Navigating Challenges and Embracing Opportunities: ESL Steel's FY23 Performance and Future Outlook

06 September 2023

ESL Steel Limited faced losses in FY23 due to several factors:

1. EBITDA Margin Contraction: Despite achieving record hot metal and saleable production, EBITDA margins contracted by 56% year-on-year. This contraction was primarily attributed to dynamic price fluctuations in both input commodities and finished products. The company experienced an abnormal surge in international Coking Coal prices at the beginning of the year.

2. Government Interventions: The Indian government imposed export duties on ESL's products, including Pig iron, TMT, and Wires rod, and increased export duties on all grades of iron ore. Although these measures were later withdrawn, they had a significant impact on the company's performance.

3. Cost Optimization Efforts: To mitigate losses and protect margins, ESL is actively working on cost optimization across various aspects of its operations. The company aims to increase production and operational efficiency to achieve a better product mix and price realization.

4. Iron Ore Self-Sufficiency: As a cost-saving initiative and to ensure a continuous supply of iron ore, ESL acquired two mines during FY 2022-23. This move made the steel plant self-sufficient in its iron ore requirement for the financial year.

Despite these challenges, ESL remains optimistic about future prospects. It anticipates benefiting from India's projected 8% GDP growth and expects significant growth in the Indian steel industry over the next 3 to 5 years. The national infrastructure pipeline, with substantial investments in projects like Pradhan Mantri Awas Yojana and Har Ghar Jal Yojana, is expected to drive demand for ESL's products. Additionally, stable raw material prices, particularly for iron ore and metallurgical coal, contribute to a positive outlook for the upcoming fiscal year.