SAIL shares rise after report of steel union proposing merging three companies with PSU major

Shares of Steel Authority of India Limited (SAIL) rose as much as 3 percent on July 5 on report of steel union proposing a mega public sector undertaking by merging the company with three others.

In a report by Economic Times, the Steel Executives Federation of India (SEFI) has reportedly urged the steel ministry to merge state-run Rashtriya Ispat Nigam Limited (RINL), Ferro Scrap Nigam Limited (FSNL) and Nagarnar steel plant with SAIL.

As per the report, the steel body emphasised the potential benefits in achieving capacity expansion targets and addressing resource challenges faced by the individual firms, while questioning the wisdom of FSNL disinvestment.

Shares of SAIL were trading 3.11 percent higher at 11:30 am at Rs 155.65 apiece on BSE. The stock has gained 33.09 percent in the last 6 months.

Brokerage analyst Centrum Broking sees the news report as “big positive” for SAIL as it will help to fast track expansion at minimum capex and drive future earnings growth and lead to value unlocking.

If the merger proposition goes through, SAIL’s EBITDA, or earnings before interest, taxes, depreciation, and amortization, will likely jump 55 percent from Rs 13,000 crore to Rs 20,000b crore and capacity would increase by 50 percent, as per Centrum Broking. It will be able to avoid massive capex of Rs1 lakh crore for organic expansion and manage with minimum capex requirement, it added.