SAIL invites bidders for strategic disinvestment of alloy steel plant

Alloy steel plant at Durgapur to be disinvested as per Niti Aayog recommendation in 2016.

Feb 14, 2018 04:02 IST India Infoline News Service

SAIL has invited bidders for its alloy steel plant in Durgapur. This sale is part of a divestment decision regarding 3 units of SAIL - Salem Steel Plant, Alloy Steels Plant and Visvesvaraya Iron and Steel Plant. The alloy steel plant focuses on the production of long and flat steel products as well as ingots and stainless steel. The total capacity of the Alloy Steels Plant stands at 2.46 lakh MT per annum of liquid steel, with 1.84 lakh MT per annum of saleable steel capacity. The total production for 9MFY18 for Alloy Steels plant stood at 69,961 MT with annualized capacity utilization standing at ~47%.

The revenue for the Alloy Steels plant stood at Rs321.35cr for 9MFY18, while EBITDA stood at a loss of Rs4.87cr. PAT for 9MFY18 stood at a loss of Rs34.23cr. The first day of taking queries is 14 February 2018 and the last day is 14 March 2018. The intimation to shortlisted bidders would be done on 2 May 2018.

SAIL Ltd results for Q3FY18 clearly beat analyst estimates. The company reported strong growth on the revenue and operating fronts. Revenue grew by 21.4% yoy to Rs15,323.6cr (expectation Rs14,694cr). EBITDA stood at Rs1,571cr, up 71.8% qoq against estimates of Rs1,367cr. EBIDTA margin rose by 354bps yoy to 10.3%. Net Profit stood at Rs43cr in Q3FY18 against a net loss of Rs795cr in Q3FY17. Sales Volume for the quarter stood at 3.77mn tonnes, an increase of 15% yoy. Cost efficiencies resulted in the company reducing the cost per tonne of steel by 10% yoy over 9MFY18.

SAIL is a leading steel manufacturer with market share of ~20% in India. Capacity stood at 18.5MTPA at the end of FY17. Crude steel production was 14.5mn tonnes (up 1.5% yoy) at the end of FY17. Flat and long products formed 50% and 40% of value sold respectively, with alloys and secondary products formed 5% of value each. Captive power generation stood at 820MW up 4.5% yoy at the end of FY17. The company has spent ~Rs 2,300cr on capex in H1FY18 and the total capex guidance for FY18 is ~Rs4,000cr. SAIL is also for setting up an Ultra Mega Steel Plant in Bastar with a capacity of 6mtpa through a joint venture.
  
We expect SAIL to report revenue CAGR of 13.8% over FY17-20E aided by (a) ~11% volume growth in steel production supported by infrastructure spending and (b) favourable demand supply scenario to lead to firm pricing for steel products. EBITDA margins are likely to expand to 11.3% in FY20E aided by higher utilization levels and cost cutting measures. The stock is currently trading at 7.2x FY20E EV/EBITDA.

Steel Authority of India Ltd is currently trading at Rs 96.3, up by Rs 0.95 or 1% from its previous closing of Rs 95.35 on the BSE. The scrip opened at Rs 96.55 and has touched a high and low of Rs 97.7 and Rs 95.85 respectively. The BSE group 'A' stock of face value Rs 10 has touched a 52 week high of Rs 101.4 on 08-Jan-2018 and a 52 week low of Rs 53 on 28-Sep-2017. Last one week high and low of the scrip stood at Rs 98.35 and Rs 77.4 respectively.

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