Final Leg Of The Deleveraging Cycle, Only Divestment Can Unlock Value: Systematix

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Steel Authority of India Ltd. produced 16.9 million tonne (up 12% YoY) and sold 16.2 million tonne (up 8% YoY) of saleable steel during FY22. The company reported highest-ever Ebitda of Rs 212 billion (up 68% YoY) during the year, as steel realisations surged 35% YoY, despite higher costs.

Overall, staff costs remained elevated due to wage renegotiations, despite steady attrition; staff strength fell 25% over the last five years, and is slated to slip further by 15% until FY25.

The company incurred a capex of Rs 60.1 billion during FY22, and estimates further Rs 80 billion of capex during FY23.

SAIL reduced its net debt by Rs 184 billion during FY22 to ~Rs 165 billion, aided by limited capex, strong operational performance and an improved working capital cycle from 91 to 29 days in FY22.

We believe SAIL would continue to reduce its debt through FY25 to achieve net cash balance of Rs 75 billion by FY25 end.

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