Jindal Stainless, a leading player in the stainless steel manufacturing sector, reported a significant 21.05% year-on-year decline in consolidated net profit for the July to September quarter (Q2 FY25), totaling Rs 611.31 crore. This decrease was attributed to ongoing challenges in the export market. In the same quarter last year, the company had posted a net profit of Rs 774.33 crore.
Financial performance
According to the company’s latest financial results released on Thursday, revenue from operations on a consolidated basis saw a marginal decline of 0.20%, amounting to Rs 9,776.83 crore in Q2 FY25, compared to Rs 9,797.04 crore in the corresponding period last year. However, on a sequential basis, revenue experienced a slight increase of 3.68%, while net profit fell by 5.67%.
One of the notable trends was the share of exports, which accounted for 10% of total sales in Q2 FY25, a decrease from 13% in Q2 FY24. Overall, exports represented 15% of total sales in the first half of FY24. This decline in export share is a concerning trend for the company, especially given the volatility in global markets.
Challenges in export markets
The challenges faced by Jindal Stainless in the export sector can be attributed to two primary factors. First, the growth momentum in key markets such as the US and Europe has been under significant pressure. Second, geopolitical conflicts in West Asia have led to increased logistics costs, further complicating export operations.
Abhyuday Jindal, Managing Director of Jindal Stainless, acknowledged these challenges during a post-results interaction. He emphasized the company’s strategy to explore and expand its presence in alternative markets to mitigate the effects of these difficulties. “We are targeting South Korea, West Asia, South America, and Japan as potential markets,” he said. Jindal also noted the potential for increased exports to Canada if the country decides to impose duties on Chinese steel imports. “If it happens, then we will be able to push more volumes in Canada,” he added.
Domestic market outlook
Despite the challenges in the export market, Jindal remains optimistic about the domestic market’s prospects. The company anticipates volume growth to accelerate in the coming quarters. Jindal stated, “In terms of domestic demand, all new-age industries are picking up. Plus, we see good demand coming from the white goods sector; the auto industry is witnessing some recovery this Diwali compared to last year. There are multiple tailwinds available in the domestic market for good growth in stainless steel.”
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Concerns over imports
However, not all is well on the domestic front. Jindal Stainless expressed concerns regarding the increasing volume of imports, particularly subsidized and dumped stainless steel products entering India. The company highlighted that these imports have remained unabated throughout the quarter, impacting the competitive landscape for Indian manufacturers.
The company pointed out that without adequate policy deterrents and due to the misuse of the Free Trade Agreement (FTA) route, imports from countries like China and Vietnam have flowed into Indian markets with relative ease. This influx is disrupting the level playing field for Indian producers, especially affecting the micro, small, and medium-sized enterprises (MSMEs) within the sector.
In summary, Jindal Stainless’ Q2 FY25 results reflect a challenging environment for the company, particularly in the export sector. While domestic demand shows promise, the ongoing issues with imports pose significant challenges. Moving forward, the company’s strategic focus on diversifying its export markets and addressing the competitive pressures in the domestic arena will be crucial for sustaining growth and profitability in the coming quarters.
