Published: 09th Aug 2024
By: Value Research
NMDC and Lloyds Metals, two major iron ore producers, have announced grand capex plans to capitalise on the current upcycle in the steel industry.
NMDC will invest Rs 50,000 crore over the next five years to double its production capacity. Lloyds Metals has set aside Rs 33,000 crore for the same purpose.
The Indian government's capex spree to improve infrastructure has led to unprecedented domestic demand for steel. The National Steel Policy aims to increase steel production capacity to 300 MTPA by 2031, which will require 450 million tonnes of iron ore annually.
With a CFO run rate of Rs 7,000 crore in FY24, cash reserves of Rs 12,000 crore, and low debt, NMDC is well-positioned to fund its capex without external funding. Lloyds Metals will raise Rs 1,200 crore through QIP and Rs 700 crore through preferred warrants.
The steel industry dynamics currently favour iron ore makers. However, there are risks that investors must not ignore. Get to know more about them in the complete article.