Companies

‘Anti-China sentiment is likely to give an opportunity to the downstream customers’

Shobha Roy Kolkata | Updated on November 16, 2020 Published on November 16, 2020

Coils of rolled steel at the Jindal Stainless Ltd factory in Hisar (file photo)   -  Bloomberg

Since there are “concerns” around growth in the economy in the wake of the Covid-19 pandemic, which has impacted demand, the growth in the stainless steel industry could also be affected, says Vijay Sharma, Director, Jindal Stainless

Stainless steel maker, Jindal Stainless Ltd is expecting 10-15 per cent drop in sales volumes this fiscal over last year on the back of subdued economic growth.

The company had registered sales volume of 915,900 tonnes in FY20. This would translate into a capacity utilisation of around 94 per cent given that the total steel production at the company’s plant in Jajpur is close to 973,995 tonne.

According to Vijay Sharma, Director, Jindal Stainless, empirical evidence suggest that consumption of stainless steel goes in tandem with the growth in GDP. Since there are “concerns” around growth in the economy in the wake of the Covid-19 pandemic, which has impacted demand, the growth in the stainless steel industry could also be affected.

“Q1 was washed out due to the lockdown in April. Though we started opening up slowly in May, however, things started picking up from July onwards and by September we reached 80-90 per cent capacity utilisation. So in Q2 we have performed better than last year. Now moving forward with a little word of caution, if Covid continues to remain under control we are hopeful of sustaining our market,” Sharma told BusinessLine.

Also read: Jindal Stainless posts consolidated profit of ₹80.64 cr for Q2

For the quarter ended September 30, 2020, Jindal Stainless registered 88 per cent growth in net profit at around ₹98 crore, as compared with ₹52 crore same period last year. Revenue during the period was however, marginally down (by less than one per cent) at ₹3,156 crore ( ₹3,170 crore).

On a sequential basis, however, revenues were up by 150 per cent as compared to ₹1,262 crore during the April-June 2020 quarter.

Talking about the company’s strategy to tide over the current situation, he said, internally it tried to remain agile and feel the need of the market and push products accordingly. On the external front, certain emerging and new sectors such as healthcare started contributing to the demand.

Demand to recover/Call for level playing field

Stainless steel industry has been showing good recovery and the anti-China sentiment is likely to give an opportunity to the downstream customers as well as to Jindal Stainless, he said.

The long term prospect for stainless steel in India is very strong given the low level of per capita consumption. The per capita consumption of stainless steel in India is only one-third of the global consumption and hence it provides a huge scope for growth.

“But there is an issue of level playing field for the country. The products made in the country, have to compete with those made outside the country. Unfortunately the higher cost of capital and logistics make our products uncompetitive by 10-12 per cent. So it is very important to create a level playing field,” he pointed out.

Betting big on decorative pipes and tube segment

Jindal Stainless is betting big on decorative stainless steel pipe & tube segment (P&T). India’s existing production capacity in the decorative pipes and tubes segment stands at over 6.5 lakh tonnes annually. In value terms, it is estimated to be close to ₹7,000 crore market and has been growing at around 10-12 per cent on a year-on-year basis.

The P&T market in the eastern region is estimated to be close to ₹1,000 crore.

Bouyed by the success of the Phase 1 of its co-branding programme – Jindal Saathi – the company has recently launched the second phase.

Also read: Jindal Stainless launches second phase of co-branding programme

The phase 1 of the programme was launched in 26 cities in the eastern region last year to address the burgeoning issue of counterfeiting in the stainless steel P&T market. In the second phase, the programme has been expanded to over 100 cities.

The Jindal Saathi campaign has helped curb the sale of counterfeit P&T by upto 10 per cent in the region, he said.

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Published on November 16, 2020
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