SAIL shares surge on mega merger proposal with State-Run steel firms

5 Jul 2024 , 04:31 PM

Shares of Steel Authority of India Limited (SAIL) rose by up to 3% on July 5 following reports of a proposed mega public sector undertaking merger.

The shares closed the day at ₹155.37 which is a 2.86% gain than the previous close. The stock has gained a total of 76% in the last one year, and 24% since the beginning of the year.

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

SEFI highlighted the potential benefits of the merger, such as achieving capacity expansion targets and addressing resource challenges faced by the individual firms, while questioning the wisdom of FSNL’s disinvestment.

If the merger is approved, SAIL’s EBITDA is expected to increase by 55%, from ₹13,000 crore to ₹20,000 crore, and capacity would rise by 50%, according to Centrum Broking.

The merger would allow SAIL to avoid a massive capital expenditure of ₹1 lakh crore for organic expansion, managing with minimum capex instead.