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India Equity Research Reports, IPO and Stock News
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In our Sesa Goa report of this morning (Leave Oil, buy Steel) we suggested Sesa Goa could
acquire JSW Steel instead of Cairn. We should clarify that JSW Steel has no intention
whatsoever of being acquired and our suggestion was purely hypothetical given the serious
challenges faced by iron ore exporters
JSW Steel is not up for sale
We should clarify, contrary to the suggestion we made in our report on Sesa Goa “Leave Oil, buy
Steel” (released this morning), that, while Sesa Goa might look at JSW Steel as a potential
acquisition target, JSW Steel has no intention of being sold or acquired. In fact, JSW Steel is
currently pursuing its own expansion programme in India and has its own M&A agenda. Our note
was purely hypothetical: we were suggesting an alternate course of action for Sesa Goa given: 1)
negative investor feedback in relation to the Cairn acquisition; and 2) the increasing number of
obstacles iron ore exporters face that make venturing into steel-making a viable proposition. The
promoters of JSW Steel own 38% of it with a further 15% owned by JFE Steel, Japan and any
attempt to acquire JSW Steel would require these two parties’ consent.
JSW Steel all set to achieve historic milestone
JSW Steel is all set to commission a 3mtpa blast furnace at its Vijayanagar works which would
take total capacity to 10mt and make it the largest Indian steel producer at a single location and
India’s largest private sector steel producer. JSW Steel is also completing the acquisition of
controlling stake in Ispat Industries and has raised its open offer price for the minority acquisition
for Ispat Industries.
Rating unchanged: raw material prices remain high
We believe that the next two to three quarters will involve a confluence of several factors that
could increase the volatility of margins for JSW Steel given the lack of integration across its
businesses: 1) higher coal and iron ore prices, 2) a seasonally sluggish domestic steel market,
and 3) new capacity coming on stream. Steel producers could attempt to raise prices but we
would not be confident that they would achieve 100% pass-through. We prefer integrated players
such as Jindal Steel & Power at this stage.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
In our Sesa Goa report of this morning (Leave Oil, buy Steel) we suggested Sesa Goa could
acquire JSW Steel instead of Cairn. We should clarify that JSW Steel has no intention
whatsoever of being acquired and our suggestion was purely hypothetical given the serious
challenges faced by iron ore exporters
JSW Steel is not up for sale
We should clarify, contrary to the suggestion we made in our report on Sesa Goa “Leave Oil, buy
Steel” (released this morning), that, while Sesa Goa might look at JSW Steel as a potential
acquisition target, JSW Steel has no intention of being sold or acquired. In fact, JSW Steel is
currently pursuing its own expansion programme in India and has its own M&A agenda. Our note
was purely hypothetical: we were suggesting an alternate course of action for Sesa Goa given: 1)
negative investor feedback in relation to the Cairn acquisition; and 2) the increasing number of
obstacles iron ore exporters face that make venturing into steel-making a viable proposition. The
promoters of JSW Steel own 38% of it with a further 15% owned by JFE Steel, Japan and any
attempt to acquire JSW Steel would require these two parties’ consent.
JSW Steel all set to achieve historic milestone
JSW Steel is all set to commission a 3mtpa blast furnace at its Vijayanagar works which would
take total capacity to 10mt and make it the largest Indian steel producer at a single location and
India’s largest private sector steel producer. JSW Steel is also completing the acquisition of
controlling stake in Ispat Industries and has raised its open offer price for the minority acquisition
for Ispat Industries.
Rating unchanged: raw material prices remain high
We believe that the next two to three quarters will involve a confluence of several factors that
could increase the volatility of margins for JSW Steel given the lack of integration across its
businesses: 1) higher coal and iron ore prices, 2) a seasonally sluggish domestic steel market,
and 3) new capacity coming on stream. Steel producers could attempt to raise prices but we
would not be confident that they would achieve 100% pass-through. We prefer integrated players
such as Jindal Steel & Power at this stage.
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