Investors looking for promising opportunities in India can’t afford to overlook the thriving metal sector. In this article, we’ll reveal a carefully curated list of ten steel stocks that present compelling investment prospects.
The Context
The development of the modern world over many centuries has been significantly influenced by steel. Because of its high tensile strength and low cost, steel is used in buildings, infrastructure, tools, ships, trains, cars, machines, electrical appliances, and weapons.
The iron and steel industry in India is among the most important industries in the country. India surpassed Japan as the second top steel producer in January 2019. Like various other sectors, India dominates the international list of top steel producers in the third position after China & European Union.
India also boasts the seventh position on the world’s top 10 list of largest Steel exporters. The Indian steel sector contributes approximately 1.5% to the country’s GDP and is one of the core sectors shaping the backbone of our economy. The magnitude of this sector can be assessed by the fact that it employs about 25 lakh persons directly and indirectly.
India is also the third-largest manufacturing hub of steel pipe in the world. With a predicted growth rate (CAGR) of roughly 6 percent per year, this industry is indeed a rewarding one for long-term investors.
💡Terminology Alert – MTPA in the writeup stands for Million Tons Per Annum.
The top ten Indian steel stocks listed on the Indian Stock Exchange are as follows:
1. Tata Steel Ltd
Tata Steel Ltd. was established in India as Asia’s first integrated private steel company in 1907 Owned by the Tata Group.
The company’s crude steel capacity across Indian operations is nearly 19 MTPA. Tata Steel is the second-largest steel producer in Europe with a crude steel production capacity of over 12 MTPA.
It is the biggest steel manufacturer in India.
In 2018, Tata Steel increased the scope of its business by acquiring Bhushan Steel Limited. Through one of its companies, Tata Steel Group also bought Usha Martin Limited’s steel division. Tata Steel has manufacturing units at Jamshedpur, Jharkhand, and Kalinganagar, Odisha with production capacities of 10 million and 3 MTPA, respectively.
In the financial year 2018-19, the company initiated a 5 MTPA expansion project at Kalinganagar to enhance its cumulative capacity to 8 MTPA.
Fun fact– TATA Steel is the world’s second-most geographically-diversified steel producer, with operations in 26 countries and a commercial presence in over 50 countries.
2. JSW Steel Ltd
JSW Steel Ltd. is a flagship company of the JSW Group and the second-largest Indian steel company. The Company has a steel-making capacity of 18 MTPA. Ranked seventh out of the top 34 producers of world-class steel by World Steel Dynamics, it has a huge presence both inside and outside of India.
Starting with a single plant in 1982, JSW Steel is India’s leading manufacturer of value-added and high-grade steel products. The company has facilities in Maharashtra, Tamil Nadu, and Karnataka.
JSW Steel Coated Products Limited is India’s leading manufacturer and exporter of coated steel with a capacity of 1.8 MTPA. A 100% subsidiary of its parent company JSW Steel Ltd.
Fun fact– Jindal South West was the former name of this business. Later, the business changed its name to JSW to build its brand.
3. Steel Authority of India Ltd
Steel Authority of India Ltd. holds the number 3 spot on the list of the top 10 Indian steel stocks.
Steel Authority of India Ltd. (SAIL) is a Government steel-making company in India and one of the seven Maharatna’s of the country’s Central Public Sector Enterprises. SAIL, mostly in India’s eastern and central regions, produces iron and steel in five integrated plants and three specific steel factories that are close to local raw material sources.
One of the best steel firms in India, SAIL produces and distributes a wide variety of steel products.
Fun fact– SAIL was ranked 647th on the 2008 Forbes Global 2000 Companies list.
4. Jindal Steel & Power Ltd
Jindal Steel & Power Ltd. (JSPL), a part of the USD 22 billion diversified O. P. Jindal Group, is a leading Indian Steel manufacturer and Power producer. JSPL’s business operations span across the states of Chhattisgarh, Odisha, and Jharkhand, where it utilizes some of India’s most advanced steel manufacturing and power generation capacities on a global scale.
JSPL has created cutting-edge capacities to produce up to 9.95 MTPA Iron catering to its 11.6 MTPA Liquid Steelmaking capacities across three locations in India and abroad. The company has a well-spread-out installed finished steel capacity of 6.55 MTPA. This is prudently spread over Bar Mills, Plate Mills, Rail and Universal Beam Mill (RUBM), Medium and light Structural Mill (MLSM), and Wire Rod Mill.
The captive iron ore mines owned by JSPL in Tensa, Odisha, have a 3.11 MTPA production capacity. The company owns and operates combined power generation capacities of 5034 MW including the 3400 MW O.P. Jindal Super Thermal Power complex at Tamnar, Chhattisgarh.
Fun fact– Five of JSPL’s companies, including Jindal Steel Bolivia, Jindal Steel and Power Mauritius, Jindal Africa Investments, and Skyhigh Overseas, are based outside of India.
5. APL Apollo Tubes Ltd
APL Apollo Tubes Ltd. holds the number 5 spot on the list of the top 10 Indian steel stocks. APL Apollo Tubes Ltd. (APL Apollo) is one of India’s leading branded steel products manufacturers.
Headquartered in Delhi NCR, the company runs 10 manufacturing facilities churning out over 1,500 varieties of MS Black Pipes, Galvanised Tubes, Pre-Galvanised Tubes, Structural ERW Steel Tubes, and Hollow Sections to serve industry applications like urban infrastructures, housing, irrigation, solar plants, greenhouses, and engineering.
The company has well-diversified operations with a product portfolio comprising 4 primary products with different specifications as per the customer need in each primary product category. The 4 product categories are Apollo Structural, Apollo Z, Apollo Tricoat & Apollo Galv. These products find their use in buildings, houses, warehouses, factories, skyscrapers, and industrial & agricultural activities.
The company currently holds a 50% market share in the domestic steel construction pipe sector, making it the dominant player there. Its market share has grown exponentially from 27% in FY16 to 50% in FY21.
The company, with its subsidiaries, owns and operates 10 manufacturing facilities across the country. Its facilities are located in the states of Uttar Pradesh, Tamil Nadu, Chattisgarh Telangana & Karnataka.
The company boasts a manufacturing capacity of 2.6 MTPA which is geographically diversified with the South being at 42% followed by the North at 30%, the West at 15%, and the East at 13%. Presently, it operates at capacity utilization rates of about 62%.
Fun fact– APL Apollo’s multi-product offerings are awfully large. It includes over 1,100 varieties of MS Black pipes, Galvanized Tubes, Pre-Galvanized Tubes, Structural ERW steel tubes, and Hollow Sections.
6. Jindal Stainless Ltd
Jindal Stainless Ltd. holds the number 6 spot on the list of top 10 Indian steel stocks.
Jindal Stainless Ltd. is one of the biggest manufacturers of Stainless Steel flat products, in Austenitic, Ferritic, Martensitic, and Duplex grades in India used in a variety of industries like automobile, railways, construction, consumer goods, etc.
JSL is the largest manufacturer of stainless steel in the 200, 300, 400, and duplex stainless steel series. Ferro Alloys, Steel Slabs, Hot Rolled Coils, Cold Rolled Coils, Steel Plates, etc. are among the available products. Jindal Steel is currently increasing the melting capacity at Jajpur from 1.1 MTPA to 2.1 MTPA.
It is also expanding downstream capacities which include a 1.5x increase in HRAP capacity (Hot Rolled Annealed and Pickled) to 1.25 MTPA, and a 1.7x increase in HRAP capacity to 0.75 MTPA among others.
According to reports, the company will spend 2600 crores in total by FY23, with internal accruals providing the majority of the funding. JSL has tied up with the integrated container logistics company, Maersk, to ease and optimize the flow of containerized exports and imports between JSL, Jajpur, and Vizag Container Terminal (VCTPL).
Maersk will facilitate to and fro rail movement of containers between Vizag and Jindal Stainless Logistics Park (JSLP), a newly commissioned Inland Container Depot (ICD) located at Jajpur & Odisha.
Fun fact– In December 2020, Jindal Stainless Ltd. (#JSL) and Jindal Stainless (Hisar) Ltd. (#JSHL) announced they would merge. The combined company will rank among the top ten in the globe and be the largest Stainless Steel (SS) conglomerate in India.
Post the merger, JSL will be the single listed entity on the stock exchanges and the promoter holding will be around 57%, while the remaining 43% will be held by the public.
Although the merger was supposed to be finished by FY21, subsequent developments indicate that it may take until FY23.
7. Jindal Stainless (Hisar) Ltd
Jindal Stainless (Hisar) Ltd. holds the number 7 spot on the list of the top 10 Indian steel stocks. Jindal Stainless (Hisar) Ltd. (JSHL) has a fully integrated stainless steel plant with a capacity of 0.8 MTPA.
It is also the world’s largest producer of stainless steel strips for razor blades and India’s largest producer of coin blanks, serving the needs of India and international mints. Starting with melting, casting, hot rolling, cold rolling, and other value adds, the JSHL factory employs a backward and forward integration method.
JSHL’s specialty product division caters to the high-end precision and specialty stainless steel requirements of reputed Indian and International customers. The product range includes Slabs and blooms, Hot Rolled Coils, Strips, Plates, Coin Blanks, Precision Strips, and Cold Rolled Coils.
Fun fact– Please refer to #JSL number 7.
8. Jindal Saw Ltd
Jindal Saw Ltd. holds the number 8 spot on the list of top 10 Indian steel stocks. Jindal Saw Ltd., the flagship company of the PR Jindal group, is a leading global manufacturer and supplier of Iron and steel pipes and pellets.
The major products of the company are longitudinal submerged arc welded (LSAW) pipes, helical SAW (HSAW) pipes, ductile iron (DI) pipes, seamless pipes, and pellets. These products have applications in oil and gas exploration, transportation, power generation, supply of water for drinking, drainage, irrigation purposes, and other industrial applications.
Jindal’s sales split comprises ~65% domestic sales & 35% exports. The clientele of the organization is diverse and includes companies like BPCL, GAIL, L&T, NCC, ONGC, RIL, Abu Dhabi Gas Industries, Chevron, and Gazprom, among others.
The top 10 customers contributed around 33% of the total topline during FY21.
Fun Fact-The Company has entered into a JV Agreement with Hunting Energy Services Pte Ltd., Singapore, under which a Joint Venture Company will be incorporated in India with 51% shareholding to be held with the object to set up a world-class, state-of-the-art precision machine shop to thread premium connections in India for Oil Country Tubular Goods (OCTG) including accessories for markets across the globe.
9. KIOCL Ltd
KIOCL Ltd. is a flagship company under the Ministry of Steel, GoI, with Miniratna status and holds the ninth spot on this list of the top 10 Indian steel stocks. It is an export-focused facility with knowledge of mining for iron ore, filtration technology, and producing premium pellets.
The company has 3 business segments namely a Pellet Plant unit, Mineral Exploration works, and a Blast Furnace Unit. KIOCL procures iron ore (a major raw material for its pellet plant located in Karnataka) mainly from Chhattisgarh as there is a restriction on the export/inter-state sale of pellets manufactured from iron ore procured in Karnataka.
This results in an elevated freight cost and keeps KIOCL’s operating profitability weak. Besides, in the absence of a beneficiation plant, the company is dependent on costlier iron ore finds with high ‘iron (Fe)’ content.
The company provides services to both domestic and international customers. Glencore, ArcelorMittal, Star Global, Caravel, Itochu, CIEC, Jindal, Aditya Birla Group, Tata Steel, SAIL, and Vizag Steel are just a few of the company’s well-known clientele.
Fun fact- At the moment, KOICL is working to lessen its reliance on exports to China. In FY21, steel mills in the Middle East, Bahrain, Brazil, and Malaysia accounted for 56% of all exports, compared to 43% in FY20.
10. Gallantt Ispat Ltd
Last but not least, Gallantt Ispat Ltd. holds the number 10 spot on the list of top 10 Indian steel stocks. Gallantt Ispat Ltd. is engaged in the diversified business of Iron & Steel, Agro, Power, and Real Estate.
Gallantt Ispat’s primary steel products come from rolling mills that manufacture sponge iron and steel. The company is presently running two primary steel plants with a captive power plant in the states of Uttar Pradesh and Gujarat.
Fun fact– The business was recognised in Forbes Asia Magazine’s July-August 2019 edition under “200 Best Under A Billion.”
Conclusion
As you must have found out, the majority of steel companies have debt. This is because the steel industry requires a lot of cash, in other words, the steel sector is highly capital-intensive. Huge plants must be built, and steel corporations must invest significantly in people and inventory. Since a lot of capital is needed, the promoters frequently cannot match that capital with their equity.
Steel businesses incur significant debt to fulfil their high capital requirements.
Pro Tip– An amazing indicator to examine for capital-intensive companies like Steel is the interest coverage ratio. The greater the metric, the better it is for investors.
That concludes our ranking of the top 10 Indian steel stocks in India.
Note- The rankings are based on expansion projections, industry authority, and innovation potential.
If you think we’ve forgotten to include a company that you believe belongs here, please comment!
Frequently Asked Questions (FAQs)
1. Why should I consider investing in Indian steel stocks?
Investing in Indian steel stocks presents compelling opportunities due to the significant role of the steel industry in shaping the modern world. With India ranking as one of the top steel producers globally and boasting a predicted growth rate of approximately 6 percent per year, the steel sector offers long-term investment prospects.
2. What factors contribute to India’s prominence in the global steel market?
India’s position as a major steel producer stems from its rich history in the iron and steel industry and its robust infrastructure for steel manufacturing. With the country’s contribution of approximately 1.5% to its GDP and employment of about 25 lakh individuals directly and indirectly, the steel sector forms a vital part of India’s economy.
3. How do Indian steel companies differentiate themselves in the market?
Indian steel companies like Tata Steel, JSW Steel, and Jindal Steel & Power stand out for their innovative approaches, technological advancements, and diverse product offerings. These companies have established themselves as leaders in value-added steel products, catering to various industries both domestically and internationally.
4. What are some key considerations for investors looking to invest in Indian steel stocks?
Investors should evaluate factors such as the debt levels of steel companies, their capital-intensive nature, and metrics like the interest coverage ratio. Additionally, understanding the companies’ expansion projections, industry authority, and innovation potential can help investors make informed investment decisions in the steel sector.
5. How can I identify promising Indian steel stocks for investment?
To identify promising Indian steel stocks, investors can consider factors such as the companies’ market position, production capacities, geographical diversification, and customer base. Researching companies listed on the Indian Stock Exchange, analyzing their financial performance, and seeking professional advice can aid investors in selecting steel stocks with growth potential.
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