The truckers are protesting the hike in diesel prices and the government’s toll policy
All India Motor Transport Congress (AIMTC) today threatened that truckers will go on an indefinite strike from 1st August in southern India to protest the hike in diesel prices and the government's toll policy, reports PTI.
"Representatives of Southern India Motor Transport Association (SIMTA) have decided to stop operations from mid-night of 1 August, 2010, and AIMTC will also join SIMTA if no action is taken by the government," the transporters' body said in a statement here. SIMTA is part of the all-India body.
The opposition National Democratic Alliance (NDA) and the Left parties had called for a “Bharat Bandh” on 5th July to protest the recent hike in fuel prices.
Following the hike last month, petrol, diesel and kerosene rates have gone up by Rs3.50, Rs2 and Rs3 a litre, respectively.
In an environment of herd mentality, it is refreshing to see completely different viewpoints on Sesa Goa Ltd from two respected brokerages. CLSA is incredibly bearish and IDFC very bullish. Where could the stock be headed?
A very negative environment in iron-ore pricing (after China's removal of export rebate for steel) has been putting pressure on Sesa Goa, India's largest exporter of iron ore in the private sector. However, despite a negative breakout on 29th June, the stock has not broken below the Rs345 level (take a look at the attached chart). Technical analysis shows that if the stock breaches the Rs345 level, it could fall to Rs315. However, if it sustains above this, it could touch Rs400. Interestingly, CLSA India is extremely bearish on this company and has come out with a report today cutting estimates sharply, while IDFC is very bullish. So where could Sesa be headed?
Sesa Goa has some incredible positives - good cash flow, volume growth (mostly from Orissa and Karnataka), reserve addition through acquisitions such as Dempo, and apparently cheap valuations. A recent IDFC research report says its current market price of around Rs350 implies steady state realisation of $47 per tonne for iron ore reserves, which is 70% lower than the spot price and also below the 5-year average contract prices ($65). IDFC pegs Sesa's EV/EBITDA at 1x FY12, lower than peers.
But there are a lot of things that could go wrong for this stock:
(1) The management has a sales volume target of 50 million tonnes per annum (mtpa) for FY12 but they could easily fall short of this (current sales at 21mtpa) since this ramp-up is dependent on too many clearances, mainly environmental.
(2) Most positive reports on the stock assume that the bargaining power will remain with iron ore suppliers over the next few years, especially after the Rio and BHP joint venture. However, recent events have shown that if China continues its strategy of rationalising production of steel, this balance may soon tilt in favour of buyers - and there is no doubt that China has incredible influence as a resource buyer. Sesa sells most of its products in the spot market and would be adversely affected.
(3) Another perceived positive that could easily turn into a major negative is Sesa's acquisition potential. Sesa will probably be sitting on about Rs210 billion in cash and have a net-worth of around Rs240 billion by FY12 (IDFC estimates). However, even in a falling iron ore price environment, any acquisition that it might make in the next two years has the potential to be expensive - this is because iron ore prices are still at unprecedented highs and nowhere near a value zone as far as acquisitions are concerned and secondly, if it is a global acquisition, it will face tough competition from bigger players, which will only drive up prices.
(4) Another risk that is often taken lightly by the market is regulatory risk. The steel ministry has been lobbying for a ban on iron ore exports not on the grounds of shortage, but on the grounds of 'non-renewable resource for the local industry'. Interestingly, this is the reason why China does not promote iron ore exports. Another regulatory risk is environmental clearances or a resource tax on Indian miners. Other risks include even more stringent measures from China to ban low grade iron ore (Sesa's grade is not as good as NMDC's).
CLSA's recent report believes that supply will outstrip demand much sooner than expected (in the second half of 2010 itself) as many projects go on-stream and China's steel demand is likely to slow down very sharply to just 4% in 2011 after the withdrawal of the stimulus.
It is very clear that Sesa is very sensitive to news from China but it is also sensitive to the movements in our broader market. If the Nifty fails to sustain above the 5,400 mark, we could see pressure in the overall market and Sesa would be no exception. However, if the broader market keeps outperforming, Sesa could very well outperform, unless there is some fresh negative news from China.
Sesa Goa operates in Goa, Karnataka and Orissa. In the past couple of years, it has also started manufacturing pig iron and metallurgical coke.
Mr Mittal has already said that 3G services will not come cheap, especially for metro cities like Delhi and Mumbai, where the 3G spectrum bid was the highest at Rs3,316.93 crore and Rs3,247 crore respectively
With no operator getting a pan-India footprint for third generation (3G) because of high bid for spectrum, telecom czar Sunil Mittal today slammed the auction design, saying it created an artificial scarcity, reports PTI.
The government has earned over Rs67,700 crore from the sale of 3G spectrum with pan-India bid touching Rs16,750 crore. Bharti paid Rs12.295.46 crore, the most among operators, for 3G spectrum in 13 circles, including Delhi and Mumbai.
The pan-India reserve price for 3G spectrum was Rs3,500 crore.
To a question on operators initially welcoming the auction process, but later opposing it after bid prices touched sky high, Mr Mittal said "we welcomed the auction process for giving spectrum out. The auction design we never welcomed.
"The auction design, given that the auction will close when all 22 circles close, to my mind lends itself to mischief by some of the non-serious players," he said.
Global consultant NM Rothschild was the lead auctioneer, contracted by the Department of Telecom (DoT).
After the end of the 34-day long auction process for 3G spectrum, Mr Bharti had said "we would like to point out that the auction format and severe spectrum shortage, along with ensuing policy uncertainty, drove the prices beyond reasonable levels.
The government had estimated Rs35,000 crore revenues from the sale of 3G and Broadband Wireless Access (BWA) spectrum but it got over Rs1,06,262 crore, an amount that would bring down the fiscal deficit of the Centre by about one percentage point.
Mr Mittal has already said that 3G services will not come cheap, especially for the subscribers in the metro cities like Delhi and Mumbai, where the 3G spectrum bid was the highest at Rs3,316.93 crore and Rs3,247 crore respectively against the reserve price of Rs420 crore each.
As per the auction format, the bidding remained open till the demand and supply became equal in all the circles.
This created a situation of an artificial scarcity and drove the prices beyond reasonable levels, Mr Mittal said, adding this would determine the tariffs for 3G mobile services offering high-speed broadband.
Similarly in case of BWA spectrum auction the all-India bid touched Rs12,847.77 crore vis-à-vis reserve prices of only Rs1,750 crore.
In the BWA auction, only Infotel Broadband, which was later acquired by Mukesh Ambani-led Reliance Industries (RIL), bagged the pan-India spectrum while other leading players like Airtel could manage to get the radio airwaves only in four circles.
In fact Anil Ambani group firm Reliance Communications (RCom) and Vodafone exited from the auction citing high bid prices.