Confidence up, but regulatory woes nag metal cos: Morgan

Moneycontrol Bureau

Long plagued by the overall slump in demand and policy paralysis, the Indian economy is finally showing some signs of recovery. While there has been a renewed level of confidence post the election of new government into power, yet regulatory uncertainties remain a key concern. Moreover, the recent Supreme Court order terming coal block allocations since 1993 as illegal has dealt a major blow for companies present in the metals and mining sector.

Brokerage house Morgan Stanley recently met up with metal companies, consultants and government bodies to check out the demand environment, ground level changes, and evolution of the regulatory scenario post elections.

Following are the key takeaways from the Morgan Stanley report:

-- After commissioning delays and project cost inflation witnessed over the last three to four years, companies seemed optimistic on meeting their commissioning timelines from hereon. However, a lack of availability of iron ore and coal could curtail the ramp-up and capacity utilization of some projects in the medium term.

-- Balance sheet consolidation was one of the key focus areas of most of the companies; further expansion plans were to be taken up only after existing net debt to equity levels were brought within target ranges.

--While business sentiment has largely improved following the election, it is yet to translate into incremental metals demand. This may take another 3-4 months to begin.

--Apart from the uncertainly surrounding the ongoing coal de-allocation case, there was a sense of belief that a conscious effort was being made by the new government to streamline the regulatory framework.

In a recent interview to CNBC-TV18, Anil Swarup, Additional Secretary, Cabinet Committee on Investments (CCI), said a large number of projects have got moving and a lot of clearances have been given so far. He said importantly the emphasis is now on improving the processes.

Posted by Kankana Roy Choudhury