Uttam Galva steel is hopeful of an improvement in the ferrous sector's performance going forward. It is also positive on the merger of Shree Uttam Steel and Power with Uttam Galva.
Ankit Miglani, deputy managing director of Uttam Galva is hopeful of bottoming out of the ferrous business going forward. The business will see an upside and exports to the US market will drive the growth of the company next year, he tells CNBC-TV18. He is also confident that the merger of Uttam Galva.and Shree Uttam Steel and Power will driving furure expansions.
Meanwhile, strong GDP data from China increased expectations of a hike in metal prices. However, Miglani sees no significant changes in these throughout the fiscal. Apart from the price increase of Rs 3,000 per tonne two months ago, there has been no changes in the prices and is expected to be the same from hereon, he adds.
Bhavesh Chauhan of Angel Broking also expects the growth for steel sector in FY14 to be better than FY13. Steel companies have ramped up their utilisation, which will better its performance going forward, he says.
Below is the edited transcript of his interview to CNBC-TV18.
Q: Have you seen any sort of incremental increase in metal prices in the past quarter which you have managed to pass on to customers?
Miglani: We did see price increases of about Rs 3,000 per tonne two months ago. We did pass that on and beyond that prices have been flat and expect to remain flat going forward, not seeing huge fluctuation in prices. This will have no implications on margins at all because this is strictly a cost increase pass.
Q: What are you expecting in terms of earnings from the metal space?
Chauhan: In terms of earnings, we expect decent growth for steel sector primarily because their Q2 of fiscal FY13 was not that great. It is the base effect that will come into play. Apart from that, main reasons for increase in topline would be volume growth.
Whether it is Steel Authority of India Ltd (SAIL), Tata Steel or even JSW, everybody has almost expanded capacity or ramped up utilisation. We expect decent profitability. FY14 is expected to be much better than FY13 for metal sector in steel in general.
On the non-ferrous side, we see a mix set of results where some companies will have a decent growth while companies like Hindalco will continue to suffer.
Q: Last quarter was very difficult for the entire ferrous sector. Are things looking better in Q2 and even going forward in Q3 and Q4? Or is the situation going to be similar to last quarter?
Miglani: It cannot get any worse. It has to get better. It is like flat on your back and the only way to go is up. So, we don’t see any downside from here.
Q: Where are you seeing more traction coming in from the export market, which are the geographies and where are you focusing your energies more on?
Miglani: Surprisingly, today, the biggest buyer and the best paying market is the United States. That is where the volume is growing. That is where growth is coming from.
We are not seeing any significant uptick on the European or Middle East markets. The real upswing is in the US market and we see that driving next year’s performances.
Q: You have also approved the merger through Shree Uttam Steel & Power. What is this going to do to your profit and loss (P&L)?
Miglani: Basically, this is a significant land bank and project approvals we have in this company. We are merging into the flagship listed company and are going to bring in a lot of assets on to the Uttam balance sheet. It will be driving future expansions.
On a financial basis, we are valuing the share of Uttam Galva Steel at something at Rs 101 and the other company at par. It will double my net worth so it will bring my leveraging to much safer levels and overall it should be value addition for the investors.
Q: Wil you monetise the land sitting on Shree Uttam Steel and Power for FY14 or will it be done later? Walk us through the monetisation plans.
A: The immediate plan would not be to monetise it. We will wait for the market to improve. Maybe 3-4 years down the line, we might sell some portions of the land and the rest will be used for future expansions.
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