Focus is on low cost steel cos: IFC

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Focus is on low cost steel cos: IFC

Sujoy Bose, Regional Manager South Asia for IFC (International Finance Corporation), said they are now focusing on low cost steel companies and Tata Steel is one of them.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other FIIs are saying about the markets See what other experts are saying about markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news Federal Bank | HDFC Bank | Industrial Credit & Investment Corporation | Kotak Mahindra Bank | Moser Baer (India) | Tata Steel |

Sujoy Bose, Regional Manager South Asia for IFC (International Finance Corporation), said they are now focusing on low cost steel companies and Tata Steel is one of them. They have recently purchased shares in Cairn and their long-term outlook is positive.

IFC's stake in Federal Bank is just below 5%. It holds a large stake in Tier-II caps like ICICI , HDFC Bank  and Kotak Mahindra Bank . They also continue to hold substantial stake in Moser Baer .

IFC has been investing in midcap manufacturing companies. They are positive on the paper sector in India.

Excerpts from CNBC-TV18's exclusive interview with Sujoy Bose:

Q: You have got a big exposure in Tata Steel. Is that a call on what the management is doing, or is it a call on the global steel cycle?

A: We basically take exposures in companies that we think are competitive. In the steel sector, our global strategy is to work with companies that fall in the lowest quartile of the steel cost curve. We know that steel is a cyclical industry and we think it is these competitive companies that will do well over the long-term and Tata Steel is one of them. We know the company for many years.

We were investors in Tata Steel for a long period of time and we like the story. Two years ago, we did a large syndicated loan for them, which included a USD 100 million loan for our balance sheet and a USD 300 million-syndicated loan in the foreign markets.

Q: I believe you have taken exposure to Cairn Energy, which hasn't had a great listing post IPO. What do you like about that story?

A: We focus on companies that we believe will do well in the long-term. Last year we did a large loan to Cairn Energy and we had been in discussions with them to take a stake in the company as well. You know that IFC tries to step in when we see that the market is not fully available for the company. We felt that at the IPO, there was a strong demand for the company's shares and we were not needed at the time. We have recently bought some shares in the company, because it will be a good story for India and hopefully for us.

Q: You have been investing in a lot of financial services companies.  In which ones do you still hold a sizeable chunk, and how much money have you put into them?

A: The financial sector has been a large sector, in terms of our investments this year. We work in the financial sector in two ways. First, we have taken large stakes in upper Tier-II capitals in larger banks like ICICI, HDFC and Kotak Mahindra. The stake in these banks, which are under RBI regulations, qualify as capital and can be levered by them for further growth.

Then in smaller banks, we take equity positions, like Federal Bank where we have just below 5% stake and hope to continue to find such opportunities in the future. With smaller banks, we also work to provide them with some technical assistance based on what we have learnt in other countries from our investments in banks. We try to also work with banks over here, to provide them with some of those learning's, which hopefully help them in the management of their balance sheet and systems.

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