Stocks

Sesa Goa jumps as iron ore export ban ends

Suresh P. Iyengar Mumbai | Updated on April 05, 2011

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Nod for Cairn open offer also boosts sentiment





Sesa Goa, a Vedanta Group company, gained investors' interest on hopes that the Karnataka Government will lift the ban on iron ore exports from April 20, as directed by the Supreme Court.

The company's shares on BSE were up 6 per cent at Rs 314 on Tuesday

The company, one of the largest iron ore exporters, was hit by the State Government decision last July to impose a ban on iron ore exports from the State's 10 ports to curb illegal mining.

A petition against the State Government's dictate was filed in the Supreme Court in November by major mining companies such as Sesa Goa, MSPL Ltd, SB Minerals and Mineral Enterprises after the High Court rejected their plea.

In January, the Supreme Court asked the Karnataka Government to either notify a law against illegal mining within two weeks or lift its ban order on transportation of iron ore meant for exports. In February the Court directed the Government to allow export of the iron ore that had piled up at major ports in the State.

It gave 15 days for the State Government to tighten the required infrastructure to check illegal mining in the State.

Production

Following the court direction, the State Government had notified the Karnataka Prevention of Illegal Mining, Transportation and Storage of Minerals Rules, 2010.

Mr Pawan Burde, Research Analyst, Anand Rathi, said with the ban gone, Sesa Goa's iron ore production from the State may increase as Karnataka contributes about 18 per cent of volume.

Sesa Goa stocks were further boosted by the Vedanta Group Chairman, Mr Anil Agarwal's confirmation on Tuesday that SEBI has cleared the open offer for acquiring 20 per cent stake in Cairn India.

The much-delayed open offer comes after Vedanta Group announced in August last year its intention to acquire about 60 per cent stake in Cairn India for $9.6 billion, including Sesa Goa's open offer.

As a person acting in concert, Sesa Goa will make an open offer at Rs 355 a share to Cairn minority investors while the UK-based Cairn Energy will receive Rs 405 a share, including a non-compete fee of Rs 50 a share.

Analysts expect the Cabinet Committee on Economic Affairs that is meeting on Wednesday to clear the Vedanta Resources Plc deal to acquire Cairn India stake.

“We are upgrading the stock to buy from sell. Current stock price does not include valuation of the probable 20 per cent holding in Cairn India in the event of its acquisition by Vedanta coming through after regulatory approvals. This holding itself would be valued at about Rs 5,300 crore at Cairn's CMP of Rs 350 after factoring in 60 per cent holding company discount,” said Mr Niraj Shah of Fortune Financial Services.

STEEL PLANT ACQUISITION

Sesa Goa recently acquired the distressed assets of Bellary Steel and Alloys in a deal valued at Rs 220 crore from IFCI.

The all-cash deal provided the country's largest iron ore producer and exporter an entry into steel industry.

Bellary Steel assets include an under construction steel plant of 0.5 mtpa with freehold land of 700 acres.

Located in iron ore-rich belt of Karnataka, Bellary Steel provides Sesa Goa an opportunity to set up a value addition facility, with about 700 acres of freehold land.

Published on April 05, 2011

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