Industry experts view the
imposition of export duty on steel as temporary, similar to one in FY08, when the
export duty was withdrawn within a month on flats and in a few months on longs.
The final quarter of FY22 witnessed
a strong performance from the iron and steel companies in terms of revenue
growth as the supply from two of the world’s biggest producers - Russia and
Ukraine - dried up and resulted in a surge in global commodity prices.
Indian
companies rushed to fill up the void in supply created by the East
European crisis and reaped the dual benefits of higher volumes and increased
prices. The prices however cooled down a bit in the second half of the quarter
due to COVID related slowdown in China.
On the
flipside, the surge in energy prices and raw material costs dented the overall
margins of the steel players.
During the
quarter ended March 2022, the iron and steel companies from the BSE 500
universe witnessed a robust year-on-year growth of 24 percent in their revenue
and a sequential growth of 3 percent. Along with the on-going geo-political
crisis, the increased industrial activity after the pandemic led to the jump in
demand for metals which also aided the on-year growth.
The
increase in realisations, however, could not keep pace with the rise in energy
and raw material costs which resulted in a huge 790 basis points (bps) on-year
decline in operating margins of the sector (BSE 500 universe). On an overall
basis, the sector was able to achieve operating margins of 18 percent for FY22
compared to 26 percent in FY21.