Steel Authority of India (SAIL) expects its divestment programme to be completed by FY13 itself. Currently, the government holds 85.82 percent in the company and it will divest around 10.82 percent.
The pricing decision will be taken by the GoM
SAIL & NMDC
Steel Authority of India (SAIL) expects its divestment programme to be completed by FY13 itself. Currently, the government holds 85.82 percent in the company and it will divest around 10.82 percent. The SAIL stake is worth over USD 600 million at current price ( according to rough estimates) and its sale would leave the government with a 75 percent stake.
The government is likely to raise around Rs.40,000 crore by divesting stakes in state-run firms by 2014.
Meanwhile, the company's chairman CS Verma in an interview to CNBC-TV18 said that the company will soon start road shows for the divestment programme. He further said that decision regarding pricing is not yet taken. "In a dynamic market prices keep changing each day. We will take a call on it during our road show." he said.
Below is the verbatim transcript of his interview to CNBC-TV18
Q: Could you update us on what's happening in terms of the plan for divestment and by when the entire process is likely to be completed?
A: The present level of Government of India holding in Steel Authority of India Limited (SAIL) is 85.82 percent. Government has taken a decision to divest 10.82 percent in the holding of SAIL. This is going to happen in this financial year only. Our road shows are going to start next week. So, the process is on and I am sure that we will be in a position to complete the process during the remaining part of the fiscal.
Q: I know that the decision is up to the EGoM but any sense of where you would like to price the issue especially considering how much pressure the stock has already seen through this month?
A: The prices will depend upon the market prices. I mean, we are going to start road shows and then the divestment will happen through offer for shares (OFS). The pricing decision will be taken by the GoM.
So, it is difficult to say any pricing level as of now. It is a very dynamic market situation and the market prices keep on changing day to day and also intraday. Let us see what shape about the pricing takes the market. However, as far as the process is concerned, we are starting the process now.
Q: Dynamic is right because we have heard talk of an Rs 85 kind of take on the offer. The stock is far away from that level right now. Is that where you see value for your issue hitting the market?
A: I had not heard Rs 85. No merchant, banker, no government will take a decision about the pricing. As I told you the pricing is a dynamic situation. So, at what price the divestment will take place, the price will be known only after road shows are over. Let us see how much the appetite of the investors is.
Let us also project them fully about the potential of the company, the ongoing expansion program of the company, the competitive strength of the company and the various aspects of the company.
Q: The environment is pretty tough though for metal companies both - globally and locally. Some of your peers have already hiked prices. Has SAIL already done that, would you have to look at more price hikes in the next few months?
A: SAIL has also increased the prices of the steel products at the beginning of the current month, March 1. The price level is determined by the demand and supply forces. Some of the input costs on account of freight increase will definitely be passed on to the ultimate customer.
However, again, we determine the total cost of producing steel which has many cost components. Then, we take into account the demand-supply scenario. Market positions of the demand and then we decide the prices. Every month our committee meets and we take a view of the demand-and-supply situation. Then we discuss and decide about the pricing levels.
Q: As your overseas NMDC as well, could you just give us a sense of what you see both in terms of iron ore prices and production targets that you have got going?
A: In January, NMDC had produced slightly more than three million tonne in just one month. Three million tonne per month means 36 million tonne on an annualised basis. This has been the highest ever production in one single month ever since NMDC was formed. Our capacity is about 32 million tonne. We have been producing about 27-28 million tonne.
So, three million tonne production in one month was because of the efforts made by our production team and the good demand in the market also. February has been good and March is again going to be good. This year as a whole, we are going to cross the level of 26 million tonne.
This year we did not have advantage of the slurry pipeline. Last financial year in 2011-12, we have evacuated more than 4 million tonne through the slurry pipeline. This year we did not have the advantage even for a single day of the slurry pipeline. Even then our production is going to be more than 26 million tonne. Our despatch will be more than 26 million tonne.
As far as the price level is concerned, as you know in NMDC, we have resorted to monthly price regiment. Even today we had our board meeting, whereby we have taken a decision about the iron ore prices for the month of March. Most of the prices we have rolled over from the previous level February 2013.
As far as the Intl scenario, iron ore pricing level is concerned, in the beginning of the financial year price level was USD 155 per tonne and then it dipped to a low level of USD 90 per tonne in October 2012. Again it picked up and reached the level of USD 160 per tonne, today it is hovering around USD 152 per tonne.
SAIL stock price
On September 16, 2014, Steel Authority of India closed at Rs 77.15, down Rs 2.5, or 3.14 percent. The 52-week high of the share was Rs 112.90 and the 52-week low was Rs 47.00.
The company's trailing 12-month (TTM) EPS was at Rs 6.53 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 11.81. The latest book value of the company is Rs 103.30 per share. At current value, the price-to-book value of the company is 0.75.
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