The Hindu Business Line : Sesa Goa gains on hope of good growth prospects

Some of the top broking firms feel that Sesa Goa's strong performance is expected to continue into 2006 as steel raw material (iron ore) prices continue to show strength.

On Tuesday, the stock gained 6.6 per cent at Rs 736.90 on the BSE with a volume of 8.16 lakh shares; on the NSE, it closed at Rs 736.75, up 6.58 per cent, with a volume of 17.59 lakh shares.

Another reason for the rise in the stock price was due to better performance shown by Sesa Kembla, a subsidiary of Sesa Goa, in 2004-05. Sesa Kembla is into the business of coke, a raw material for making steel.

The company also issued a notice to the stock exchanges on Tuesday saying that the merger of Sesa Kembla with it has been approved by shareholders. However, brokers said the rise in the stock price had nothing to do with the notice, as the market knew about it.

According to foreign broking firm CLSA, "We had expected that average coke prices in 2005 would be lower than in 2004 — but coke prices have stubbornly stayed about 2.5-3 times higher than 2004."

The firm said for 2006, the company expects that coal contract prices will increase by about 50 per cent whereas coke prices may remain at present levels.

An analyst with a domestic broking said recent discussions between various steel mills and iron ore producers such as BHP and CVRD indicate that annual contract prices for iron ore are likely to see an increase in double digits next year.

"China has emerged as the largest market for Sesa's exports. Indian iron ore exports have incrementally gained market share in China due to relatively lower freight costs in importing from India."

He said Sesa Goa expects to achieve a volume growth of five per cent from its existing mines.

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