- Government infrastructure spending and capacity goals drive steel sector.
- Safeguard duties protect domestic steel, boosting prices and profitability.
- Leading steel producers report strong financials, plan major expansions.
India’s steel sector is emerging as one of the biggest beneficiaries of the government’s aggressive infrastructure spending.
The Union Budget for FY27 has allocated Rs 12.2 lakh crore for infrastructure development, more than three times the expenditure in FY20.
Every Rs 1 lakh crore spent on infrastructure is estimated to generate demand for around 6-7 million tonnes of steel, creating a strong long-term growth opportunity for domestic steel producers.
Alongside higher public spending, the government’s target of expanding India’s steel-making capacity to 300 million tonnes by 2030 from around 170 million tonnes currently is expected to provide sustained support to the sector.
The industry’s outlook has also improved after the government imposed safeguard duties on flat steel imports at 12 per cent in the first year, 11.5 per cent in the second year and 11 per cent in the third year.
The move is aimed at protecting domestic manufacturers from low-cost imports, particularly from China.
As a result, domestic hot-rolled coil (HRC) prices have increased nearly 20 per cent over the past four months, strengthening profitability for steel companies. Among the leading players, Tata Steel remains one of the strongest integrated steel producers.
The company reported Q4 FY26 EBITDA of Rs 15,245 per tonne, supported by higher steel prices and operational efficiencies.
Tata Steel has announced a capital expenditure plan of USD 2.09 billion for FY27, with nearly 60 per cent of the investment directed towards its Indian operations, including the HRPGL line at Tarapur and new coke oven facilities at Jamshedpur.
The stock has target prices ranging between Rs 180 and Rs 224, while investors are also tracking the potential benefits from the India-UK Free Trade Agreement and improvements in its European business.
JSW Steel continues to lead the domestic industry in terms of production capacity with 25 million tonnes per annum (MTPA) and plans to increase this to 62 MTPA by FY32.
The company reported EBITDA of Rs 11,622 per tonne during Q4 FY26 as stronger domestic prices supported margins.
Analysts have assigned target prices of around Rs 1,400-Rs 1,425, with volume expansion and the safeguard duty expected to remain key growth drivers.
Steel Authority of India (SAIL) offers investors exposure to the public sector steel segment.
The company generates EBITDA of around Rs 7,000-Rs 8,000 per tonne and has significantly increased its FY27 capital expenditure by 44 per cent to Rs 25,125 crore.
SAIL also benefits from captive iron ore mines and improving inventory management. Brokerage target prices for the stock range from Rs 139 to Rs 215.
Jindal Steel & Power continues to expand its manufacturing footprint across Odisha and Chhattisgarh, focusing on capacity additions and improving operating efficiencies.
Although its EBITDA per tonne has been improving sequentially, the company is also benefiting from expansion-led growth and relatively competitive production costs.
Several brokerages have target prices of around Rs 1,400 for the stock. APL Apollo Tubes provides a different investment opportunity within the steel value chain as a leading manufacturer of structural steel tubes.
The company has maintained EBITDA of more than Rs 5,500 per tonne despite raw material cost pressures. Its extensive dealer network and strong presence in Construction, water infrastructure and Real Estate projects continue to support growth, although the stock trades at premium valuations compared to traditional steel manufacturers.
While the sector’s outlook remains positive, investors should monitor quarterly EBITDA per tonne rather than focusing only on revenue growth, as it provides a better indication of pricing power and profitability.
Coking coal prices also remain an important variable since any sharp increase can reduce margins.
Demand from the real estate sector, in addition to government infrastructure spending, will remain another key factor influencing steel consumption. Investors should also remain mindful of valuations, as several steel stocks are currently trading above their historical book value multiples.
Despite the favourable policy environment, risks remain.
Chinese steel overcapacity continues to pose a threat to global pricing, while volatile coking coal prices can impact profitability.
Tata Steel’s European operations are still undergoing restructuring despite support from the UK government following the India-UK Free Trade Agreement.
In addition, any slowdown in real estate activity or delays in infrastructure spending could weigh on steel demand.
As the steel industry remains cyclical, investors should adopt a diversified approach instead of concentrating investments in a single stock.
Disclaimer: The article is for informational purposes only and not investment advice.
(“Disclaimer: This article uses information originally published by Dalal Street Investment Journal (DSIJ). The views expressed are those of the original authors and not necessarily of ABP Network Pvt. Ltd. This content is provided for general informational and educational purposes only and should not be construed as investment, financial, legal or tax advice. Readers are advised to conduct their own research and/or consult a qualified financial advisor before making any investment decisions. This content is for informational purposes only and should not be treated as investment advice. ABP Network, its employees and associates shall not be responsible or liable for any losses or damages arising directly or indirectly from the use of or reliance on this article or any information contained herein.”)
