Best Steel Stocks to Invest in India: Are Their Current Valuations Attractive?

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Best Steel Stocks to Invest in India: Are Their Current Valuations Attractive?

Steel Industry In India

Steel is the most commonly used alloy around us, from our cars to our refrigerators, to washing machines, and even to roads. We can find the presence of Steel. Steel is used extensively in engineering and construction work. As a result, one can say that the production and consumption of Steel are directly linked to the socioeconomic development of India. The consumption of Steel is highly dependent on how the country’s GDP is performing and, more specifically, on how the investments are turning out in infrastructures such as railways, ports, roads, airports, and even housing. 

India ranks 3rd in its consumption of Steel globally, and it is likely that in coming years, it will surpass the US to become the 2nd largest consumer of Steel. The importance of Steel in India’s growth can be seen in the reports prepared by the National Council of Applied Economic Research (NCAER). Apart from being used in almost everything related to construction. 

The steel industry also presents a massive employment opportunity to the local people, especially in tier III cities. Steel has an employment multiplier effect of 6.8x. At the same time, the output multiplier effect goes to 1.4x. Over the years, India has become the world’s second-largest crude steel producer by producing more than 100 MT of it yearly. Steel in the present day scenario contributes to 2% of the total India’s GDP and employs more than 6 lakh people directly to the production of Steel and 20 Lakh people indirectly. 

The current per capita consumption of Steel is 77 Kg, which is considered to be low than the global average, which is 240 Kg. This is due to the fact that India has a low income per capita and limited urbanization. On the other hand, this also showcases the vast potential which exists in India and is bound to grow by 8% to 9% annually, given how much infrastructure is needed to be built. In addition to this, India is the largest producer of Sponge iron in the world. 

Top Steel Stocks in India

Given below, we have defined the top three leading companies in the field of Steel production in India. These three companies are leading the race for market share and also in the field of research and development to make better products at affordable costs.  

JSW Steel Ltd. 

This steel company is the flagship company of JSW Group, and over time it has installed a steel-making capacity of 28 million tonnes per annum in India and the USA. Every single product you expect from the Steel producing company is produced by this company. The company deals in both Hot Rolled and Cold Rolled Steel, Galvanized Steel, pre-painted Steel, TMT rebar wire Rods, along with special steel bar rounds and blooms. The JSW’s steel plant, which is located in Vijayanagar in Karnataka, is the single largest Steel producing facility in India with a capacity of 28.5 MTPA. 

  • Market Cap:- 163,089 Crores
  • Dividend Yield:- 2.57
  • Sector PE:- 5.16
  • Shareholdings:- 45.02% Promoter, 34.13% Public, 10.61% FII, 9.58% DII, 0.66% Others.
  • Revenue March 2022:- 146371 Crores
  • Net Profit 2022:- 20021 Crores

Tata Steel Ltd.

Tata steel is known to be the world’s largest steel company which has the highest global crude steel production capacity of 34 million tonnes each year. Furthermore, the company has manufacturing units across 26 countries around the world. Also, the commercial presence is in over 50 countries. Apart from this, Tata steel is also the second largest steel producer in Europe which has a steel production capacity of 12.1 million tonnes per annum. 

The company offers a wide range of steel products that comes with high value-added downstream products like Hot Rolled and Cold Rolled coated steel rebar wires, rod tubes, and wires. Moreover, the company also involves in discovering and mining iron ore, coal, ferroalloys, and other minerals as well. During the financial year 2021-2022, the company was able to conduct 20 trials across the plant in order to establish a new operating paradigm. Tata Steel Ltd developed 29 products, out of which three products were developed for the first time in India.  

  • Market Cap:- 127,510 Crores
  • Dividend Yield:- 4.89
  • Sector PE:- 5.16
  • Shareholdings:- 33.92% Promoter, 25.01% Public, 21.95% FII, and 19.12% DII.
  • Revenue March 2022:- 243959 Crores
  • Net Profit 2022:- 41100 Crores

Hindalco Industries Ltd.

Hindalco Ltd is the flagship company under the management of the Aditya Birla Group. It has a 16.7 billion USD metal powerhouse which is the largest aluminum rolling and recycling company in the world, along with the major player in copper manufacturing as well. The company’s aluminum manufacturing plants are located all over the globe and have a number of operations, such as bauxite mining, alumina refining, and aluminum smelting.

On November 2020, the Birla Group made an agreement with American Industrial Partners for the successful sale of Lewisport. The sale took place on November 20, 2020, when Birla Group received Rs 1335 Crores in cash proceeds. On the other hand, the Group has recorded Rs 123 Crores which will be used for the net working capital adjustments. 

  • Market Cap:-92,438 Crores
  • Dividend Yield:- 0.97
  • Sector PE:- 12.11
  • Shareholdings:- 34.64% Promoter, 24.76% FII, 21.53% DII, 18.76% Public, and 0.31% Others. 
  • Revenue March 2022:- 195,059 Crores
  • Net Profit 2022:- 14,195 Crores

(All the above data is as of 27th October 2022)

Disclaimer: The securities quoted are exemplary and not recommendatory. Past performance is not indicative of future returns

Best Steel Stocks to Invest in India

Given below are the best steel stocks which you should know about before you invest your money in steel stocks. 

Company Name Market CapitalPE
JSW Steel Ltd.163,512 Crores5.16
Tata Steel Ltd.127,510 Crores5.16
Hindalco Industries Ltd.92,438 Crores12.11
Jindal Steel & Power Ltd.47,607 Crores5.98
Steel Authority of India Ltd.34,056 Crores5.16 
NMDC Ltd.31,166 Crores7.93
APL Apollo Tubes Ltd.26,975 Crores28.36
KIOCL Ltd.10,924 Crores7.93
Lloyds Metals and Energy Ltd.8,583 Crores5.98
Shyam Metalics & Energy Ltd.7,427 Crores5.16

(Data as of 27th October 2022.)

Disclaimer: The securities quoted are exemplary and not recommendatory. Past performance is not indicative of future returns

Future Of Steel Stocks In India 

In recent years we have seen the steel industry and other associated mining sectors attain significant investment and developments. In the financial year 2022, the demand for Steel is expected to see a growth of 17% to 110 million tonnes, and the leading cause of this rise is the rising construction activities all across the Indian map. In May 2022, Tata Steel came up with a CAPEX of Rs 12,000 Crores. It is noted that by the end of 2025, the Indian steel industry could become a $5 trillion economy. This sector is quite vibrant, and it is growing at a rapid pace of 5% to 6% each year. 

The government is also providing a lot of support for the expansion of the Steel industry in India. The policies which are formed have lots of advantages to establishing a Steel company or a factory in the country. Likewise, in coming years, we can see top industry players like Tata Steel, JSW Steel, and many more will be demonstrating discipline in their capital spending along with the foresight in investing in having an expansion in the right field. 

This is not an investment advisory. The blog is for information purposes only. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, goal, time frame, risk and reward balance, and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs. The performance and returns of any investment portfolio can neither be predicted nor guaranteed. 

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