Stake in Cairn India to save the day for Sesa Goa in Q1

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26 Aug, 2025 12:21

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At a time when iron ore production had almost halted during Q1, what will perhaps help mining major Sesa Goa stay in black, is its 20 percent holdings in exploration firm Cairn India.

Sesa Goa’s revenue and operating profit will be almost nil due to continued mining ban in Goa and Karnataka during June quarter.

Since Cairn India has reported a net profit of Rs 3127 crore, Sesa would account for Rs 625 crore which will be partially offset by standalone loss, states a CNBC-TV18 poll.

Net sales will decline over 82 percent to Rs 305 crore year-on-year. Revenues will come only from reduced pig iron ore sales and met coke sales. (Traditionally together contribute 15-20 percent of total revenues)

Pig iron plant is operating but at lower utilization due to unavailability of iron ore

Despite almost nil operations, analysts have estimated Rs 30 crore toward fixed cost on a monthly basis. When in operation, Sesa’s Goa mine accounted for 80 percent of its sales volumes (capacity of 15 mtpa) and Karnataka accounted for 20 percent of its volumes (capacity of 6 mtpa)

However, Karnataka mining ban was lifted during the quarter after the Supreme Court recently allowed Category B mines to be reopened:

Key issues to watch out

International:

Specific capex for Liberia is estimated at USD 80-90/t of capacity, while it is targeting to end FY14 with 2mtpa. However, given the constrained cash flows post mining ban, it will be raising external funds for the project

Domestic:

Mining in Karnataka and Goa is expected to start in FY14 and will contribute to FY14 sales volume
Further delay to start mining will result in more cuts in sales volume assumptions
Pertinently, it has to increasingly depend on dividend from Cairn India and external financing to support its Liberia capex