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Metals and mining Marginally negative
Expectations from the budget
Increase in import duty on steel, which is currently at 5%.
An increase in ad valorem export duty on iron ore exports from the current level of
15% for iron ore lumps and 5% for iron fines.
Announced measures
Increase in ad valorem export duty on iron ore: The rate of export duty on iron ore
has been increased from 15% on lumps and 5% on fines to a unified 20% on all
iron ore grades. However, full exemption from export duty has been provided to
exports of value-added forms of iron ore including iron ore pellets.
Imports of stainless steel scrap have been fully exempted from basic customs duty.
Increase in the rate of Minimum Alternate Tax (MAT) from the current 18.0% to
18.5% of book profit.
Impact on the metals and mining sector – marginally negative
Increase in ad valorem export duty on iron ore – we view this as being
negative for iron ore exporters, but positive for Indian steel producers not
fully integrated on iron ore
The increase in export duty on iron ore is negative for iron ore exporters like Sesa
Goa (SESA IN) and NMDC (NMDC IN). We expect this to hurt EBITDA and PAT of
the two companies in FY12. For iron ore exporters, operating costs will increase
with higher export duty; for miners selling domestically, iron ore realisations will
decline due to export parity pricing.
The measure is positive for JSW Steel (JSTL IN) as its buys 80-90% of its iron ore
requirement from NMDC and other domestic sources. We expect a positive impact
on EBITDA and PAT for FY12. We see no impact for other Indian steel producers
like Tata Steel (TATA IN) and SAIL (SAIL IN) as they are 100% self-sufficient in
iron ore.
Increase in the rate of Minimum Alternate Tax (MAT) from the current 18.0%
to 18.5% of book profit - Neutral
The increase in the MAT rate does not impact the metals and mining sector as
most of the companies, except Balco and Sterlite Energy (subsidiaries of Sterlite
Industries), pay taxes at the full rate, and do not under the ambit of MAT.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Metals and mining Marginally negative
Expectations from the budget
Increase in import duty on steel, which is currently at 5%.
An increase in ad valorem export duty on iron ore exports from the current level of
15% for iron ore lumps and 5% for iron fines.
Announced measures
Increase in ad valorem export duty on iron ore: The rate of export duty on iron ore
has been increased from 15% on lumps and 5% on fines to a unified 20% on all
iron ore grades. However, full exemption from export duty has been provided to
exports of value-added forms of iron ore including iron ore pellets.
Imports of stainless steel scrap have been fully exempted from basic customs duty.
Increase in the rate of Minimum Alternate Tax (MAT) from the current 18.0% to
18.5% of book profit.
Impact on the metals and mining sector – marginally negative
Increase in ad valorem export duty on iron ore – we view this as being
negative for iron ore exporters, but positive for Indian steel producers not
fully integrated on iron ore
The increase in export duty on iron ore is negative for iron ore exporters like Sesa
Goa (SESA IN) and NMDC (NMDC IN). We expect this to hurt EBITDA and PAT of
the two companies in FY12. For iron ore exporters, operating costs will increase
with higher export duty; for miners selling domestically, iron ore realisations will
decline due to export parity pricing.
The measure is positive for JSW Steel (JSTL IN) as its buys 80-90% of its iron ore
requirement from NMDC and other domestic sources. We expect a positive impact
on EBITDA and PAT for FY12. We see no impact for other Indian steel producers
like Tata Steel (TATA IN) and SAIL (SAIL IN) as they are 100% self-sufficient in
iron ore.
Increase in the rate of Minimum Alternate Tax (MAT) from the current 18.0%
to 18.5% of book profit - Neutral
The increase in the MAT rate does not impact the metals and mining sector as
most of the companies, except Balco and Sterlite Energy (subsidiaries of Sterlite
Industries), pay taxes at the full rate, and do not under the ambit of MAT.
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