The company faces twin pressures of falling steel prices and higher raw material costs on its profitability.
The stock has corrected and currently trades at an attractive valuations of about 9 times its FY19 estimated earnings
Consumption sectors (FMCG, durables, autos), though on a soft base, post noticeable volume growth for a consecutive quarter.
Tata Sponge has been able to capitalise on this trend thanks to the support from Tata Steel, parent company, for the supply of iron ore and its proximity to iron ore belt and ports.
The company is looking at setting up a long-steel product division for which they have the necessary land, and some infrastructure is readily available on site, said Sanjay Pattnaik, MD, Tata Sponge.
Tata Sponge Iron posted a strong set of first quarter earnings. In an interview to CNBC-TV18, Sanjay Pattnaik, MD of the company spoke about the results and gave his outlook for the company.
In an interview to CNBC-TV18's Anuj Singhal & Sonia Shenoy, Sanjay Pattnaik, MD at Tata Sponge Iron spoke about the company‘s Q3 numbers.
However, net realisations and production costs may not change significantly in the current quarter, says DP Deshpande, MD of Tata Sponge.
Realisation rate, which was at Rs 12,200 for the fourth quarter of FY16, will remain at the same level for the first quarter of FY17, says DP Deshpande, MD of Tata Sponge Iron.
DP Deshpande, MD, Tata Sponge expects slight improvement in margins on back of sponge iron prices firming up.
A 15 percent fall in realizations led to Tata Sponge Iron logging a 75 percent fall in second quarter profit to Rs 5.75 crore but MD DP Deshpande says he does not expect the company to clock a loss in the third quarter.
DP Deshpande, MD of Tata Sponge, says the primary reason behind the disappointing numbers is that realisations in the market have dropped. He does not see the situation in terms of demand for sponge iron improving dramatically in the next three to six months.
The company's profits were down 79 percent to Rs 8.57 crore year-on-year.
Suresh Thawani, MD, Tata Sponge, says that Tata Songe has performed 94% to our rated capacity. We expect good production for the rest of the year. He also says that Orissa block will be operational in two-three years.