Top Steel Stocks to in India in 2023

The foundation of industrialization lies in the utilization of metals, with steel holding a venerable position among them. As both a raw material and intermediary product, steel production and consumption serve as critical indicators of a country’s economic development. India’s steel sector, classified into major producers, main producers, and secondary producers, has emerged as a formidable force, propelling the nation to become the world’s second-largest producer of crude steel as of December 2022.

Overview of India’s Steel Sector

The growth in India’s steel sector can be attributed to the availability of domestic raw materials like iron ore and a cost-effective labor force. As a result, the steel industry has become a major contributor to India’s manufacturing output, playing a pivotal role in its economic growth.

Over the past 10-12 years, India’s steel sector has witnessed impressive expansion, with production surging by 75% since 2008. Concurrently, domestic steel demand has grown nearly 80%, showcasing the industry’s significant organic growth.

Looking ahead, the Indian steel industry envisions surpassing annual steel production of 300 million tonnes by 2030–2031. With a projected crude steel production of 255 million tonnes and finished steel production reaching 230 million tonnes at 85% capacity utilization, the industry is poised for substantial growth. Anticipated net exports of 24 million tonnes and increased consumption, reaching 206 million tonnes, will likely lead to a rise in per-person steel consumption to 160 kg.

As the Indian steel industry gears up for an exciting future, investors seeking to capitalize on its growth potential may find value in exploring the top steel stocks in India. With the nation’s rising steel consumption and expanding global presence, careful analysis of key players’ performance, market position, and growth prospects can help investors make informed decisions and participate in this thriving sector’s success.

In this article, we delve into the top steel stocks in India. Continue reading to discover the best picks!

Factors considered for the Selecting the Steel Stocks

Considering their scarcity and versatility, metals prove to be exceptional investment options. To become a prudent investor in metal stocks, one must grasp and comprehend a diverse array of distinct aspects.

We have curated the following list of top steel stocks in India based on the following factors:

1. Market Cap

We have chosen only those steel stocks whose market cap is greater than 5000 Crore INR

2. Price to Earning Ratio

The better a steel stock’s performance, the lower its price-to-earnings ratio tends to be.

3. Sales

We have selected the steel stocks with an Average Sales Growth (3 years) of more than 10%.

4.Profit

The following list consists of steel stocks whose Average Profit growth (3 years) > 10%.

Top Steel Stocks to in India in 2023

Maharashtra Seamless Ltd

Maharashtra Seamless Ltd. (MSL), established on May 10, 1988, is a well-structured publicly listed organization based in Hyderabad, India, committed to the production of premium-grade pesticides.  In 1991, the import-substitute project was set up near Mumbai, in Nagothane, Distt. Raigad, Maharashtra. Leveraging the world-renowned CPE technology from Mannesmann Demag Huttentechnik Gmbh (MDH), Germany, the plant commenced operations in February 1992. It is notable as only the third of its kind globally, with state-of-the-art machinery imported from the USA based on MDH design.

• Market Cap – ₹ 7623.38 Cr.
• CMP – ₹ 568
• High / Low – ₹ 587 / 279
• Stock P/E – 7.58
• ROE – 18.1 %

The company has made significant progress in managing its financial obligations, as it has successfully reduced its debt burden. As a result, it is now almost debt-free, which bodes well for its financial stability and future prospects. Moreover, the company’s performance seems promising, with expectations of a good quarter ahead. Over the past five years, the company has achieved an impressive profit growth of 32.1% Compound Annual Growth Rate (CAGR), indicating its ability to generate substantial returns for its shareholders. Additionally, the company’s debtor days have shown notable improvement, decreasing from 54.6 days to 41.0 days, indicating more efficient management of accounts receivable and better control over cash flow. These positive developments highlight the company’s efforts and competence in maintaining a strong financial position and fostering growth in the competitive business landscape.

Godawari Power & Ispat Ltd

Godawari Power & Ispat primarily operates in the mining of iron ore and the manufacturing of various products, including iron ore pellets, sponge iron, steel billets, wire rods, H.B. wire, and ferro alloys. Additionally, the company is involved in electricity generation.

• Market Cap – ₹ 8916.27 Cr.
• CMP – ₹ 632.25
• High / Low – ₹ 640 / 226
• Stock P/E – 12.85
• ROE – 22.3%

The company has shown commendable financial management as it successfully reduced its debt burden, leading to its current status of being almost debt-free. Moreover, over the past five years, the company has demonstrated remarkable growth in profitability, achieving an impressive Compound Annual Growth Rate (CAGR) of 30.6%. Such consistent growth is reflected in the company’s strong track record of return on equity (ROE), which stands at an impressive 35.5% over the last three years. These financial achievements indicate the company’s ability to generate significant returns for its shareholders and its capacity to navigate the market with prudence and efficiency. With its solid financial standing, the company is well-positioned to pursue further growth and capitalize on future opportunities.

Shyam Metalics & Energy Ltd

Shyam Metalics, a prominent integrated metal producing company headquartered in India, specializes in long steel products and ferro alloys. Renowned for its large production capacity of ferro alloys, the company is equipped to market both intermediate and final products throughout the steel value chain.

• Market Cap – ₹ 12247.68 Cr.
• CMP – ₹ 479.80
• High / Low – ₹ 495 / 253
• Stock P/E – 18.29
• ROE – 13%

Shyam Metallics is a prominent metal producer in India, known not only for its impressive position among the largest ferroalloy producers but also for its significant role in the sponge iron industry. The company’s product mix is well-diversified, contributing to its overall revenue. This mix includes Ferro Alloys, accounting for 31% of revenue, Iron Pellets contributing 9%, Sponge Iron at 25%, and various steel products making up 15% of revenue. To further enhance its market presence and offerings, Shyam Metallics is actively expanding its product portfolio, with upcoming launches such as Blast Furnace, Ductile Iron Pipes, and Aluminum Foil.

In terms of capacity, Shyam Metallics holds a considerable share of 6.6% in the domestic Ferro-alloys market. As of February 2021, the company boasts an annual installed capacity of 0.21 million tons, highlighting its significant manufacturing capabilities in this sector. With its strong position in the industry and plans for diversification, Shyam Metallics is poised to maintain its leading status in the metal and alloy production landscape in India.

Jindal Stainless Ltd

Jindal Stainless Ltd stands as a major manufacturer of Stainless Steel flat products in India, offering an extensive range of Austenitic, Ferritic, Martensitic, and Duplex grades. These stainless steel products find applications in diverse industries such as automobile, railways, construction, and consumer goods, among others.

• Market Cap – ₹ 39207.94 Cr.
• CMP – ₹ 476.10
• High / Low – ₹ 494.10 / 120
• Stock P/E – 18.64
• ROE – 19.1 %

Over the past five years, the company has demonstrated remarkable financial performance, achieving commendable profit growth at an impressive Compound Annual Growth Rate (CAGR) of 43.5%. This consistent growth reflects the company’s effective strategies and sound management, which have led to increased profitability over time. Moreover, the company boasts a strong track record of return on equity (ROE), a key indicator of its ability to generate value for its shareholders. With a 3-year ROE of 27.5%, the company has consistently delivered substantial returns on the investments made by its shareholders, instilling confidence in its financial stability and competence. These achievements signify the company’s competitiveness in the market and its potential to capitalize on future opportunities, making it an attractive prospect for investors and stakeholders alike.

Steel Authority of India Ltd

Steel Authority of India Limited (SAIL) stands as one of India’s largest steel-making companies and holds the prestigious Maharatna status among the country’s Central Public Sector Enterprises. SAIL operates five integrated plants and three special steel plants, strategically located in the eastern and central regions of India, in close proximity to domestic raw material sources. The company boasts a diverse portfolio of steel products manufactured and sold across various markets.

• Market Cap – ₹ 42441.14 Cr.
• CMP – ₹ 102.75
• High / Low – ₹ 104 /73.2
• Stock P/E – 30.52
• ROE – 3.64 %

The stock of the company is currently priced at 0.70 times its book value, indicating that the market values the company’s assets at a lower valuation compared to their accounting value. Despite this, the company has a strong track record of maintaining a healthy dividend payout ratio, consistently distributing 28.6% of its earnings to shareholders in the form of dividends. This practice not only rewards investors but also demonstrates the company’s ability to generate profits consistently. Another positive aspect of the company’s financial performance is the notable improvement in debtor days, which have decreased from 26.3 days to 18.8 days. This reduction signifies more efficient management of accounts receivable, reflecting the company’s prudent approach to cash flow management and potentially leading to enhanced liquidity and financial stability. Overall, these financial indicators suggest a well-managed company with the potential to attract investors seeking a combination of value and growth.

Kirloskar Ferrous Industries Ltd

Incorporated in 1991, KFIL is an itegral member of the Kirloskar Group, based in Pune. The company specializes in the manufacturing of pig iron and ferrous castings, catering to industries like automobiles, tractors, and diesel engines. Its product range includes cylinder blocks, cylinder heads, transmission parts, and various types of housings essential for these sectors. KFIL stands as a prominent player in the domestic market for foundry-grade pig iron and ferrous castings.

• Market Cap – ₹ 7,119 Cr.
• Current Price – ₹ 512
• High / Low – ₹ 534 / 237
• Stock P/E – 20.4
• ROE – 20.3 %

The company has demonstrated effective financial management by successfully reducing its debt burden, which has strengthened its overall financial position. Over the past five years, the company has shown remarkable growth in profitability, achieving an impressive Compound Annual Growth Rate (CAGR) of 55.1%. This consistent and substantial profit growth reflects the company’s ability to capitalize on market opportunities and deliver value to its stakeholders. Additionally, the company’s commendable track record of return on equity (ROE) further emphasizes its capability to generate favorable returns for its shareholders, with a 3-year ROE of 30.1%. This strong performance makes it an attractive investment option for those seeking companies with a history of delivering solid returns.

Furthermore, the company’s commitment to rewarding shareholders is evident through its consistent maintenance of a healthy dividend payout ratio of 21.2%. This practice not only rewards investors but also indicates the company’s confidence in its financial stability and capacity to sustain dividends in the long term. By effectively managing its finances, achieving impressive profit growth, and maintaining a steady dividend policy, the company has established itself as a reliable and promising entity in the market, making it a favorable choice for investors looking for both growth and income opportunities.

Jindal Steel & Power Ltd

Jindal Steel & Power Ltd holds a prominent position among India’s top steel producers and maintains a strong presence in sectors such as mining and power generation. Additionally, the group has a global footprint through its subsidiaries, with significant operations in countries like Australia, Botswana, Indonesia, Mauritius, Mozambique, Madagascar, Namibia, South Africa, Tanzania, and Zambia.

• Market Cap – ₹ 72197.27 Cr.
• CMP – ₹ 707.20
• High / Low – ₹ 707.20 / 386
• Stock P/E – 33.93
• ROE – 8.82 %

Company has delivered good profit growth of 41.2% CAGR over last 5 years

Jindal Saw Ltd

Jindal Saw Limited, the flagship company of PR Jindal group, holds a prominent position as a global manufacturer and supplier of Iron & Steel pipes and pellets. The company’s major product range includes longitudinal submerged arc welded (LSAW) pipes, helical SAW (HSAW) pipes, ductile iron (DI) pipes, seamless pipes, and pellets. These products find applications in various industries such as oil and gas exploration, transportation, power generation, water supply for drinking, drainage, irrigation, and other industrial uses.

• Market Cap – ₹ 11635.88 Cr.
• CMP – ₹ 363.80
• High / Low – ₹ 385 / 77.4
• Stock P/E – 16.39
• ROE – 6.09 %

The company is looking forward to a promising quarter ahead, with expectations of positive developments and potential growth opportunities on the horizon. However, it is worth noting that the company has experienced relatively low returns on equity over the last three years, with a figure standing at 5.34%. This indicates that the company might be facing challenges in generating favorable returns for its shareholders compared to its equity base.

Additionally, the company has contingent liabilities amounting to Rs. 3,128 Cr, which could pose potential risks or financial obligations that may need to be addressed in the future. It is essential for the company to manage these liabilities prudently to ensure its financial stability and protect the interests of its stakeholders. While the promising quarter ahead offers hope for improvement, addressing the challenges related to returns on equity and contingent liabilities will be crucial for the company’s sustained growth and success in the long term.

Lloyds Metals & Energy Ltd

Lloyds Metals & Energy is actively involved in the manufacturing of Sponge Iron, Power generation, and mining activities. It holds the distinction of being the largest coal-based DRI manufacturer in Maharashtra, located in Ghugus Village, Chandrapur district, with an impressive production capacity of 270,000 TPA. Additionally, the company operates a captive power plant with a capacity of 30MW. Moreover, plans for the forward integration of this plant are currently underway.

• Market Cap – ₹ 24945.39 Cr.
• CMP – ₹ 561.15
• High / Low – ₹ 688 / 141
• Stock P/E – 23.87
• ROE – 90.5 %

The company has made significant strides in improving its financial health by successfully reducing its debt burden, resulting in a nearly debt-free status. This positive development sets the stage for a potentially promising quarter ahead, with expectations of continued growth and profitability. The company’s impressive track record of return on equity (ROE), boasting a 3-year ROE of 71.3%, underscores its ability to generate substantial returns for its shareholders, indicating strong financial performance and efficient capital utilization.

Furthermore, the company’s proactive management approach is evident in the significant decrease in its working capital requirements, which have reduced from 84.3 days to 18.9 days. This improvement reflects the company’s adept management of its day-to-day operations and efficient utilization of resources, leading to enhanced liquidity and potentially increased profitability.

These positive developments collectively signal the company’s resilience and competence in navigating the market dynamics, setting a positive tone for future growth and value creation. With its improved financial position, impressive return on equity, and optimized working capital management, the company appears well-prepared to capitalize on opportunities and deliver further value to its stakeholders.

Usha Martin Ltd

Usha Martin Ltd is predominantly involved in the manufacturing and sale of steel wires, strands, wire ropes, cords, and related accessories. Additionally, the company engages in the sale of other products, including wire drawing and allied machines.

• Market Cap – ₹ 10653.41 Cr.
• CMP – ₹ 349.10
• High / Low – ₹ 365 / 115
• Stock P/E – 28.89
• ROE – 18.8 %

Over the last five years, the company has experienced a moderate sales growth of 9.61%, indicating steady but not particularly rapid expansion in its revenue. However, it is worth noting that the dividend payout ratio has remained relatively low during this period, with the company distributing only 14.3% of its profits as dividends over the last three years. This conservative dividend policy suggests that the company might be retaining a significant portion of its earnings to reinvest in its operations or for other purposes.

Another aspect that warrants attention is the decline in promoter holding by -5.64% over the past three years. This reduction in promoter ownership could have various implications, such as changes in management control or shifts in ownership structure. Investors and stakeholders should carefully assess the reasons behind this decline and its potential impact on the company’s governance and decision-making.

Overall, the company’s modest sales growth, coupled with its relatively low dividend payout and the decline in promoter holding, may indicate a period of strategic changes or challenges. Investors should conduct a thorough analysis of the company’s financials, management, and long-term vision to make informed decisions regarding their investment in the company.

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FAQs

When is a good time to buy steel stocks?

The opportune moment to purchase steel stocks is during the beginning of an economic expansion due to their cyclical nature. Conversely, it is advisable to sell them just before the economy starts to slow down.

Why is Tata Steel falling?

Tata Steel’s decline can be attributed to several factors, including the impact of decreasing steel prices and rising coking-coal expenses since the first quarter of the previous fiscal year. The company faced a 6% increase in the cost of raw materials consumed, while delivery volumes in Europe also saw a significant decline of over 11%.

List of Top Steel Stocks to Watch out for in India (PE and Marketcap)

The list is created based on the increasing PE and is not a recommendation.

Conclusion

The aforementioned steel stocks exhibit a diverse range of stock market returns. Therefore, exercise caution while considering any of them for purchase. Although all the listed companies have been profitable, a significant number of them have experienced declines in their stock prices.

Incorporating metal stocks into a portfolio can prove to be an efficient and effective means of diversification. However, to ensure success, it is essential to comprehend your objectives and risk appetite beforehand. The volatility inherent in metal stocks can be leveraged to accumulate wealth, but it also carries the potential for disruption if not managed prudently.

For making investment decisions, thorough research based on the aforementioned factors is crucial. Take the time to assess the individual characteristics of each company before proceeding with any investment choices.

Investment Disclaimer: Cofounder of Financesrule have investment in SAIL.

Author: Vedanti KiranVedanti is a female finance writer, currently pursuing her studies at Hansraj College. She has a passion for writing and travelling, and her articles on the stock market, finance, investment, and cryptocurrency are well-researched and informative. With her unique perspective on the world of finance, Vedanti is a go-to source for those seeking insights into the world of finance.