Domestic steel cos 'better placed' than global peers in India

Notwithstanding the presence of global steel giants like ArcelorMittal and Posco in the country, domestic steel firms are still "better placed" to grow in the lucrative Indian steel market, global research firm Macquarie says.

"We believe that domestic steel companies are better placed to grow given the issues faced by most multi nationals trying to enter the Indian market," Macquarie said in a research note.

Domestic steel firms are well poised as even after 3-4 years of announcing large steel projects of 12 million tonnes per annum (mtpa) each, South Korean steel major Posco and L N Mittal-led ArcelorMittal are still struggling to enter the Indian steel market directly.

Despite "full support of the central government, these projects have hardly made any headway. The issues involved are allocation of resources, land acquisitions and environmental clearances," Macquarie said.

At a time when hurdles are being faced by global biggies, domestic firms like including Tata Steel, SAIL, JSW Steel, Uttam Galva, Electrosteel Casting and Monnet Ispat are pursuing large projects.

"Many small steel companies, like Electrosteel Casting, Monnet Ispat etc, have cornered large iron ore and coal resources and are pursuing large steel projects," Macquarie said.

Besides, with the demand for cars, bridges and roads rising, the prospects of Indian steel industry, which is the second fastest growing steel market globally with cheap availability of iron ore, looks very promising and makes it an ideal destination for steel production, the report said.

After ArcelorMittal's own efforts to gain an entry through Greenfield projects were unduly delayed, world's largest steel maker earlier this month entered into an agreement to acquire a 35 per cent stake in mid-cap firm Uttam Galva.

Regarding the deal, Macquarie said the recent ArcelorMittal-Uttam Galva deal is likely to create a "new benchmark in both valuations and outlook for the Indian steel sector", and added that "any further consolidation attempts will lead to better value discovery."