The Hindu Business Line : Budget impact: Sesa Goa slumps 8.5%

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Kolkata Feb. 28 The Sesa Goa scrip closed at Rs 1,783.35, down 8.45 per cent, after touching a low of Rs 1,760. The traded volume was higher than the two-week average of 2.89 lakh shares on the BSE. Analysts said the Budget proposal for imposition of export duty of Rs 300 per tonne of iron ore has served as negative for the only listed iron ore exporter.

Mr P.K. Mukherjee, Managing Director of the company, told Business Line today that the imposition of export duty on iron ore would have a "disastrous" effect on the balance sheet of the iron ore exporters in both private and public sectors. The profitability of the company will be directly affected to the extent of the fresh export duty imposition. In 2005-06 Sesa Goa had exported around 7.7 million tonnes of iron ore.

For 2007-08, Sesa Goa has secured a price increase of 9.5 per cent for all its grades of iron ore from its Japanese and Chinese customers over the 2006-07 prices. The deals for European and Pakistani clients are slated to be through in March and April respectively.

In the backdrop of a proposed sale of the controlling stake in the company by the Japanese promoter, Mitsui, and the anticipation of increase in the profits in view of higher rates, the stock had been attracting premium in the market.

Mr Mukherjee confirmed that a due diligence exercise would take place in March.

Mr Ajay Jaiswal of Angel Broking said today's market response was in relation to the Budget proposal as also revaluation because of impending stake sale possibility.

He felt that since the company has very little flexibility in terms of dictating the export price in the long-term (one-year) contracts, the bottomline might be adversely influenced.