New Delhi, Aug 06: With infrastructure, automobiles and white goods sectors showing signs of pick-up, the domestic steel industry is poised for a quantum leap, provided it improves operating profitability to match global trends. Though the global demand growth and increasing steel prices are spelling good news for the Indian steel producers, there is an imperative need to improve operating profitability for facing all phases of the steel price cycle, ICRA said in its latest study.

This is possible through cost control measures, enhancement of capacity utilisation, improvement of operational efficiencies, altering the product mix for maximising share of value added products and targeting niche market, suggested the study by ICRA Information, Grading and Research Service (Ingres). It pointed out that on the demand front in the domestic market, consumption of steel would be a function of the growth prospects in the end-user sectors like construction/infrastructure, white goods and automobiles.

These sectors have recorded sluggish growth in the past but are showing signs of pick-up.

However, in the medium term, with the revival of the economy, the performance of these sectors is likely to improve further and would bless the market prospects of the steel industry, the study added. Unlike the global industry, the Ingres report noted, the domestic steel sector continues to remain fragmented with a huge financial burden of over Rs 40,000 crore.

Recently, however, the financial institutions have restructured about Rs 20,000 crore debt to improve the repayment prospects.

Ingres -- a division of Icra -- observed that it is high time the fragmented domestic steel industry matched global trends to emerge as potential player in the cut-throat international market. Bureau Report