IT Services (UBS) Budget 2011 impact: Marginal negative

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Mining (Navin Gupta)
Budget 2011 impact: Negative for iron ore companies
􀁑 No change in excise duty from the current 10% - in line with expectations
􀁑 Decrease in surcharge from 7.5% to 5% - This is positive for the entire
metals/mining sector
􀁑 Increase in export duty on iron ore – both lumps & fines to 20% from the
current 15 & 5% respectively
— The increase in the iron ore export duty is significantly negative for Sesa
Goa, as the company exports ~95% of its production and ~90% of the
exports are fines.
— The move is just marginally negative for NMDC as in its case exports
account for less than 10% of total sales volume.
Sector view: Selectively positive
We forecast deficit both in the global iron ore market and seaborne trades in
2011 and 2012. Both Sesa Goa and NMDC are plays on iron ore but we prefer
Sesa Goa due to attractive valuations. Introduction of mining tax or increase in
royalty rate is likely to be negative for the sector.