Vedanta stock dips 1% after acquisition of Ferro Alloys Corporation
Shares of Vedanta slipped 1% on the BSE after the company said in the filing that it is implementing the approved Resolution Plan for Ferro Alloys Corporation.
The acquisition will complement the Company's existing steel business as the vertical integration of Ferro manufacturing capabilities has the potential to generate significant efficiencies.
"Under the order dated January 30, 2020, of National Company Law Tribunal Cuttack, Vedanta Limited is implementing the approved Resolution Plan for Ferro Alloys Corporation Limited ("FACOR")," the company said.
The consideration is in the form of upfront cash and non-convertible debentures which will mature in 4 equal instalments over a period of 4-years whereby management control of FACOR will be taken by the company.
The consideration payable for the acquisition of FACOR on debt and cash-free basis under the approved Resolution Plan is Rs10cr as well as equivalent of cash balance in FACOR's subsidiary, FACOR Power Limited (FPL) as Upfront Payment and zero-coupon, secured and unlisted Non-Convertible Debentures of aggregate face value of Rs270cr to the Financial Creditors payable equally over 4 years commencing March 2021.
FACOR is a company in the business of producing Ferro Alloys and owns a Ferro Chrome plant with capacity of 72,000 TPA, two operational Chrome mines and 100 MW of Captive Power Plant through its subsidiary, FPL.
Meanwhile, the company will announce its Q3FY20 numbers today.
InidaInfoline
SC allows Jindal Steel to transport iron ore from Odisha's Sarda Mines
The Supreme Court on Thursday allowed Jindal Steel and Power (JSPL) to transport high quality iron ore lying at its Sarda Mines but with riders. The apex court has said that the iron ore can be transferred only after Sarda Mines Pvt Ltd (SMPL) pays off its dues to the Odisha government.
The decision will allow JSPL to transport ₹2,000 crore worth of 12 million tonne of iron ore from Sardda Mines to its pellet plant at Barbil, both in Odisha. At 11.10 am on the BSE, shares of JSPL traded at ₹174.85, recovering from the day's low of ₹172.40.
The Supreme Court had on 16 January reserved its order in the case after taking on record from SMPL an undertaking of payment of ₹933 crore towards environmental compensation to the state government. An official, familiar with the development, said SMPL has already cleared its dues of ₹933 crore.
SMPL, a supplier of a high quality ore to the Naveen Jindal-led JSPL plant, was closed on March 2014, because of lack of environment clearances. Following the closure of the mine, JSPL has been sourcing raw material for its plant from the open market.
The Odisha government had challenged an order passed by the Odisha high court giving JSPL access to 12 million tonne of iron ore from Sarda Mines. The state government had claimed that this could not be allowed without an environmental clearance under the Mines and Minerals (Development and Regulation) Act, 1957.
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Foreign capital outgo exceeds FDI inflows in the mining sector
The flight of foreign capital in mining sector has outweighed the inbound FDI (Foreign Direct Investment) flows.
Though FDI is permitted in the mining sector since February 2000, its flow has been intermittent over the last few years. From $592 million in 2010-11, FDI in mining has subsided by more than half to $247 million at the end of 2018-19.
Predicating its findings on FDI inflow figures of the Reserve Bank of India (RBI) and outflow data collated by Cassels & Graydon LLP and EY, the Federation of Indian Mineral Industries (Fimi) in its study titled 'Indian Mining: A Synopsis' noted that Indian capital in mining is moving out of the country to foreign locations, creating employment opportunities and socio-economic development there. By contrast, the domestic mining sector is languishing with substantive job losses precipitated by intermittent closure of mines. Production has also got a jolt due to shutdown of mines in the key producing states of Odisha, Karnataka and Goa. For instance, Goa, a producer of baser grade, inferior quality iron ore witnessed the complete shutdown of 88 mines after a Supreme Court order in February 2018.
On a comparative plane, outgo of domestic capital trumps the incoming FDI many times over. Between 2010 and 2014, the country received $889 million of FDI inflows in mining. Against this figure, the capital outgo in the comparable period stood at $3200 million with 22 deals struck in Australia, Indonesia and Africa. The same lopsided trend was seen in calendar 2015 as FDI inflow of $129 million paled into insignificance compared to the capital outflow of $721 million with 25 global deals clinched.
India is losing out on FDI investments due to frequent bans on mining and implementation of Acts and Rules that have proved to be counterproductive to investments.
"The overall ecosystem has proved to be repulsive to foreign investors who have exited India. It has also pushed the country out of the league of mining destinations of the world. The situation is manifest in India's ranking in Mining Attractiveness at the Fraser Institute's Annual Survey of mining companies based on policy perception and mineral potential", said an industry source.
India ranked 73 amongst 109 countries or mining jurisdictions surveyed by Canada-based Fraser Institute in calendar 2015. The ranking slumped to 97 in the list of 109 countries in 2016. India dropped out of the survey in 2017 and 2018.
Steep taxes on mining have robbed India of its competitive advantage. Mining continues to be the most taxed industry anywhere in the world with a cocktail of levies like royalty, Goods & Service Tax (GST) and contributions by mine lessees to District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET).
The Effective Tax Rate (ETR) on mining in the country ranges from 54-58 per cent. This is far steeper than Mongolia (31.3 per cent), Chile (37.6 per cent), Australia (39.7 per cent), South Africa (39.7 per cent) and Namibia (44.2 per cent).
BS
Coal India production not to exceed 640 million in FY20: Official
Hit by disruptions due to a prolonged monsoon, mining major Coal India Ltd's production in the current fiscal will not exceed 640 million tonnes, a top company official said on Thursday.
The state-run miner had a target to produce 660 million tonnes of coal in 2019-20 as against 607 million tonnes produced in the last fiscal.
"We are trying our best to reach close to 660 million tonnes, but given the circumstances, we don't think we will able to cross 640 million tonnes," Coal India Chairman A K Jha told PTI.
Production loss in five months during the monsoon was a major reason that dragged down the miner's production, the official said.
Coal India has targeted February and March to achieve the highest production and strategy for it is already in place, he said.
BS
Govt pushing for demerger of NMDC's Chhattisgarh steel venture
Bhubaneswar: The central government's disinvestment arm is pushing for a demerger of NMDC's steel venture in Chhattisgarh and a strategic stake sale of the unit despite objections from the steel ministry, people in the know of the development said.
The Department of Investment and Public Asset Management (Dipam) has issued a revised note before it seeks the approval of the Cabinet Committee on Economic Affair for the demerger of the Nagarnar Steel Plant (NSP), following which the government's shareholding (of 72.28% in the demerged entity) can be sold, they said. The process, the department expects, can be completed in seven months. Dipam has argued that the demerger would give investors a clear idea of NSP's individual operations and cash flows, the people, who have seen the note, told ET. The demerger will also likely increase the market capitalisation of NMDC since its focus would then be on the core business of mining, they cited the department as saying in the note. However, NMDC, its parent steel ministry and the Congress government in the state are opposed to the idea of adisinvestment at this juncture. Dipam's note has cited the steel ministry's objections. The ministry fears that the move will derail its plans to complete the construction of this 3-million-tonne-a-year plant deep in the Naxal-affected district of Bastar in Chhattisgarh, the people said. Conceived more than a decade back, the plant is expected to be commissioned by June 2020. It is now expected to cost Rs 22,500 crore. Also, the state miner believes any suggestion of disinvestment will affect its capital expenditure and complicate plans for acquiring new mines in the now Congress-ruled state, the people said.
Four years ago, when the Narendra Modi government initiated the disinvestment of this plant, there were strong protests. Even the then Raman Singh-led BJP government in the state had concerns that the move could flare up left-wing extremism. Current chief minister Bhupesh Baghel of the Congress has made public comments against any move to sell the plant.
As steel demand picks up, companies turn to home market; prices may go up
A pick-up in demand for steel and successive price increases is prompting companies to bring back focus on the domestic market.
Steel companies are mulling an increase in prices up to Rs 2,000 a tonne in February, which would be the fourth increase in a row. The price differential between domestic steel and imports is approximately $30 a tonne currently.
JSW Steel, director (commercial & marketing), Jayant Acharya said there is a potential for prices to increase to that extent.
Add to it, an increase in international prices by $50-$100 a tonne in the last few months and an upward push in raw material prices, and there is a case for an increase in steel prices.
After a slump in September-October, prices started moving up since November. International prices of hot rolled coil (HRC) in April (last year) were at around $530 a tonne. In September-October, it dropped to $430 a tonne and now it's around $505 a tonne.
"There is an improvement in demand. Prices have bottomed out," Acharya added.
It holds for domestic prices too that have been moving up since November. In the last three months, the increase passed on to customers is about Rs 3,000 a tonne.
Restocking is one of the major factors fuelling the increase. "Infrastructure and construction sector has seen some of the demand coming back as has auto," said an official of another major steel producer.
As a result, there has been some correction in inventories across supply chains. JSW's inventory over the last quarter, for instance, has reduced by 245,000 tonne. Over the next few months, Acharya expects demand to pick up further.
The improvement in demand is prompting steel companies to focus on the domestic market.
Acharya said, JSW's exports moderated from 31 per cent of total sales in the second quarter to 24 per cent in the third quarter. "Some moderation was expected in the fourth quarter as well," he said, while reminding that the fourth quarter was seasonally a strong quarter.
"The focus is clearly on the domestic market. Whenever there is an increase in prices, the focus is on the domestic market. Even if there is some differential in import and domestic prices, transportation time makes up for it. Exports to Europe take about 2-3 weeks," said another producer.
With the increase in prices, there is clear-cut case for companies to increase focus on the domestic market, said Jayanta Roy, senior vice president, ICRA.
To bring down the inventory levels, steel companies had resorted to increase exports in the second quarter. However, month-on-month, exports have been coming down.
"The key thing to watch out for would be whether the price increase planned in February would be sustainable," Roy added.
Currently, prices of HRC are at around Rs 36,000 a tonne, that's at the same level as August 2019.
The only difference between now and then, said Roy, is that coking coal prices were at around $200 a tonne last August and it's currently at $150 a tonne. "So there is a coal cost saving of $35-$40 a tonne," he added.
Coking coal prices had dipped further to $130 a tonne and then moved to $150-levels.
BS
Diamond exports to China, the Far East likely to come down
Diamond exports to China and the Far East are likely to suffer owing to the outbreak of coronavirus, said exporters, especially since the region accounts for nearly 30 per cent of India's total shipments of cut and polished diamonds. Exports during the Chinese New Year fell drastically, they said. "Sales of diamonds pick up during the Chinese New Year," said Vipul Shah, a leading diamond exporter. "The diamond stock with Chinese traders comes down once the Chinese New Year is over, and they place new orders. Due to the outbreak of coronavirus, sales of diamonds have already dropped in China and the Far East nations. And subsequently, enquiries from the region have dropped." The Chinese New Year kicked off on January 25 and the festival will continue till February 8. China as well as the neighbouring Far East nations draw a lot of tourists during this time and many of them splurge on jewellery. "The coronavirus attack comes at a time when diamond exporters had heaved a sigh of relief following the signing of the 'phase one' agreement between the US and China," said Shah, a former chairman of the Gem & Jewellery Export Promotion Council. "We were expecting that the trade situation will improve and demand from the Chinese market will start picking up. But just at that juncture, coronavirus attacked China. Consumer spending becomes a casualty as people stay away from malls and shopping complexes in fear of getting infected by the virus." India's exports of cut and polished diamonds fell 17.14 per cent year-onyear in the first nine months of this financial year. Traders were expecting an increase in exports in the fourth quarter following the US-China trade treaty. But the coronavirus outbreak has dampened sentiment. The new strain of the coronavirus pathogen was traced to a busy seafood market in Wuhan city, Hubei province, in December 2019. The number of confirmed coronavirus cases in China surged to 5,974 by Wednesday, with 132 people reported to be dead.
ET
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