Steel stocks shine as Government inks pacts with specialty steel manufacturers for PLI scheme

JSW Steel is expected to gain market share from the rising domestic demand, Motilal Oswal Financial Services said

There was some rebound in metal stocks on March 17 after Thursday’s selloff. Investors rushed to buy steel stocks today with steel manufacturers signing contracts with the Government for PLI scheme.

The government is planning to introduce the second edition of the PLI scheme for specialty steel to boost production of value-added steel in the country, Union Minister of Steel Jyortiraditya Scindia said at the PLI Scheme for Specialty Steel MoU signing event, a news report said.

As many as 27 steel companies signed 57 memoranda of agreements with the Steel Ministry at the event to produce coated or plated steel products, high-strength or wear-resistant steel, specialty rails, alloy steel products, steel wires and electrical steel, the report said. These products have a broad range of applications in the white goods, automobile and defence sectors, industrial machinery, and so on.

This will bring in an additional investment of Rs 30,000 crore in the domestic steel sector, leading to a capacity addition of 25 million tonne per annum, it added.

The PLI scheme is seen as bolstering domestic manufacturing and will cut down imports by encouraging domestic companies to set up or expand existing manufacturing units.

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Shares of Tata Steel, JSW Steel, Jindal Steel & Power, Steel Authority of India, and Kalyani Steels were up 2-4 percent on the BSE.

However, analysts feel smaller players might benefit in terms of revenue growth and margin expansion. However, that the quantum of incentives may not be as significant for big players because the addressable market for specialty steel is small as compared to the normal steel.

Even Ravi Sodha, Senior Vice President, Elara Securities India, believes the development will not have a material impact as the quantum is too low to move the needle. However, he added that a marginal positive impact could be seen in the company’s financial performance.