Indian steel demand has grown at a rate of 4%-5% for the last 12-18 months and has now started to reflect in the weakened pricing power of the companies, says Nomura Equity Research in its report on medium-term prospects for Tata Steel
Weak domestic steel demand growth in the last 12-18 months has resulted in Indian steel prices trading at a discount to import parity. While Nomura does not expect a significant improvement in operating environment in the near term, it expects Tata Steel to see improved profitability with stabilization of expansion. This is reflected in by Nomura Equity Research in its report on the medium-term prospects for Tata Steel.
Indian steel demand has grown at a rate of 4%-5% for the last 12-18 months and has now started to reflect in the weakened pricing power of the companies. While Indian steel prices used to be at a premium to import parity (until 6-8 months back), domestic steel prices are now at a discount of 1%-2% to import parity (current discounts are at 4%-5%).
Tata Steel should see a gradual improvement in the profitability of its Indian operations despite a challenging external environment driven: by (a) ramp-up of 2.9mtpa expansion; (b) production from coke oven battery; (c) residual benefits of lower coking coal prices and (d) commissioning of cold rolled mill in H2FY14F, according to Nomura analysts.
At the same time, European operations of Tata Steel should also see EBITDA/tonne stabilizing at $30-35/tonne, driven by: (a) Port Talbot BF rebuilt (it will have better efficiency, lower fuel rate, etc) (b) marginal improvement in pricing outlook in Europe, and (c) lower raw material costs.
Weaker domestic steel demand has started to reflect in realization pressures. Nomura has lowered its FY14F and FY15F realization estimates for Tata Steel’s Indian operations by 1.2% and 1.8%, respectively. It has lowered its sales volume estimates to 8.7millon tonne in FY14F (from 9.1mt earlier and as per Tata Steel management’s guidance) and 9.3mt in FY15F (from 9.4mt earlier). As a result, Nomura’s FY14F and FY15F stand-alone EBITDA estimates are down 8% and 4.3%, respectively
Nomura estimates Tata Steel’s average realization premium to shrink to 10% in FY14F from 13.7% in FY12 and 11.5% in FY13F on account of both (a) discount of 1%-2% ascribed to domestic steel price in general and (b) deterioration in product mix. However, it expects premiums to again improve to 11.5% in FY15F as cold rolled mill would come on line and product mix in general would improve. Nomura’s analysts maintain their ‘Buy’ recommendation for the company’s share.
The Foundation has nearly tripled its member base in the past 365 days to almost 21,000. Workshops on topics as diverse as the Right to Information Act, the evils of the Aadhaar scheme, food adulteration and Wills & Nominations, along with numerous financial literacy seminars allowed it to surpass 150 events a few weeks ago over the last three years
Moneylife Foundation has completed three years educating savers about the various financial products and their risks, giving them the knowledge to make independent decisions about money and life. Its membership, which is free, has reached almost 21,000 today from 7,388 a year ago.
Aside from various workshops on financial literacy, the Foundation organised events on issues of deep public interest, such as biometric identification, the draconian Section 66A of the IT Act, food adulteration, property taxes and medical malpractice. Each of these were conducted by experts such as former IPS officer and now activist lawyer YP Singh, Col Mathew Thomas, a missile scientist from Bengaluru and Advocate Godfrey Pimenta. While the majority of the events were held in Mumbai, the Foundation also travelled to Kochi, Mangalore and Pune this last year. But this is not all the Foundation is up to. A major chunk of its work is related to advocacy.
A couple of weeks ago, for example, the Foundation was able to get justice for a barely literate ticket collector from Solapur—Arvind Injamuri. He had been fraudulently mis-sold insurance polices work Rs12 lakh by Reliance Life Insurance. The regulator forced Reliance Life to pay back the money plus Rs1.5 lakh in interest. The Foundation, by filing an RTI application, managed to get the performance of Portfolio Management Schemes to be disclosed and, eventually, was able to get an order asking SEBI to put all the information out on its website from April this year.
Moneylife Foundation has also been working towards the removal of arbitrary regulations governing mutual fund distribution and the tens of thousand unregulated pyramid and Ponzi schemes that are beggaring people around the country.
In the next year, it plans to widen its counseling initiative to areas such as Wills & Nominations and other legal issues. It intends to launch counselling in at least two new areas in the coming year and to extend this to members across India through webchats, email and video links. The Foundation also plans to take up issues relating to credit scores and credit history as well as senior citizens’ issues in the coming year.
To mark the occasion of its third anniversary, Moneylife Foundation has organised an event in Mumbai today, 15 February 2013, at which CAG Vinod Rai will speak on “Government Accountability is the key to a Vibrant Democracy”.
Vinod Rai, the first Comptroller & Auditor General of India (CAG) to show us that the government and politicians can be made accountable, if statutory bodies simply do their job, will address a packed audience on the need for an accountable government in building a vibrant democracy
Moneylife Foundation has organised a lecture by Comptroller and Auditor General of India (CAG) Vinod Rai, to be followed by a question and answer session to be moderated by the Foundation’s trustee Sucheta Dalal, at Swatantryaveer Savarkar Rashtriya Smarak in Dadar (Mumbai) at 6:30pm this evening.
CAG Vinod Rai’s relentless audit and fearless disclosures have told the story of the massive real and potential losses in the sale of 2G telecom spectrum, the Commonwealth Games, allocation of captive coal blocks and irrigation projects. Mr Rai has managed to remain unflappable under extraordinary political pressure, making him no less a national hero than anyone else in recent memory.
His fearlessness has shaken up government and unsurprisingly attracted detractors, mostly from the government. Even the prime minister, on more than one occasion, has said that the CAG is going beyond his mandate. Mr Rai hasn’t backed down, of course. Just last week, addressing Harvard’s prestigious Kennedy School, he criticised the Manmohan Singh government for attempting to reduce the federal auditor to a mere accountant with no real role in auditing policy.
Mr Rai took over as the Comptroller & Auditor General of India on 7 January 2008. He has a Masters Degree in Economics from Delhi University and Masters in Public Administration from Harvard. A 1972 batch IAS from the Kerala cadre, he was the Additional Secretary, Banking and later, Secretary, Department of Financial Services, in his previous assignments.
About ML Foundation: For three years now, Moneylife Foundation has been spreading financial literacy all over India. Its member base now exceeds 21,000. The Foundation has conducted over 150 seminars on topics as diverse as Right to Information, Wills and Nominations and Pyramid Schemes. It was set up by Sucheta Dalal, Debashis Basu and Dr Nita Mukherjee.