PLI to drive 25mt of downstream capacity: IIFL Capital Services

21 Mar 2023 , 10:11 AM

This would drive an uptick in domestic production and lower the import dependence for various types of specialty steel with estimated 25mt of downstream capacity addition at ~Rs300 billion capex. All major listed players and a few unlisted steel players have signed MoUs, and would benefit from additional volumes, higher value-added product share and incentives on incremental production.

Government approves Rs63 billion PLI incentives for specialty steel products

Ministry of Steel has signed 57 MoUs with 27 companies under the Rs63 billion PLI scheme. The move is to boost the production of specialty steel in India and hence, decrease import dependence. The ministry estimates Rs300 billion investment for capacity creation of 25m tonnes of specialty steel over the next five years. In terms of the included key segments, incentives are spread across specialty rails, alloy steel products & steel wires, electrical steel, high strength/wear-resistant steel and coated/plated products. The ministry also pointed towards phase-2 of the scheme to further enhance domestic production for defence and automotive uses.

Major listed players have won approvals

Amidst the approved specialty steel segments, all the major listed and a few unlisted players have got approvals. The committed investment and hence share of PLI incentive is not known currently. But based on the segments where companies have got approvals, JSPL, JSW Steel, Tata and AM/NS have the largest share and would drive gains from higher value addition apart from incentives. Multiple smaller listed beneficiaries include Kalyani Steel, Lloyds Metals, Vardhman Special Steels, Kirloskar Ferrous, among others.