How reduction in exports duty will impact white goods and durables
Six months after the levy's implementation, the government has reduced export duties on steel products and iron ore, with effect as of November 19. According to a late-night announcement from the finance ministry on November 18, export duties will be "nil" for certain pig iron and steel products as well as iron ore pellets.
Additionally, export duties on lumps and fines of iron ore containing less than 58% iron will be "nil." The rate of duty will be 30% for lumps and fines of iron ore that contain more than 58% of iron content.
This might give domestic steel producers more opportunities to export their products, which might increase demand for steel and drive up domestic steel prices.
In FY22, Havells' total sales and total raw material costs, respectively, were made up of 1.6% and 2.3% of steel. Steel exposure for other durable goods companies is less than 5% of net sales.
Copper, aluminum, and derivatives of crude oil are important raw materials for manufacturers of durable goods and white goods. It is anticipated that there will be little impact on the profitability of durable companies because steel accounts for only 2–4% of net sales.
TTK Prestige's steel cookers account for 30% of its overall cooker portfolio (or 10% of sales). Domestic steel prices are predicted to rise sharply, which could have an immediate negative effect on TTK's profitability and potentially slow the rate of portfolio premiumization.
White goods and durables are expected to have strong return ratios, robust growth potential, and low penetration levels. It is anticipated that value will steadily be created as the unorganized to the organized sector transitions. Both Crompton Greaves and Havells India stand to gain.
DisclaimerInvestment/Trading is subject to market risk, past performance doesn’t guarantee future performance. The risk of trading/investment loss in securities markets can be substantial. Also, the above report is compiled from data available on public platforms.
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