ESL Steel – Multibagger in Russia Ukraine War
New Delhi (India), March 10: The Russian-Ukraine war wreaked havoc on the entire world, and India, in particular, has been hit by poor market conditions. The Sensex fell by 15% from its 52 weeks high, but the steel industry has been on a bull run. Cumulatively, Russia and Ukraine are the 5th and 12th largest steelmakers globally, respectively, accounting for around 10% of the global steel trade. About 45% of the steel production in Russia and approximately 75% in Ukraine is exported to other nations. Russian mills brace for sanctions, and Ukrainian steel production gets severely disrupted by the conflict, which gives an opportunity for Indian Steel manufacturers to gain market share globally as India is the net exporter of steel and is the second-largest country to manufacture steel after China.
Since the war has started, NIFTY metal has seen 60 points increase from the last month, and with 7.5% customs duty, cesses, and freight cost, there is any way a significant trade barrier that allows the domestic steelmakers to benchmark local rates against imports. With the landed cost of imports surging and demand being buoyant, it will be much easier now for Indian steel companies like state-run SAIL and private companies like JSW Steel, Tata Steel, ESL, and JSPL to hike the local prices.
Tata Steel, one of the largest steel manufacturers in India, has seen record-breaking growth in its stock prices. Stock prices have increased by 78.36% from last year. On the other hand, JSW Steel stock prices have witnessed 55.38% growth from previous year. These steel stocks have seen a staggering increase in the past year.
Among companies like Tata Steel, JSW Steel, and many other companies. ESL Steel Ltd, a fully integrated steel plant in Bokaro, Jharkhand, with a capacity of 1.5 MT, has generated total revenue of Rs. 4900 Cr and Rs. 2700 Cr profit in FY21. ESL is aiming to double its steel capacity in a few years. Vedanta Group acquired the company through NCLT. Vedanta, the holding company of ESL, is one of the world’s leading oil and gas and metals companies with significant operations in oil and gas, zinc, lead, silver, copper, iron ore, steel, and aluminum and power across India, South Africa, and Namibia. With proactive management and economies of scale, the company has also witnessed a sharp increase in its revenue and net profit amid COVID-19.
ESL shares are traded in the unlisted market between ₹85 – ₹90, which is precisely what investors should look for to make a good return if they have missed out on opportunities with listed steel companies. With the surge in steel prices, there is substantial demand for this stock in the private equity space. ESL is expected to give an excellent return to investors in the coming future.