Below is the edited transcript of his interview on CNBC-TV18. Also watch the accompanying video.
Q: What is your take particularly on JSW Steel? Do you think the company will start improving its utilisation levels in the next three-four months?
A: Given the current levels, it has inventory to produce only probably one to one-and-a-half months of steel at utilisation level of 80%. So, given that, we also believe that it will take atleast four-five months for category A mines to start production.
Going forward, probably in the next first half of FY13, it might struggle to increase its capacity. It might not operate at capacity of around 50 or 60%. So, hence, we are kind of neutral on the stock. We await further clarity on these matters from CEC.
Q: Do you remain hands off on all the stocks concerned like Kalyani as well as Sesa Goa? You are in sell mode or in no view mode.
A: On Kalyani Steel, we don’t track that company. So, we don’t have a view. But for Sesa Goa, we are marginally positive. We are valuing based on whatever it produces from Goa mine. So, we are not taking into consideration atleast in the first half of FY13. Overall, we believe that it might be able to do two million in FY13 from its Karnataka mines, given that it will take six-eight months to start production from today. So, we like Sesa Goa at these levels, but we are neutral on JSW Steel.
Q: In Sesa Goa, the possibility of an export of ore is pretty much out right because the CEC’s recommendations clearly suggest that the ore will be mainly for domestic use?
A: CEC’s recommendations are that if low grade ore is not finding its way to steel plants, they can be exported. But the issues now are with export duty – a 30% export duty and very high railway freight, that probably makes its unviable for Sesa to export. So, it would be better of selling in the domestic market from Karnataka.
Q: Would steel companies, therefore, be in a slightly more beneficial stage at all since exports have been completely discouraged?
A: At the same time, you have to see that production from Karnataka would be much lower than what it’s used to be earlier from 45 million tonne odd now to it’s now being recommended to cap at 30 million tones. So, in a way, taking into consideration the savings from exports or we have to see that some of the production is already lost. So, net-net, I would say that both of them offset each other.
Q: They have spoken about this rehabilitation and restoration, would that add some more responsibilities on the companies and therefore even when mining starts it would become a slightly more expensive proposition, in the sense margins would be under pressure?
A: I don’t think so. Rehabilitation process would be kind of procedural delays could happen, but it’s not significant in terms of the cost that company would be boning basically. So, only question is how long it takes to complete the process.