SAIL’s growth outlook dims amid lack of near-term capex plans

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Subscribe to enjoy similar stories. Shares of Steel Authority of India Ltd (SAIL) have dropped around 6% since the company reported weak September quarter (Q2FY25) results on Thursday. A downward revision in the FY25 sales volume guidance has likely added to the negative sentiment.

The stock is now down 34% from its 52-week high of ₹175.35 on 22 May. The problem is that earnings visibility is poor as the company may be staring at an extended period of muted growth with large expansion plans beginning only in the second half of FY26. Read this | BIS, Vietnam probe cloud steel imports In Q2FY25, SAIL’s Ebitda, adjusted for FY23 price revisions for sales to the railways, dropped a sharp 40% year-on-year to ₹1,270 crore.

This adjustment reflects the steelmaker's practice of initially booking railway sales at an ad hoc price, which is later revised based on actual costs. The quarter also saw declines in sales volumes and a 4% drop in realization per tonne. Thus, while raw material prices were lower, adjusted Ebitda per tonne was down 30% to ₹3,091.

“SAIL’s market share loss continued in Q2FY25, with volume decline of 14% year-on-year, the worst among peers, a phenomenon likely to continue given capacity additions by private companies," said analysts from Kotak Institutional Equities. Higher imports and reduced offtake due to heavier rainfall have weighed on SAIL’s average realizations. The steel industry also faces diverging trends across segments: flat products, mainly used in sectors like automobiles and consumer durables, are seeing greater price erosion due to subdued demand.