According to a recent report, Top five steel companies in the country are set to pay back Rs 35,000 crore of debt, or 15 percent of their total borrowings, through the current and next fiscal years.

Rising demand and higher prices will boost their operating margins by 23 percent next fiscal, though down from 25 percent this fiscal, leading to improved credit metrics for steelmakers, Crisil said in its report. Debt cutting will also come from the savings they made in FY21 by partially deferring capex, which has further strengthened the balance sheets and credit metrics of five primary steel producers, which account for 55 percent of domestic production, Crisil said.

Domestic demand recovered strongly in the second half of FY21, clipping at 10 percent between October 2020 and January 2021 as against a steep 30 percent on-year fall in the first half due to the pandemic. This will have demand contraction improving to under 10 percent for the whole of this fiscal. Further aiding the sector is higher infrastructure spending by the government and a recovery in residential real estate which are expected to improve demand by 10-12 percent next fiscal.

On the pricing side, domestic hot-rolled coil prices rallied to a multiyear high of Rs 56,000 per tonne in February from Rs 39,200 per tonne in March 2020 as demand improved amid iron-ore supply constraints and high global prices.

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