Steel cos throwing up ‘insane’ cash; 2008 crash comparisons wrong: Expert

“One is the deleveraging because the way the cycle is going, the amount of cash these companies are throwing is insane. Meaning you are doing Rs 30,000 per tonne of margin, and the capex cost for a new steel plant is around Rs 60,000 per tonne. So the payback is like two years, so you are going to payback a new steel plant in two years’ time,” Arora said, adding that the market was underestimating the cash, these companies are throwing.

Steel demand strong; prices unlikely to fall much: Arcelor Nippon CEO

Arora is bullish on Tata Steel and Steel Authority of India.

He feels investors are mistaken in trying to draw parallels with the crash following the 2008 global rally.

“Most of the analysts and investors have a memory of 2008 global rally, which happened and post that there was global financial crisis and they saw a big drop. Nothing like this is happening this time around because the crisis has already happened and we are into that huge liquidity boom driven by monetary policy easing then we have got fiscal support coming in from the government.

So we are into continued demand support. So we are in for a stronger for longer theme and that is what the street is missing and valuations are extremely low,” Arora said.