Tisco advanced further on Saturday on the back of hopes that the company's exports may gain momentum in the near future.
The scrip of India's largest private sector steel manufacturer was the second biggest gainer among the 30-share BSE Sensex constituents, up 2.20% to Rs 144 by 12:50 IST. A relatively higher volume of over 479,000 shares was recorded on the counter. In four sessions, the scrip rose by 8.8% from Rs 132.35 on 17 March 2003. Earlier, between 19 February and 17 March 2003, the scrip shed 16.3% from Rs 158.15.
Essar Steel (up 3.92% to Rs 7.95), Sail (up 3.09% to Rs 10) and Jindal Steel (up 3.13% to Rs 357.45) also posted gains on hopes of better export orders.
The buying support on the Tata Iron & Steel Company counter was on expectations that the company's exports may increase in the coming months, especially to China, which is the biggest importer of steel in the world. The demand from China is also expected to peak with the US cutting its exports to that country by 30%.
Dealers feel the recovery on the Tisco counter was also due to a technical rebound after a recent fall. They said the open interest position in the stock is still huge.
Meanwhile, the domestic demand for steel is also expected to increase with government's major thrust on infrastructure development in the Union Budget for 2003-04. As per the Budget, the initial government funding for new infrastructure projects will total Rs 2,000 crore (Rs 20 billion) for the next fiscal. Principally, investments will be made in railways, airports and sea ports through an innovative funding mechanism.
The Railway Budget for 2003-04 has also proved to be benificial to Tisco, with the cut in freight rates for steel. Freight costs account for nearly 11% of the total cost of production of steel companies, and nearly 50% of their output is transported by rail. Steel companies are expected to save nearly 2.8% in freight costs and 0.32% of the total cost of production. There will also be savings in freight on scrap and iron ore as well, but savings will differ from company to company depending on the raw material mix and the distance from mines.
The Indian steel sector has witnessed a turnaround following sustained demand for steel (in both domestic and international markets) coupled with a huge hike in steel prices over the last year. Last month, steel majors effected a hike in flat steel prices by Rs 1,000-1,400 per tonne, the second major price hike in 2003. Further, there are rumours that the steel makers may hike steel prices further in the coming months, riding on the back of strong demand.
For the third quarter ended 31 December 2002, Tisco posted a impressive net profit of Rs 280.23 crore as against Rs 34.54 crore in the corresponding period of the previous year. Net sales rose by 27% to Rs 2,152.69 crore (Rs 21.52 billion) from Rs 1,694.63 crore (Rs 16.94 billion) in DQ 2001.
BSE code:500470
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