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Foreign Institutional Investors (FIIs) are generally more interested in frontline companies of the country they invest in, partly due to their gigantic amount of investment. While many companies witnessed these FIIs increasing their stake in the recently ended quarter, JSW Steel (NS:) turned out the be their favorite, and by a huge margin.
The company has a market capitalization of INR INR 1,62,260 crores and it is India’s largest steel producer with a capacity of 29.2 mtpa (million tonnes per annum), having expansion plans to scale it to 38.5 mtpa.
JSW Steel’s 1H FY23 wasn’t quite good as its EBITDA declined due to a sharp fall in steel prices after they peaked in April 2022 while prices of coking coal remained elevated. The volume figures were also impacted particularly due to the government’s increase in export duties from May to November 2022. The company also suffered unrealized MTM losses due to a steep depreciation of the .
But margins have started to recover now which was clearly reflected in the last quarter with a profit of INR 490 crores, compared to a loss of INR 848 crores in the previous quarter. This significant improvement was seen despite a 7.6% QoQ decline in revenue in Q3 FY23 which is clearly showing an improved market condition.
The company is also optimistic regarding its near-term potential, backed by the government’s infrastructure push and increased spending which are positive for the entire steel sector. China’s re-opening is also expected to support steel prices. Also, on a global level, as all countries are nearing the peak of the ongoing rate hike cycle with economies still doing good, the potential economic downside seems limited now.
From September 2021 to September 2022, FIIs were in a mood to liquidate their holdings in the company, as their stake fell from 12.17% to 10.75% in this period. But surprisingly, they took a very sharp U-turn in the next quarter, as their total interest in the company shot up to a massive 26.04%, which is more than double their prior stake, in just one quarter.
This buying action (15.29% increase in the stake) makes JSW Steel the most-favorite counter from the Nifty 50 list in the reported period.
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