in the country.

Currently, SAIL manufactures iron and steel at five integrated plants and three specialized steel plants. These facilities are primarily situated in the eastern and central regions of India, strategically placed near local sources of raw materials. SAIL is known for producing and offering a diverse range of steel products.

Steel Authority of India: A Story of Success and Growth

1954: Hindustan Steel Limited (HSL) was established, consisting of four plants: Bhilai Steel Plant, Rourkela Steel Plant, Durgapur Steel Plant, and Alloy Steel Plant.
1957: The Iron and Steel Ministry transferred the supervision of Bhilai and Durgapur Steel Plants to HSL.
1960: A Rail and structural mill was started at the Bhilai Steel Plant.
1962: By January 1962, HSL had a total steel production capacity of 2 million tonnes, and they had inaugurated their Wheel and axle plant at Durgapur.
1968: Construction of Bokaro Steel Limited began, and various facilities were commissioned at different HSL plants.
1972: To create a new industry management model, the Ministry of Steel and Mines shared a new plan with the parliament.
1972: The first blast furnace at Bokaro Steel Plant was inaugurated, Salem Steel Limited was formed in Tamil Nadu, and RDCIS was established in Ranchi.
1973: SAIL was officially incorporated on January 24, 1973, with an authorized capital of Rs 2000 crore, and started its operations with five integrated plants in Rourkela, Bhilai, Durgapur, Bokaro, and Burnpur. The Bokaro steel plant helped increase the overall crude steel production capacity to 4 million tonnes by 1973.
1978: Gradually, they started restructuring and transforming into an operating company by acquiring the Indian Iron & Steel Company (IISCO) as a subsidiary.
1985: The integrated trial run of the Meghahataburu iron ore project was inaugurated.
1986: The first modernization phase was initiated at Durgapur, and SAIL took over Maharashtra Electrosmelt Limited (MEL), subsequently renamed Chandrapur Ferro Alloy Plant (CFP).
1989: Then, in 1989, they formed The Raw Material Division, and the subsidiary Visvesvaraya Iron & Steel Plant (VISL) merged into SAIL.
1992: SAIL got listed in the Bombay Stock Exchange.
1995: Rourkela Steel Plant’s first modernization was commissioned.
1997: SAIL became a Navratna company.
2001: SAIL entered into a joint venture with NTPC to form NSPCL for captive power generation.
2004: SAIL released its environment policy, and the Bhilai plant produced the first 80-meter-long rail.
2006: IISCO was merged with SAIL.
2007: A modernization and expansion plan was initiated to increase crude steel production to 21.40 million tonnes per annum.
2010: SAIL became a Maharatna company.
2013: Durga, India’s second largest blast furnace with a capacity of 4060 cubic meters, was set up at RSP. Special grade steel from Bhilai and Rourkela was used for building India’s first indigenous aircraft carrier, INS Vikrant.
2015: Steel plants at Rourkela and IISCO were modernized and dedicated to the Nation.
2017: The Rail Mill at BSP produced the world’s longest single-piece rail, measuring 130 meters.
2018: LHB wheels were developed and supplied by DSP, as well as the new ‘NEX’ brand called Parallel Flange Section.
2019: In 2019, SAIL introduced its new range of branded TMT bars called SAIL SeQR.

SAIL Units Across India

This table provides details about the various SAIL Units located throughout India.

SAIL Integrated Steel Plants:

Unit	State
Rourkela Steel Plant	Odisha
Bhilai Steel Plant	Chhattisgarh
Durgapur Steel Plant	West Bengal
Bokaro Steel Plant	Jharkhand
IISCO Steel Plant	West Bengal

Special Steel Plants

Unit	State
Alloy Steel Plant	West Bengal
Salem Steel Plant	Tamil Nadu
Visvesvaraya Iron and Steel Limited	Karnataka

Ferro Alloy Plant

Unit	State
Chandrapur Ferro Alloy Plant	Maharashtra

Business Overview of Steel Authority of India

Steel production comprises three main categories. “Flats” include plates, sheets, and coated sheets. “Long products” consist of rails, bars, and rods. “Semis” are semi-finished products requiring further processing.

The above chart indicates that the majority of the production comprises flat steel products, followed by long products, with semis accounting for a smaller portion.

In the fiscal year 2023, SAIL’s Integrated Steel Plants showcased diverse production profiles.

At Bhilai Steel Plant, the majority of their production (66%) consisted of long steel products.
Durgapur Steel Plant focused primarily on semis, which accounted for 52% of their production.
Rourkela Steel Plant specializes in flats, achieving full capacity in this category (100%).
Bokaro Steel Limited primarily produced flats, making up 99% of their production.
At IISCO Steel Plant, there was a significant emphasis on long products, representing 69% of their production, with semis accounting for 31%.

Returns Over Various Periods

These figures provide a clear picture of how performance has evolved over different timeframes.

Over the past year, there was a positive change in returns, showing a 25% increase. However, looking back two years, there was a decrease of 17% in returns. On a three-year horizon, there was a significant surge, with returns shooting up by 157%. Over a five-year span, there was a steady growth of 35% in returns.

Key Financial Metrics

Company Essentials	Value
Market Cap	₹ 38,289.97 Cr.
Face Value	₹ 10
Current Price	₹ 93.35
52 Week High	₹ 103.65
52 Week Low	₹ 73.20
Industry P/E	17.50
Stock P/E	24.31
P/B	0.71
Div. Yield	1.61%
Debt	₹ 30,773.39 Cr.
EPS (TTM)	₹ 3.09

Steel Authority of India’s Cash Flow (value in Cr.)

The table below presents the Steel Authority of India’s cash flow for the past four years, and there have been fluctuations in cash flows from different activities. While operating activities have shown both positive and negative trends, investing activities have consistently been negative, indicating investments made. Financing activities have shown a mix of positive and negative trends, signifying sources of cash inflow and outflow.However, overall, their net cash flow decreased a bit in 2023. This indicates the need for careful financial management in the future.

Fundamental Analysis of Persistent Systems

Particulars (Consolidated)	Mar 2020 (Cr.)	Mar 2021 (Cr.)	Mar 2022 (Cr.)	Mar 2023 (Cr.)
Cash from Operating Activity	-617	23,430	30,986	-5,290
Cash from Investing Activity	-4,260	-3,412	--3,975	-3,370
Cash from Financing Activity	5,003	-19,689	-27,397	8,586
Net Cash Flow	124	327	--386	-74

Annual Financial Overview

Sales Growth: Looking at the sales growth figures of Steel Authority of India over the past four years, we can see a clear pattern of growth. In March 2020, the company’s sales increased to 61,664 crores. The following year, in March 2021, it went up to 69,114 crores. Then, in March 2022, there was a substantial jump to 1,03,477 crores. Impressively, in March 2023, the company maintained this strong performance, reaching a sales growth of 1,04,448 crores. This shows that Steel Authority of India has been growing steadily, indicating that their business strategies and market presence are in good shape

Operating Profit Growth: Looking at the Operating Profit Growth of Steel Authority of India over the past four years, we can see some interesting trends. In March 2020, it was 10,264 Crore, which increased to 12,776 Crore in March 2021. The following year, in March 2022, there was a substantial rise, reaching 21,363 Crore, indicating a significant growth in the company’s operational profits. However, in March 2023, there was a noticeable drop, down to 8,038 Crore. This could be due to various factors like market conditions, industry changes, or specific company strategies.

Net Profit Growth: Over the past four years, Steel Authority of India has seen significant growth in net profits. In March 2020, they earned 2,121 crore, which increased to 4,148 crore in March 2021. The most remarkable surge was in March 2022, with a net profit of 12,243 crore. Although there was a slight dip in March 2023 to 2,177 crore, the company’s overall financial health remains strong. This indicates that Steel Authority of India continues to be a key player in the industry with a positive outlook for the future.

Key Financial Metrics

ROE Ratio:

ROE Ratio, or Return on Equity, is like a report card for a company. It tells us how well the company uses the money its shareholders invested. A higher ROE means the company is good at turning shareholders’ money into profits.

ROCE Ratio:

ROCE Ratio, which stands for Return on Capital Employed, is a financial measure that tells us how well a company uses its money to make more money. If a company has a high ROCE, it means it’s doing a good job of using its money to make profits. But if the ROCE is low, it could mean the company isn’t using its money very efficiently.

Steel Authority of India’s Shareholding Pattern

The ownership structure of Steel Authority of India reveals that the majority of the company is held by its promoters, accounting for 65% of the shares. The public holds a significant portion at 17.56%, indicating a level of widespread ownership among individual investors. Domestic Institutional Investors (DIIs) have a shareholding of 13.63%, while Foreign Institutional Investors (FIIs) hold a smaller stake at 3.82%. This distribution of ownership signifies a balanced mix of control between promoters and public investors, contributing to the stability and diversity of the company’s shareholder base.

Steel Authority of India’s Outlook for Expansion

Alright, let’s talk about the company’s growth and investment plans.

They are aiming to produce 19 million tonnes this year, and they’ve set aside INR 6,800 crores for capital expenditure (capex).
They are also working on expanding and improving different plants.
Additionally, they’re looking to use more of their raw materials, which means they want to use more local coal in their operations. This is all part of their strategy to keep growing and improving.

Happy investing and thank you for reading!

Disclaimer:
This website content is only for educational purposes, not investment advice. Before making any investment, it’s important to do your own research and be fully informed. Investing in the stock market includes risks, and you should carefully read the Risk Disclosure documents before proceeding. Please remember that past performance doesn’t guarantee future results, and due to market fluctuations, your investment goals may not always be achieved.

Fundamental Analysis of Steel Authority of India Share (SAIL)