India’s biggest steelmakers may be suffering from buyer’s remorse as assets they bought from bankrupt rivals stretch their bottom lines while market conditions have worsened.
Less than 18 months after scooping up these distressed assets in the hopes of extracting value and boosting market share, the steelmakers are struggling to meet sales and production targets because of a slowdown in the key construction and auto sectors. Tata Steel Ltd, JSW Steel Ltd and others are also wrestling with falling revenues amid high debt loads.
Steel prices were high and demand was booming then. Now, confronted with falling prices and slower consumption, steelmakers are facing the risk of credit downgrades, job losses and cuts in capital expenditure.
Arnab Kumar Hazra, assistant secretary-general at the Indian Steel Association, an industry group that also represents major steel producers, noted companies would take a longer time to turn their assets around in the current environment.
A deepening credit crunch in India’s shadow banking industry following the collapse of a major infrastructure lender in 2018 has sharply dented spending on cars and real estate in India.
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Domestic steel consumption in September was at its lowest since the start of the fiscal year 2019/20, according to official data.