The stock price of SAIL, one of the largest public sector companies in India has been in the news.
It’s not a popular stock by any measure but the sharp jump in the price has got investors interested.
Over the last three years, the company’s stock price has gone up in response to improving fundamentals and risings steel prices.
The stock fell from its then all-time high in 2024 but then stagged a stunning turnaround from December 2025 onwards.
Recently, the stock has been driven upward by improved investor sentiment.
Then, on 13 May, the stock jumped 15%, the biggest jump in 6 years as reported in the media. This was largely attributed to technical factors in the F&O segment.
SAIL Share Price – 3 Years
Source: Equitymaster
So, can investors consider the stock now?
In this editorial we will discuss pros and cons of SAIL.
Pros
#1 Improvement in Financials
SAIL has never had a reputation on Dalal Street for great fundamentals. But things have changed over the last few years.
After post covid boom, steel prices fell and the stock languished. Even though revenue growth was flat, the company remained profitable.
In fact, other than the falling global price of steel, which is not in the company’s control, there wasn’t much to criticise about the company’s performance.
SAIL kept operating costs in check, modernised its facilities, and expanded its operations. Most importantly, it paid off much of its debt that used to be a drain on profits.
The company’s debt to equity ratio fell from 0.8 in FY20 to just 0.2 in FY23. It has remained low since.
This is the main reason for the company reporting profits despite huge pressure on its margins due to falling steel prices.
The board is expected to meet today, 15 May, to approve the fourth quarter and full year results.
#2 Growth Prospects
Looking ahead, the company anticipates positive domestic steel demand driven by government infrastructure spending, with margin improvements expected in the upcoming quarters.
To meet this, SAIL is expanding its capacity to 35 million tons per year by 2031-32.
The capex company has planned for Rs 70 bn in capex for the coming years, including major expansions at the IISCO plant and brownfield projects at Bokaro and Durgapur.
SAIL is also working towards reducing its costs by diversifying its coal sources.
The company, along with John Cockerill India, will invest Rs 60 bn in a downstream plant for producing cold-rolled grain-oriented and non-oriented electrical steel. It’s expected to commence operations between by 2029. The two companies will also develop green steel technologies.
Green steel, defined as steel produced with CO2 emissions below 2.2 tonnes per tonne of finished steel, has gained importance as the industry seeks to reduce its substantial carbon footprint, which accounts for 7% of global emissions.
Cons
#1 Cyclicality
Steel is a very cyclical commodity. It’s price is set in the global market and the company has no control over it. It’s revenue growth is partly a function of domestic capex and partly a function of global prices.
In other words, the company’s gross margin is not something that the management can accurately forecast or even anticipate at times.
This explains, to an extent, why after the bumper years in FY21 and FY22, when the net profit was Rs 4.15 billion (bn) and Rs 122.4 bn respectively, the company’s bottom line has been subdued.
On this flip side, when steel prices rise, the company’s revenue, profits, and its stock price will soar.
#2 International Factors
Steel is a global commodity. Thus, the company’s prospects is tied up with events abroad that influence steel prices.
These could be tariffs, Chinese demand, US interest rates, economic growth, as well as geopolitics. The war in Iran and the disruption caused due to it, is just the latest example.
Investors considering an investment in ‘commodity stocks’ like SAIL must have a good understanding of the forces driving the price of the underlying commodity.
It’s essential to evaluate such investments carefully, considering the company’s fundamentals, potential for growth, and the global factors. Staying conscious of these dynamics will be crucial for making informed investment decisions.
About SAIL
Steel Authority of India Ltd (SAIL) is one of the largest public sector companies in India.
It’s engaged in the manufacturing and sale of a range of steel products in India. It’s a fully integrated steel producer, meaning it handles all steps in steel production.
The government of India owns 65% of the company. The company is a ‘Maharatna’ PSU which enjoys operational and financial autonomy.
SAIL’s products serve many industries, including construction, automotive, defence, among others. It owns iron ore mines, as well as plants for producing refractories and ferro-alloys.
The company has a large pan-India dealership network and exports to international markets.
Going forward, a combination of strategic investments and a shift toward sustainable production positions SAIL for long-term growth, even as it navigates near-term challenges.
Investors should evaluate the company’s fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.
Happy investing.
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