Metals Stocks Outlook: Rally may fizzle out next week on weak cues

 29 Jul 2022

Next week the market will weigh on the weak earnings performance of metal sector stocks in the June quarter. This week two large metal sector companies, Tata Steel Ltd and Vedanta Ltd, reported their financial results for Apr-Jun with both revealing a fall in operating margin.

The metal stocks traders are also getting tired of statements of Chinese push for economic revival leading to rebounce real estate projects and ensuing demand for base metals.

“There is nothing on the ground that corroborates the claim,” said a metals analyst with a leading brokerage.

This week, metal stocks moved higher strongly on clarity from the Federal Reserve not pursuing an aggressive rate hike trajectory due to a contraction in US economy for a second quarter. The Nifty Metal index ended the week 7.7% higher.

But the effect of the slight shift in Federal Reserve’s stance may be short lived going forward as fundamentals will come back to haunt.

The steel stocks may be under pressure due to expectations of the companies facing operating margin contraction in the current quarter as well.

This week, Tata Steel announced its results. The company’s consolidated net profit in Apr-Jun fell 12.9% on the year on the back of a 7% fall in operating profit.

Tata Steel’s executive director and chief financial officer Koushik Chatterjee said that there was a sharp rise in input costs especially coking coal and gas prices in Europe.

Earnings Outlook:UPL revenue to rise but input costs to impact margin

 27 Jul 2022

UPL Ltd is likely to have recorded a rise in its volume and realisations in the quarter ended June leading to a rise in its net sales.

But input cost pressures may have resulted in a marginal decline in its operating margin, even as operating profit is expected to increase on the back of sales increase.

The bottomline of the pesticides and agrochemicals company is, however, seen down due to the high base of last year when a tax write-back had boosted the net profit.

UPL’s consolidated net profit in Apr-Jun is expected to be 6.2 bln rupees, according to an average of estimates by four brokerages. The estimates peg the company’s consolidated net sales at 95.8 bln rupees.

The estimated net profit is 9% lower while the estimated net sales is 13% higher as compared to the corresponding figures of year ago period. Sequentially, however, the net profit is lower by 55% and the net sales by 40%.

The company will declare its June quarter results on Monday.

According to brokerage Nirmal Bang Equities UPL’s consolidated revenue in Apr-Jun is expected to increase by 9.9% on the year on the back of volume growth across all the regions.

It expects volume growth of 20% in Latin American markets followed by 15% in domestic market and 5% in North American region. UPL’s volume growth in the European region will be flat and lower by 0.7% in the rest of the overseas markets.

Sales to Latin American region constituted around 30% in the year ago quarter.

UPL’s revenue growth will be aided by double-digit increases in average realisations, brokerage Kotak Institutional Equities said.

The operating margin of the company is seen contracting a little in the June quarter due to input cost pressures.

Nirmal Bang Equities estimates the EBITDA margin “to be a tad lower at 20.7% versus year-ago level of 20.8%”. Kotak Institutional Equities believes it will “compress modestly.” EBITDA is earnings before interest, tax, depreciation, and amortisation.

The revenue increase will, however, pep up the operating profit of UPL in Apr-Jun by around 10%.

Besides the potential pressure from high input costs UPL may have incurred higher than expected working capital requirement and there may have been an adverse impact due to the rupee depreciation, according to Nirmal Bang Equities.

The company’s net profit will likely decline on the year due to a “difficult base”, said Kotak Institutional Equities. UPL’s net profit in the year ago quarter included a tax credit, it said.

Earnings Review: Segmental dynamics dominated Vedanta’s operations

28 Jul 2022

The profitability of Vedanta Ltd in the quarter ended June was supported mainly by the zinc, lead, and silver operations carried out under its listed subsidiary, Hindustan Zinc Ltd, while the aluminium and other segments proved to a major drag.

In Apr-Jun, Vedanta’s consolidated operating profit went up by just 7% on the year to 107.4 bln rupees despite revenue rising by 35% to 393.6 bln rupees.

Had it not been for a 49% jump in the operating profit of the company’s domestic zinc and lead segment to 52.3 bln rupees, the company’s profitability would have been badly hit.

The aluminium segment reported a substantial fall of 40% on the year to 22.5 bln rupees in Apr-Jun while the rest of the segments collectively saw a fall of 15% to 55.1 bln rupees.

The other segments included iron ore, oil and gas, international zinc, copper, and power.

The aluminium segment’s production output was 3% higher at 565,000 tn and revenue from aluminium sales jumped 43% to 146.4 bln rupees, but the cost of production surged 74% to $2,653 per tn.

The company attributed this sharp rise in cost of production of aluminium to power and fuel costs.

Vedanta’s overall power and fuel costs jumped 2.3 times to 89.5 bln rupees in Apr-Jun from that in the year ago period, and made up for 27% of total expenses.

The operating margin contracted to 32% in Apr-Jun from 41% a year ago.

Besides aluminium sales, the significant revenue increase of 35% was led by domestic zinc, lead, and silver segment whose revenue jumped 45% on the year to 91.8 bln rupees.

The mined metal production from domestic zinc operations rose 14% on the year to 252,000 tn in the June quarter. The company said this rise was “driven by higher ore production and better mill recovery.”

The company’s overall revenue was “supported by higher sales volume across businesses, commodity prices and strategic hedging gain.”

Going forward, Vedanta’s priorities according to its chief executive officer Sunil Duggal would be on volume, timely execution of projects, value added products, vertical integration, cost reduction and commodity price risk management.

Vedanta Apr-Jun profit muted due to surge in operating cost, sales up

28 Jul 2022

A sharp rise in power and fuel costs, and other expenses, took a severe toll on Vedanta Ltd’s profitability in the quarter ended June.

The net profit and operating profit were both up in single digits but the operating margin contracted sharply.

The metals and mining company recorded a small increase of 4.7% on the year in its consolidated net profit to 44.2 bln rupees while its consolidated total income rose 35% to 393.6 bln rupees.

Vedanta’s volume in different segments showed a mixed trend with iron ore and steel production registering declines and aluminium production recording a marginal increase. A double-digit rise in domestic zinc production is what aided the company’s topline in the June quarter.

The operating profit, as denoted by the earnings before interest, tax, depreciation, and amortisation, was up only 7% on the year to 107.4 bln rupees.

Power and fuel costs jumped 2.3 times to 89.5 bln rupees in Apr-Jun from that in the year ago period, while other expenses rose 38% to 87.2 bln rupees.

Both, power and fuel, and other expenses, made up for around 27% each of total expenses.

The main impact of the surge in input costs was felt on Vedanta’s EBITDA margin which contracted significantly to 32% in Apr-Jun from 41% a year ago.

Vedanta’s aluminium production rose marginally by 3% on the year to 565 kilo tn. Alumina production was also up marginally by 1% to 485 kilo tn.

The company’s production of saleable iron ore fell 14% on the year to 1.26 mln tn, while pig iron production stood at 189 kilo tn.

Vedanta’s steel production also fell 7% on the year to 269 kilo tn in the June quarter.

The company’s net debt increased by 58.2 bln rupees in Apr-Jun to 268 bln rupees as on Jun 30.

Earnings Review:Shree Cement profit dives, power and fuel costs surge

28 Jul 2022

The power and fuel costs more than doubled for Shree Cement Ltd in the June quarter and took a heavy toll on the company’s operating profit and net profit. A good sales rise could not offset the cost pressures.

In Apr-Jun Shree Cement’s consolidated net profit fell 56% to 2.8 bln rupees as compared to the year ago quarter, and it was also down 58% from the previous quarter. The consolidated net sales rose 22% on the year and 1.1% on the quarter to 44.1 bln rupees

At a standalone level the company’s net profit of 3.2 bln rupees, which was down 52% on the year, was considerably lower than analyst estimates of 5.1 bln rupees.

The revenue from operations were up 22% to 42 bln rupees and was above analyst estimates of 40.5 bln rupees.

Shree Cement’s consolidated operating profit fell 22% on the year to 8 bln rupees, down 22% over the year ago period and down 14% over the previous quarter. The operating margin contracted sharply to 18% in Apr-Jun from 28% a year ago and 21.1% in the previous quarter.

The profitability hit by a substantial rise in power and fuel expenses, which are predominantly petcoke and coal costs. It jumped 2.1 times on the year to 15.1 bln rupees. It accounted for around 38% of the company’s total operating expenses. Sequentially too it was up, by 19%

The freight and forwarding costs increased moderately by 8.3% on the year to 9.1 bln rupees and compared to the previous quarter it showed a decline of 5.2%.

Shree Cement’s depreciation charge jumped 30% on the year to 3.5 bln rupees in Apr-Jun. Tax expenses fell sharply by 53% on the year to 0.97 bln rupees.

Shree Cement is the second largest listed cement company by market capitalisation with 12 manufacturing units across 10 states in the country.

The company recently announced an expansion of annual cement capacity by 3 mln tn by end of 2024 for which it would have to incur a capital expenditure of 25 bln rupees.

Shree Cement’s current annual capacity stands at 46.4 mln tn. In 2021-22 (Apr-Mar) its plants ran at 64% capacity.

Earnings Outlook: Shree Cement volume, operating profit seen down QoQ

26 Jul 2022

Shree Cement Ltd’s sales volume in the quarter ended June would likely have been higher than a year ago due to the low base of last year but lower than the previous quarter. Higher realisation from cement price hikes would, however, result in revenue rise for the company.

The company’s revenue from operations is seen at 40.5 bln rupees according to an average of estimates by 12 brokerages, indicating an 18% growth on the year and a 1.2% decline on the quarter.

The June quarter net profit is seen at 5.1 bln rupees according an average of estimates by 11 brokerages. The estimated figure is lower by 23% from that of the year-ago period and also lower by 21% as compared to the previous quarter.

The operating profit of Shree Cement, as represented by the earnings before interest, tax, depreciation, and amortisation figure, is seen at 8.1 bln rupees in the June quarter, according to an average of estimates by 10 brokerages. It is 30% lower than 11.5 bln rupees of EBITDA in the year ago period and 23% lower than that of the previous quarter, data from Informist Corporate Fundamental Database showed.

The steep fall in operating profit in the June quarter would hit the company’s net profit and cause it to fall.

The company will declare its June quarter results on Thursday.

Brokerage Kotak Institutional Equities estimates the company’s volume in Apr-Jun to be 7.5 mln tn factoring in demand moderation due to higher cement prices. The estimated volume is 9.6% higher than year ago period due to a low base and 6.6% lower than that of the previous quarter.

Another brokerage Axis Securities predicts Shree Cement’s Apr-Jun revenue to be higher on the year due to better volume and higher realization.

However, the elevated and rising input costs would have hit Shree Cement’s profitability in the June quarter.

According to ICICI direct.com Research, Shree Cement’s “higher dependence on petcoke and imported coal is expected to lead to a sharp increase of 13% in the cost of production on a QoQ (quarter on quarter) basis”. On a year on year it is expected to increase 26%, the brokerage said.

Due to an on-the-quarter increase of 10%-15% in power and fuel costs led by pet coke and coal prices in the past six months and a 5%-7% increase in freight costs Kotak Institutional Equities estimates the operating profit per tn to fall 4% on the quarter and 26% on the year to 1,087 rupees. This will factor in the partial offsetting impact of higher realisations, the brokerage said.

Input cost inflation still a worry, may hike price, says Asian Paints

26 Jul 2022

Input cost inflation is likely to be around 1.5% to 2% in the quarter ended September after seeing an increase in the June quarter to 6% from 1% in the March quarter, the company told investors and analysts in a post-earnings conference call today.

The company is banking on cost efficiencies and calibrated price increases to maintain its profitability going forward. To combat ongoing price increases in key raw materials such as solvents Asian Paints has decided to take a 0.5% price increase from Aug 1.

The operating margin of the company expanded to 19.4% in Apr-Jun from 18.7% a year ago, the company disclosed.

Asian Paints’ managing director and chief executive officer Amit Syngle said that the on-year volume rise in Apr-Jun was 35%.

A strong volume increase and a 2% price hike in Apr-Jun contributed to the 54% jump in net sales to 86.1 bln rupees.

Sequentially, however, the volume increased by a lower rate of around 12%, data from the company’s investor presentation showed.

Further, the Apr-Jun revenue was up sequentially by only 9%, indicating that the 2% price hike was not enough to offset the 6% input cost inflation.

Volume in the June quarter rose on the back of higher contribution of business from tier-1 and tier-2 cities where the sales of premium emulsions, luxury products and waterproofing solutions were brisk.

The company said it saw a good increase in business-to-business category sales to the builder segment, construction companies, co-operating housing societies in cities, factory units and government’s infrastructure projects.

In its international business Asian Paint’s revenue was 7.1 bln rupees in Apr-Jun, up by 16% on the year. But the volume went up by only 6% and the company effected steep price increases to boost revenue.

The Asian markets of Nepal and Bangladesh contributed the most to the international business revenue growth.

But the company said that currently the key global units, especially in Sri Lanka, Bangladesh, Ethiopia and Egypt were facing multiple headwinds and the company expected them to be under strain for some time.

On the domestic front Asian Paints is only concerned about input cost inflation going forward and does not consider consumer demand to be a matter of concern.

Earnings Review: Asian Paints PAT jumps 79%, sales up on volume growth

26 Jul 2022

Asian Paints Ltd’s sales, operating profit and net profit recorded a significant increase in the quarter ended June.

The company said the sales growth was on the back of a “strong volume growth.”

The consolidated net profit of Asian Paints jumped 79% on the year to 10.2 bln rupees in Apr-Jun on the back of a 70% rise in its consolidated operating profit to 15.6 bln rupees.

The net profit surpassed analyst estimates of 8.7 bln rupees.

The company’s consolidated revenue from operations were up sharply by 54% on the year to 86.1 bln rupees and were higher than analyst estimates of 76.1 bln rupees.

Asian Paints’ managing director and chief executive officer Amit Syngle said that the domestic decorative business of the company “recorded stellar revenue growth” in the June quarter on the back of “good consumer demand.”

He said the automobile and the industrial coatings business “delivered a strong growth trajectory.”

Syngle said that gross margins were impacted by the “persistent inflationary environment” but the company was able to deliver good operating margins.

Asian Paints’ operating margin expanded to 18.1% in Apr-Jun from 16.5% a year ago.

The margin expansion was hindered by a 59% rise in the stock-in-trade purchase costs to 10.6 bln rupees and other expenses too rose sharply by 50% to 12 bln rupees.

But the fact that raw material expenses’ increase was curtailed to 34% enabled the company to record rise in profitability. The raw material costs were 46.1 bln rupees in Apr-Jun.

The overseas business of Asian Paints saw revenue rising in double digits despite multiple headwinds across key geographies, according to Syngle.

BSE MD Ashish Chauhan resigns, likely to take over as MD of NSE soon

25 Jul 2022

Ashishkumar Chauhan has resigned from his post of managing director and chief executive officer of BSE Ltd, the stock exchange said.

He was relieved “from his roles and responsibilities at BSE from today,” the bourse said in a statement today.

He is expected to join the National Stock Exchange of India as its MD and CEO after the Securities and Exchange Board of India cleared his name among the list of contenders which had been approved by the NSE and put forth before SEBI for approval.

BSE said that till it appoints a new MD and CEO an executive management panel of senior officials will run the operations of the stock exchange.

The panel comprises of chief regulatory officer Neeraj Kulshrestha, chief financial officer Nayan Mehta, chief business officer Sameer Patil, chief of trading operations and listing sales Girish Joshi, and chief information officer Kersi Tavadia.

Today, shares of BSE ended 1.4% lower at 665.85 rupees on the NSE. BSE’s shares are listed on the NSE.

Earnings Review: Tata Steel sales up strong but input costs spoil show

25 Jul 2022

Tata Steel Ltd struggled with global and domestic headwinds to report a growth in net sales in the June quarter but could not overcome the input cost pressures, particularly from the impact of jump in raw material costs.

It meant that the net sales of the steel major grew reasonably fine but operating profit was hit  significantly and the impact percolated down further to the bottomline which fell too.

The company’s consolidated net profit in Apr-Jun fell 12.9% on the year to 77.6 bln rupees. On the other hand, the consolidated net sales rose 19% to 634.3 bln rupees.

Sequentially, however, both were down. The consolidated net profit fell 21% while the net sales were down by 8.5%.

Tata Steel’s operating profit declined 7% on the year and 0.3% on the quarter to 149.8 bln rupees in the June quarter. At 23.6% the operating margin was lower than 30.1% a year ago but higher than 21.7% in the previous quarter.

The company’s executive director and chief financial officer Koushik Chatterjee said that there was a sharp rise in input costs especially coking coal and gas prices in Europe.

In volume terms, the company’s consolidated sales fell 6.9% on the year to 6.62 mln tn. The rise in consolidated revenue despite this fall indicated that the company got higher realisation on its sales.

Volumes were hit more in Tata Steel’s overseas plants. While sales volume from domestic units declined 1.9% to 4.07 mln tn, the overseas units’ volume fell nearly 14% to 2.55 mln tn.

But in value terms, a higher realisation enabled the overseas units’ sales to rise strongly by 22% to 294.3 bln rupees while sales from domestic units rose 16% to 340 bln rupees.

Tata Steel’s profitability was hit primarily due to a surge in raw material costs and other expenses.

In Apr-Jun, the consolidated raw material costs soared by 64% on the year to 263.2 bln rupees. Other expenses were sharply up by 28% to 192.7 bln rupees.

A high tax outgo also contributed to the fall in the net profit. The consolidated tax expenses were up 82% on the year to 41.9 bln rupees.

According to Chatterjee volatility in steel prices and input costs will continue in Jul-Sep but the spreads will likely stabilise in the second half of 2022-23 (Apr-Mar).

In the June quarter Tata Steel incurred capital expenditure of 27.25 bln rupees.

The company’s net debt stood at 545 bln rupees as of Jun 30.

Tata Steel Apr-Jun sales rise but net profit down due to EBITDA fall

25 Jul 2022

Tata Steel Ltd’s operating profit for the quarter ended June fell bringing down the net profit along with it. Input costs surged ahead of sales growth and hit the operating profit and operating margin.

The consolidated net profit fell nearly 13% on the year to 77.6 bln rupees in Apr-Jun. It was marginally above analyst estimates of 77 bln rupees.

The net profit fell despite a good growth of nearly 19% in consolidated revenue from operations to 634.3 bln rupees.

A surge in Tata Steel’s input costs took a toll on its consolidated operating profit which fell 7% on the year to 149.8 bln rupees. The operating profit was calculated as total expenses after excluding the depreciation charge and finance costs.

The operating margin contracted sharply to 23.6% in Apr-Jun from 30.1% a year ago.

Tata Steel’s executive director and chief financial officer Koushik Chatterjee said that there was a sharp rise in input costs especially coking coal and gas prices in Europe.

The company said that its sales volume from domestic operations were down 2% on the year due to moderation in exports following the imposition of 15% export duty.

It said that in the June quarter global steel prices moderated on slowdown in global growth.

The impact on Tata Steel’s profitability would have been worse had coking coal prices not declined by 40% to around $300 per tn at the end of June from #530 in April.

“We expect that volatility in terms of steel price and input cost movement to continue in the next quarter but expect the spreads to stabilise in the second half of the year,” Chatterjee said.

Navin Fluorine sees weakness in contract unit to continue in Jul-Sep

25 Jul 2022

The top management of Gujarat-based Navin Fluorine International Ltd expects the weakness in revenue in its contract development and manufacturing unit in Apr-Jun to extend to the current quarter but is confident of a rebounce in the second half of the current financial year.

The Padmanabh Mafatlal Group company was addressing analyst queries during a post-earnings conference call today on the reason behind a 12% on-the-year fall in revenue in the company’s contract development and manufacturing unit to 590 mln rupees in the June quarter.

As a result the unit’s share in the company’s revenue from operations slid to 15.3% from 21.4%. The unit caters to pharmaceutical industry customers and nearly all sales are to international markets, European and North American ones being the main ones.

In its special chemicals unit, which recorded a 32% jump in revenue to 1.76 bln rupees, Navin Fluorine’s management expects a “strong pipeline of growth opportunities, especially in agrochemicals” to drive the unit’s performance going forward.

But the company admitted to the challenge of demand weakness in the specialty chemicals segment on account of slack in demand for its anti-retro viral products.

“Demand in ARVs (anti retro viral) has not yet come back but our specialty chemicals unit will continue to grow despite it,” its senior management official told analysts and investors in the call.

In the June quarter, the company derived 52% of its specialty chemicals revenue from international sales and 48% from domestic sales.

The third major unit of high performance product in fluorochemical space saw revenue rising 33% on the year to 1.52 bln rupees on the back of higher volume and price increases.

The company management that a capital expenditure of 800 mln rupees will be used for debottlenecking operations “for a new molecule in HPP (high performance product) unit in Surat.”

The company said the new plant set up for Honeywell International for manufacturing and supplying a high performance product will generate revenue from the current quarter.

In Apr-Jun, Navin Fluorine’s revenue from operations rose 23% on the year to 3.87 bln rupees while its net profit jumped 40% to 790 mln rupees. The company declared its results on Saturday.

Earnings Outlook: Cost spike to curtail Asian Paints' margin growth

23 Jul 2022

A low base and volume increase are seen aiding Asian Paints Ltd’s topline growth in the June quarter, but high input costs would likely curtain operating margin expansion and rein in the bottomline.

The consolidated net profit of Asian Paints is seen at 8.7 bln rupees according to an average of estimates by five brokerage firms. It is 52% higher than the consolidated net profit a year ago and 2% higher than that in the previous quarter.

The consolidated net sales is expected at 76.1 bln rupees, up 36% on the year and down 4% on the quarter.

The company will declare its results for the June quarter on Tuesday.

Asian Paints’ sustained focus on economy-end products, market share gains, and price hikes will likely lead to a 35% on-the-year growth in domestic volume, said brokerage Kotak Institutional Equities in a preview report.

The company’s revenue growth will be driven by price hikes in the decorative paints segment, according to brokerage IDBI Capital Market Services.

The brokerage said that an 64% on-the-year rise in the price of key raw material crude dioxide and an 18% increase in price of another raw material titanium dioxide will likely have limited Asian Paint’s operating margin expansion to 17.1% in Apr-Jun from 16.34% a year ago.

Brokerage Axis Securities said the operating margin would likely have expanded by 100 bps “on account of cost efficiencies and some respite in supply chain cost.”

The brokerage said that the key factors to monitor from Asian Paints’ earnings are the company’s outlook on demand in metro cities and tier 2 and tier 3 towns ahead of the festive season, its pricing actions and its outlook on raw material costs.

Earnings Review: Navin Fluorine PAT, sales up Apr-Jun but margin down

23 Jul 2022

Navin Fluorine International Ltd's topline grew 23% on year and its bottomline rose 40%, in the quarter ended June, but the earnings performance was marked by a contraction in its operating margin.

The chemical company’s net profit of 790 mln rupees in Apr-Jun was slightly above analysts’ estimate of 774 mln rupees, but net sales of 3.87 bln rupees missed analysts’ estimate of 4.4 bln rupees.

Sequentially, Navin Fluorine’s net profit growth was flat while net sales recorded a 3% decline.

In Apr-Jun, the company’s operating profit was up 11% on year and down 16% on quarter to 820 mln rupees. The operating margin contracted to 22.2% from 23.9% in the year-ago period and 24.3% in the previous quarter.

The company’s net profit in Apr-Jun was aided by a rise in other income to 142 mln rupees from 76 mln rupees a year ago.

Tax expenses were 234 mln rupees in Apr-Jun, up 31% on year.

On a consolidated basis, Navin Fluorine’s net profit was 745 mln rupees in Apr-Jun, up from 559 mln rupees a year ago, while its net sales was 3.98 bln rupees, up from 3.27 bln rupees.

Metals Stocks Outlook: May correct next wk on Apr-Jun earnings cues

22 Jul 2022

Shares of metal companies will react next week to forthcoming financial results announcements and the results declared so far in addition to following global cues from China on steel production and price movements.

This week, metal stocks recorded a strong upmove on positive global cues as banks in China were told by the Chinese regulator to extend loans to real estate projects raising hopes of higher demand for base metals. The Nifty Metal index ended the week 5.4% higher.

But with the peak of earnings season setting in with Tata Steel Ltd’s results on Monday the market will be taking cues from the earnings performance of metal companies.

For steel companies the picture appears bleak so far as their Apr-Jun record is concerned. Today, JSW Steel Ltd reported a steep 86% decline in its consolidated net profit in the June quarter due to a surge in operating costs. The fact that the company’s topline rose sharply by 32% on the back of a volume growth did not help.

Apart from earnings metal analysts will be tracking the uncertain scenario on movement of metal prices and the prices of the commodity materials that make up for input costs for metal companies

According to Jatin Damania, vice president-fundamental research at Kotak Securities current flat steel prices are at premium to import parity and there may be further correction in prices following the 20% price decline in the past two months due to weak demand and partially due to the export duty levy by the government on steel and iron ore products.

“On the other hand, costs are also deflating at a swift pace with 40-50% correction in coking coal and domestic iron ore prices in the past two months,” he said. But due to current bleak demand environment the steel price weakness may outpace cost deflation and margins may contract.

Brokerage Motilal Oswal Securities too said in a note that metals showed no signs of an apparent demand recovery. It said that China’s crude steel production fell 3.3% on the year to 90.7 mln tn in June.

Hind Zinc consol net profit jumps 56% YoY Apr-Jun, margin up 170 bps

21 Jul 2022

Hindustan Zinc Ltd’s recorded a significant growth in its bottomline in Apr-Jun, as compared to the year ago period, on the back of a sharp rise in revenue. The revenue grew mainly on account of higher realisation even as volume growth was moderate.

Sequentially, the earnings numbers reflected a muted performance with single-digit growth in revenue and profit.

The company’s consolidated net profit jumped 56% on the year to 30.9 bln rupees while the consolidated net sales were up sharply by 44% on the year to 93.9 bln rupees. Sequentially, the net profit was up by 5.5% and the net sales were up by 7%.

The jump in revenue was led by a 60% on-the-year rise in zinc sales to 68.7 bln rupees while lead sales rose 20% to 9.9 bln rupee and silver sales were flat at 11.1 bln rupees.

Sequentially, zinc sales recorded an increase of 7%, lead sales 5%, and silver sales 7%.

In volume terms, zinc sales grew by 10% on the year and declined 3% on the quarter to 206,000 tn. Lead sales were up by 10% on the year and 9% on the quarter to 54,000 tn.

A rise in input commodity prices reined in Hindustan Zinc’s operating margin growth.

The earnings before interest, tax, depreciation, and amortisation margin went up to 56.2% from 54.5% in the year ago quarter, but was lower than the previous quarter’s figure of 56.9%.

The company today announced that it will set up a fertilizer plant with an annual capacity of 500,000 tn through a new wholly-owned subsidiary.

Separately, the company will set up a new roaster plant with an annual capacity of 160,000 tn.

On the future outlook, the company said its capital expenditure in 2022-23 (Apr-Mar) will be $125 mln to $150 mln. It saw its zinc cost of output for the year at $1,125-1,175 per tn.

Earnings Outlook:Navin Fluorine net profit seen up 37% YoY, dn 2% QoQ

22 Jul 2022

Navin Fluorine International Ltd‘s net profit in the June quarter will likely have risen on the back of price increases, operating margin improvement and the low base of year ago period.

Sequentially, however, the net profit is seen dipping slightly due to elevated input costs.

In Apr-Jun, the company’s net profit will likely have been 774 mln rupees as per an average of estimates of four brokerage firms. This would represent a 37% rise on the year and a 2% decline sequentially.

The topline of Navin Fluorine is seen at 4.4 bln rupees, up 42% on the year and up 12% on the quarter.

The company will declare its results for the June quarter on Saturday.

Analysts expect the company to have taken significant price hikes during the quarter which would reflect in a higher topline growth.

According to brokerage Kotak Institutional Equities, the specialty chemicals unit of the company will drive its overall revenue growth but there was a risk of disappointment in the revenue in CRAMS business.

Increased prices of refrigerant gases will likely have aided Navin Fluorine’s topline growth, said brokerage Axis Securities.

Brokerage ICICI Securities expects revenue from inorganic fluoride and refrigerants would have grown strongly on price increases taken during the June quarter.

Analysts expect Navin Fluorine’s operating profit growth may have been reined in by higher input costs. But a likely rise in contribution of value added products would boost the operating profit according to Axis Securities.

The key factors to monitor post earnings announcement by Navin Fluorine would be the revenue growth in CRAMS and specialty chemicals segments and their gross margins, according to brokerage ICICI Direct.

Earnings Review: UltraTech bottomline hit by high input costs Apr-Jun

22 Jul 2022

An 82% jump in blended petcoke and coal costs was a key factor that led UltraTech Cement Ltd to post a fall in its consolidated operating profit and consolidated net profit in the quarter ended June.

The company which reported a decline of 7.1% on the year in its consolidated net profit to 15.8 bln rupees and a 8.8% fall in the operating profit to 32 bln rupees, got caught in cost headwinds once again in the June quarter, after having faced similar challenges in the previous three quarters.

It did, however, beat brokerages’ estimate of 13.2 bln rupees for its consolidated net profit.

The cost factor was so intense that the company hedged itself when giving its near term outlook today. It said that going forward the “headwinds arising out of rising cost pressure could put some pressure on the profitability of cement companies.”

On the other hand the company also said that going forward the strong momentum in housing and government’s thrust on infrastructure and industrial development will swing cement demand upwards in 2022-23 (Apr-Mar).

On an analysis of the operating costs of UltraTech Cement, the surge in power and fuel costs stands out. Driven by the 82% rise in blended petcock and coal costs the company’s power and fuel costs, which made up for one-third of all operating expenses in Apr-Jun, jumped 65% to 40.1 bln rupees.

Cost of materials consumed was also elevated, rising 29%, but at 20 bln rupees it made up for one-sixth of total operating expenses.

UltraTech’s profitability would be further hit had its logistics cost not stayed stable. The freight and forwarding expenses were up by 24% to 33 bln rupees. It made up for 27% of total operating costs.

On a per tn basis, power and fuel costs rose sharply by 54% on the year to 1,573 rupees while raw material costs were up 13% to 577 rupees and logistics cost was up only 6% to 1,253 rupees.

UltraTech Cement’s earnings performance was partly saved by a good topline growth. Its consolidated revenue from operations was sharply up by 28% on the year to 151.6 bln rupees driven by a good 16% increase in consolidated sales volume to 25 mln tn.

The revenue was higher than brokerages’ estimate of 143 bln rupees.

Today, UltraTech also said that Kailash Chandra Jhanwar was re-appointed as the managing director for a further period of two years from Jan 1 next year.

Ultratech consol PAT dn 7% YoY on EBITDA fall, but volume rises 16%

22 Jul 2022

UltraTech Cement Ltd's profitability was hit for a fourth consecutive quarter in Apr-Jun due to a sustained rise in input costs which negated the volume gains from an improved cement demand.

The company reported a 7.1% on-the-year decline in its consolidated net profit to 15.8 bln rupees in Apr-Jun primarily due to a 8.8% decline in the operating profit to 32 bln rupees.

UltraTech’s consolidated revenue from operations rose significantly by 28% on the year to 151.6 bln rupees on the back of a 16% rise in consolidated sales volume to 25 mln tn.

The company said that although the cement demand was impacted by inflationary trend and lower labour availability in May, it picked in June on pre-monsoon construction activity.

The operating profit was hit by a 65% jump in energy costs, comprising of petcoke and coal costs, to 40.1 bln rupees in the June quarter, followed by a 29% rise in raw material costs to 20 bln rupees.

The consolidated operating margin contracted sharply to 21.1% from 29.7% a year ago. In Jan-Mar too, the operating margin had gone down to 19.5% from 25.6%.

UltraTech’s consolidated operating profit per tn slid to 1,230 rupees in Apr-Jun from 1,537 rupees.

The company said its plants ran to 83% capacity utilization in Apr-Jun as compared to 73% in the year ago period.

JSW Steel Apr-Jun input costs surge, volume falls 25% QoQ, consolidated PAT dives 86% YoY

22 Jul 2022

JSW Steel Ltd’s bottomline was hit by a surge in input costs in the quarter ended June even as domestic volumes showed a steady growth despite.

The company’s consolidated net profit fell sharply by 86% on the year to 8.4 bln rupees in Apr-Jun on the back of weak operating profit.

JSW Steel’s consolidated net sales rose by 32% on the year to 380.9 bln rupees on the back of a 12% standalone steel sales volume growth to 4 mln tn.

The consolidated steel sales volume of the company was 4.5 mln tn, lower by 25% as compared to the previous quarter.

The company said the sales were “impacted by sharp reduction in exports due to levy of export duty and fall in apparent consumption due to destocking at the user level.”

The company said its earnings before interest, tax, depreciation, and amortisation margin fell to 11.3% due to lower volume of sales, one-off items such as foreign currency loan translation losses and other factors.

Input costs stayed elevated for the company during the June quarter.

The cost of materials jumped 2.4 times to 256 bln rupees in Apr-June as compared to the year ago period, while power and fuel costs were up sharply by 2.2 times to 44.3 bln rupees.

The company said that the future global economic outlook has weakened “due to high inflation across most economies, with elevated energy and food prices affecting consumption.”

SRF’s Apr-Jun topline, bottomline up strongly but margin growth muted

21 Jul 2022

Strong profit and sales growth but muted margin expansion marked the earnings performance of SRF Ltd in the quarter ended June.

The consolidated net profit of the company jumped 54% on the year to 6.1 bln rupees and the topline grew significantly by 44% to 39 bln rupees and the operating profit rose 48% to 9.9 bln rupees.

But higher increase in raw material costs, and power and fuel expenses, put the operating margin of SRF on a tight leash with the margin moving up to 25.4% in Apr-Jun from 24.8% a year ago.

It was also lower than 26.8% in the previous quarter indicating that cost pressures increased in the June quarter.

SRF’s sequential growth numbers were weak. The consolidated net profit growth was flat, the topline grew by 9.6% and the operating profit was up by just 4.2%.

The segment that stood out in the on-the-year performance was the chemicals segment while the packaging film segment was steady and the technical textiles segment came in weak.

Chemicals revenue jumped by 55% on the year to 17.2 bln rupees in Apr-Jun and the operating profit from the segment was strong at 2.4 times.

In a post-earnings statement, the company said that in the chemicals segment the fluorochemicals business “performed exceedingly well owing to higher sales volumes in the refrigerants, pharma propellants, and the blends segments with better sales realizations, especially from the export markets.”

The company’s packaging film segment saw revenue rising strongly by 44% on the year to 15 bln rupees and the operating profit growth was moderate at 25%.

During the June quarter, the packaging film segment “witnessed a slight slowdown in demand for BOPET (biaxially oriented polyethylene terephthalate) and BOPP (biaxially oriented polypropylene) films, which impacted the overall margins.”
SRF’s chairman and managing director Ashish Bharat Ram said that the packaging film business was currently seeing strong headwinds due to weak global demand and inventory losses in the short term.

The technical textiles segment performance was weak in the June quarter itself. While it recorded moderate 16% growth in revenue to 5.7 bln rupees its operating profit declined 8%.

SRF today announced new capital expenditure plans.

It said that it will be setting up new agrochemical intermediate product facility with an annual capacity of 1,000 tn at Dahej at a projected cost of 2.5 bln rupees. It will spend another 1.5 bln rupees in expanding existing chemicals intermediate facilities at Dahej.

In the technical textiles segment too the company will spend 1.62 bln rupees over the next three years in capacity expansion and modernisation.

SRF consol PAT up 54% YoY and flat QoQ as topline growth robust

21 Jul 2022

SRF Ltd reported a high growth in its bottomline in the June quarter as compared to the year ago quarter, but sequentially the growth was flat.

The net sales were up strongly on the year but in single-digit compared to the previous quarter.

The consolidated net profit of the chemicals company rose 54% on the year to 6.1 bln rupees in Apr-Jun. Sequentially, the growth was flat.

SRF’s consolidated net sales were up sharply by 44% on the year and 9.7% on the quarter to 39 bln rupees

The company’s operating profit jumped 48% on the year to 9.9 bln rupees and the operating margin went up slightly to 25.4% from 24.8% in the year ago quarter. The sequential growth in operating profit was 4.2% and the 25.4% margin in Apr-Jun was lower than 26.8% margin in the previous quarter.

Ashish Bharat Ram, Chairman and Managing Director, SRF said that the short term outlook for the company’s chemicals business remained strong but the packaging films business was facing strong headwinds due to weak global demand and inventory losses in the short term.

SRF’s chemicals business revenue rose 55% on the year to 17.2 bln rupees in Apr-Jun while the packaging films segment’s revenue reported a 44% growth to 15 bln rupees.

Earnings Outlook:Tata Steel PAT seen hit by high costs, muted topline

21 Jul 2022

Tata Steel Ltd’s bottomline would like have been hit due to lower operating profit and moderate revenue growth in the quarter ended June.

The operating margin of the company is also seen as shrinking due to input cost pressures.

In Apr-Jun, Tata Steel’s consolidated net profit is seen at 77 bln rupees, 14% lower than a year ago and 21% lower than the previous quarter, according to an average of estimates by five brokerage firms.

The company’s consolidated net sales is estimated at 612.6 bln rupees, up 17% on the year and down 11% on the quarter.

The company will declare its results on Monday.

Early this month Tata Steel disclosed its Apr-Jun volume figures from its domestic plants which showed a decline from both, the year ago period and the previous quarter.

The crude steel of the company sales declined 2.2% on the year and 21% on the quarter to 4.06 mln tn.

The company said this was “due to moderation in exports following the imposition of 15% export duty.”

Revenue is however expected to show a moderate growth.

Brokerage Kotak Institutional Equities expects Tata Steel’s realisation to increase 11% on the year and 4% on the quarter which will aid the revenue growth.

However, higher coking coal costs will likely have led to fall of 44% on the year and 20% on the quarter in EBITDA (earnings before interest, tax, depreciation, and amortisation) per tn to 18,780 rupees, the brokerage said.

Brokerage IDBI Capital Market Services estimates a decrease of 15.3% on the year in Tata Steel’s consolidated EBITDA.

The brokerage said post earnings announcement the market will watch for Tata Steel’s profitability and cash flow from European operations, and also for an update on growth capital expenditure.

Earnings Outlook: UltraTech margin, PAT seen dn on input costs surge

 20 Jul 2022

UltraTech Cement ltd will likely have recorded a sharp growth in revenue in Apr-Jun due at a low base of the year ago quarter and an uptick in volumes, but sustained rise in operating costs will likely have hit the bottomline growth significantly.

The company's consolidated net profit is seen at 13.2 bln rupees in the June quarter, down 22% on the year and down 50% on the quarter, according to an average of estimates by four brokerages.

The consolidated net sales of UlltraTech Cement, which is a pivotal member of the Aditya Birla Group, is estimated to have been 143 bln rupees, up 21% on the year and down 9.3% on the quarter.

The company's operating profit is estimated to be 27.2 bln rupees.

UltraTech will declare its results for Apr-Jun on Friday.

For the cement sector, the June quarter is seen as having been mixed in terms of cement demand dynamics with April having seen a strong demand increase and June having been a demand decline.

UltraTech’s volume during the quarter is estimated to have fallen 11% on the quarter by brokerage Kotak Institutional Equities which the low base of previous year would the volume growth high at 14% on the year.

The brokerage said that higher prices of steel and demand had moderated cement demand during the June quarter as compared to the previous quarter.
Analysts also said that UltraTech had taken price hikes in April and May and that would have led to an increase in realisations.

Brokerage IDBI Capital Market Services said that the company’s EBITDA per tn to have risen on the quarter on account of price hike in April. EBITDA is the earnings before interest, tax, depreciation, and amortisation, and denotes the operating profit.

But higher pet coke prices and other input costs would have offset the benefits from volume uptick and better realisations.

According to brokerage Yes Securities the power and fuel cost per tn would have risen 10% on the quarter for UltraTech.

Analysts will be following the management commentary post earnings announcement to gauge the company’s outlook on demand and prices for the remainder of financial year 2022-23 (Apr-Mar).

IDBI Capital Market Services said it would “look out for capacity expansion plans, ramp up of expansions and price hikes.”

JSW Steel topline seen up but EBITDA fall to pull down PAT in Apr-Jun

20 Jul 2022

JSW Steel Ltd’s bottomline is seen falling in the June quarter as compared to the year-ago and previous quarters due to the impact of higher operating costs.

But the company’s volume growth is seen positive due to higher realisations and the low base of same quarter last year when renewed lockdowns had affected production across industries. Sequentially, though, it is expected to be lower.

Estimates by three brokerage firms peg JSW Steel’s consolidated net profit between 11 bln rupees and 18.4 bln rupees in Apr-Jun with the upper end of the range being lower than the year ago quarter’s number of 59 bln rupees and previous quarter’s net profit of 32.3 bln rupees.

The company’s consolidated net sales in the June quarter is estimated to be in the 382.4-400.7 bln rupee range, as compared to actual net sales of 284.3 bln rupees in the year ago period and 460.3 bln rupees in the previous quarter.

JSW Steel will declare its results for the Apr-Jun quarter on Friday.

According to brokerage Kotak Institutional Equities, JSW Steel’s volume will fall 20% on the quarter due to demand moderation from higher steel prices and lower exports post imposition of the export tax. But realisations are expected to increase 6% on the quarter “due to higher steel prices in the domestic markets.”

Analysts were expected a sequential rise in JSW Steel’s input costs due to increase in coking coal costs and these will only be offset marginally by lower iron ore prices.

Brokerage IDBI Capital Services said JSW Steel’s EBITDA (earnings before interest, tax, depreciation, and amortisation) was likely to decline by 45.9% on the year due to sharp rise in prices of key inputs.

It said the market would watch for volume guidance for 2022-23 (Apr-Mar), and capital expenditure update, by the company after it announces its Apr-Jun results.

Bayer CropScience seeks shareholder nod to hike related party trades

19 Jul 2022

Bayer CropScience Ltd is seeking shareholder approval to raise the limit towards material related party transactions with its ultimate holding company Bayer AG to 30 bln rupees from 18 bln rupees, according to its annual report for 2021-22 (Apr-Mar) released on Tuesday.

At its annual general meeting on August 22, the company’s shareholders will vote on an ordinary resolution seeking their approval to enable the company to buy goods from, or to sell them to, Bayer AG, among other specified types of related party transactions upto 30 bln rupees every year from 2022-23 to 2026-27.

Bayer AG is the ultimate holding company of Bayer Cropscience.

As of Jun 30, the domestic promoter entities included Bayer Vapi and Monsanto Investments India, while the foreign promoter entities included Bayer AG, Monsanto Company and two others. The collective holding by promoters was 71.4%.

The proposed 30 bln rupees of related party transactions make up for 63% of Bayer CropScience’s annual turnover in 2021-22 and 70% of the 2020-21 annual turnover. It was also 2% of Bayer AG’s consolidated turnover in 2021 (Jan-Dec).

The company said the related party transactions with Bayer AG helped it to “access scientific know-how and benefit from being part of Bayer’s global supply chain.”

In 2021-22, the value of related party transactions with Bayer AG was 16.7 bln rupees, close to the 18-bln-rupees annual threshold that shareholders had approved in August 2017.

The company said it was seeking the increase in related party transaction annual threshold to 30 bln rupees from 18 bln rupees due to “its future growth plans.”

The listing rules of the Securities and Exchange Board of India specify that transactions with a related party exceeding 10% of annual turnover of any of the two previous financial years, or 10 bln rupees, whichever is higher, were material in nature and the company was required to carry them out only if shareholders had given their approval.

Pramod Rao, ex-ICICI Bank counsel, joins SEBI as executive director

19 Jul 2022

The Securities and Exchange Board of India recently appointed Pramod Rao as an executive director. Rao took charge as an ED on Friday, the market regulator said today.

Prior to joining SEBI, Rao was the group general counsel at ICICI Bank providing strategic oversight to the legal function of ICICI Group entities.

Rao was earlier on the boards of brokerage firm ICICI Securities Ltd, ICICI Prudential Trust and ICICI Trusteeship Services.

Rao has been given the task of handling the debt and hybrid securities, and enquiry and adjudication departments at SEBI.

SEBI’s enquiry and adjudication department is currently under the overall charge of whole-time member Ananta Barua, while the debt and hybrid securities department is under whole-time member Ashwani Bhatia, according to information given on the market regulator’s website.

SEBI said Rao was also a general counsel for Citi India handling legal, secretarial, security and investigative services. “He also worked with IndusLaw, a law firm, as a resident partner overseeing its banking and finance practice,” it said.

Grasim to invest 20 bln rupees over 5 yrs in new B2B digital platform

19 Jul 2022

Grasim Industries Ltd will be investing upto 20 bln rupees over the next five years in building and running a B2B e-commerce platform for the building materials segment, the company said in stock exchange filing today.

The new B2B digital platform will primarily target micro, small and medium enterprises and offer them a procurement solution with on-time delivery, a wide product range, and competitive pricing.

The company said the digital platform “will address various challenges within the existing supply chain.”

Kumar Mangalam Birla, Chairman of Grasim and Aditya Birla Group, said that the new platform crystalised the company’s intent to invest in “high growth digital space.” He said that Grasim will be able to use the new digital platform to “leverage the large B2B ecosystem within the Aditya Birla Group.”

A newly recruited leadership team from the digital ecosystem will operate the new segment, the company said.

Fall in coal price to cut input costs from Aug-end, says Jindal Steel

18 Jul 2022

Jindal Steel and Power Ltd will derive realising the benefit of recent fall in price of coking coal, a key input cost, only from the second half of the current quarter, the company’s management told investors and analysts in a conference call on Friday.

Coking coal is used as fuel in the blast furnace during production of steel.

The coal procured earlier at high costs were being used in current production and would get used in the first 6-7 weeks of the current quarter, the company indicated.

Coking coal prices for Indian steel producers have dropped from $550-$670 in Mar-Apr to below $300 in the current monthly, data from the company’s investor presentation after its Apr-Jun results disclosure on Friday showed.

The consolidated net sales of Jindal Steel in Apr-Jun was 130.5 bln rupees, up 23% on the year and down 9% on the quarter. The net profit was 19.7 bln rupees, down 22% on the year and sequentially up by 30%.

The company told analysts that it saw the hike in export duties on iron ore and select steel products in May as input cost beneficial as it led to a lowering in its domestic iron ore procurement costs. The iron ore prices in the country have fallen 36% to 46% since April, the company’s data showed.

But the exports duty hike on steel products did pinch the company in its sales. The steel volume exported by Jindal Steel in Apr-Jun was down 28% as compared to the previous quarter. In comparison, domestic volumes sold fell only 12%.

Domestic steel demand slowed down in May and June after increasing in April for the company.

V.R. Sharma, Managing Director of Jindal Steel, told analysts that the receding input costs were a great relief the domestic demand during monsoon typically comes down as the construction activities go down.

Jindal Steel’s management also said that it was keen on exploiting input cost advantages from four coal blocks it recently got mining rights on.

According to Sharma the company will be in a position to start production from one of the four mines by March. The cost of coal produced from the company’s own mine and used in the steel production will be 30-40% of the cost it would have otherwise incurred in buying equivalent quantity of coal from Coal India or international companies.

But this is unlikely to happen in meaningful numbers any time soon. The company will not plough in new funds in developing and running the coal mines. The input costs saved in using coal from an operational mine will be plowed back to the cost of mining from its own coal blocks.

On the exports front the company said that notwithstanding the hike in export tax it aims to maintain its recent run rate of more than 20% in export volume’s share to total volume sold.

NSE gets SEBI approval to appoint Ashish Chauhan as its MD and CEO

17 Jul 2022

The National Stock Exchange of India said today that the Securities and Exchange Board of India had approved the name of Ashish Kumar Chauhan among those it had proposed for the post of the exchange’s managing director and chief executive officer.

Chauhan is currently the MD and CEO at BSE Ltd.

Outgoing MD and CEO, Vikram Limaye, had decided not to seek extension after the expiry of his five-year term. Limaye’s term expired on Saturday.

Earlier, NSE had shortlisted Chauhan and its Group Chief Financial Officer and Head-Corporate Affairs, Yatrik Vin, for the position of MD and CEO, according to reports.

As required under SEBI rules, NSE had send the names of the shortlisted candidates to the market regulator for approval.

SEBI has approved Chauhan’s name and NSE will now make a formal offer to him for the post of MD and CEO.

The exchange said that Chauhan’s appointment will be subject to acceptance of the offer made to him and fulfillment of terms and conditions including approval from the shareholders of NSE.

NSE said that in the interim an internal executive panel will run the affairs of the exchange. Besides Vin, the panel will comprise of Chief Regulatory Officer Priya Subbaraman, Chief Enterprise Risk and Information Security Officer Somasundaram KS, and Chief Technology and Operations Officer Shiv Kumar Basin.

NSE gets SEBI nod to appoint Ashish Chauhan as MD, CEO, says source

17 Jul 2022

National Stock Exchange of India has received approval from the Securities and Exchange Board of India to appoint Ashish Kumar Chauhan as the managing director and chief executive officer of the exchange, a source aware of the development told Informist.

Chauhan is currently the CEO and MD at BSE Ltd.

While NSE has received the regulator's nod, it will now need the board as well as shareholders' approval to appoint Chauhan at the helm, the source said.

Email system breached, SEBI files a FIR and takes mitigation measures

17 Jul 2022

The email system at the Securities and Exchange Board of India suffered a cyber-security breach recently and the markets regulator has filed a First Information Report with the police, it said in a press release on Saturday.

SEBI said the incident occurred when its email system was undergoing a system upgrade.

SEBI said that after detecting the cyber-security breach it informed the Indian Computer Emergency Response Team “as per the standard operating procedure”, strengthened “the required security configuration of the (email) system” and took other mitigation measures.

The Indian Computer Emergency Response Team is the national nodal agency for responding to computer security incidents. It operates under the Ministry of Electronics and Information Technology.

The markets regulator had set up its own internal cyber-security operations center during 2020-21 (Apr-Mar) to monitor and defend enterprise-wide information technology systems.

The center was in charge of continuously monitoring SEBI’s computer systems for cyber threats and attacks and blocking such attacks.

SEBI introduced a cyber-security framework in July 2015 for systemically important market infrastructure institutions like stock exchanges and depositories.

It subsequently extended this framework to other regulated intermediaries and companies.

Metal Stocks Outlook: To track spreads, Apr-Jun earnings next week

15 Jul 2022

Shares of metal companies will react to mixed cues on falling trend in coking coal prices and demand sluggishness in the sector. It will also factor in the sharp declines being seen in the June quarter net profit of metal companies who have reported their earnings.

Jindal Steel and Power, which announced its Apr-Jun earnings today, reported a 22% fall in its consolidated profit as operating expenses surged. The only respite was a volume growth and a strong improvement in realisations.

This week, metal stocks moved in a narrow range as uncertainties prevailed on subdued domestic and global demand. Nifty Metal index was up marginally by 0.7% on the week.

Metal sector analysts will be closely watching the June quarter results disclosures by metal companies and the management commentary in the post-earnings conference calls with investors.

The Jindal Steel management today said in an investor conference call that it had operated under “challenging market conditions” during the June quarter. The company confirmed market concerns of exports getting adversely affected by the hike in export duties in May and that its export volumes fell 28% in Apr-Jun as compared to the previous quarter.

The market is likely to watch for updates to the downward trend in coking coal prices which has been offsetting decline in commodity prices and the consequent pressure on profitability of metal companies.

"While sharply reduced coking coal price has resulted in substantial improvement in spreads for domestic steel players, we still see headroom for further price correction as demand remains tepid and buyers expect reduced coking coal cost to be passed on," brokerage Edelweiss Securities in a report on Thursday.

Jindal Steel Apr-Jun consol sales up but PAT falls on input costs surge

15 Jul 2022

Higher realisation from better volumes in Apr-Jun notwithstanding Jindal Steel and Power Ltd’s bottomline performance was hit by a sharp rise in operating costs led by raw material expenses.

The company claimed that it operated under “challenging market conditions” during the quarter.

The company’s consolidated net profit from continuing operations fell 22% on the year to 19.7 bln rupees in the June quarter coming above analysts’ estimate range of 7 bln rupees to 13.9 bln rupees.

The consolidated revenue from operations rose 23% to 130.5 bln rupees, which was within estimates range of 99 bln rupees to 141 bln rupees.

Jindal Steel’s sales volume of steel and pig iron went up by 8.1% on the year to 1.74 mln tn in Apr-Jun.

The company produced 1.99 mln tn of steel and pig iron during the quarter, 1% lower than the year ago period. The company said that this decline was due to maintenance work in one plant and lower coal availability in another plant.

Pellet production by the company fell 11% on the year to 1.92 mln tn.

The company said that lower volume growth was offset by higher realisations that led to the strong growth in revenue.

Jindal Steel’s cost of raw materials which included coking coal costs nearly doubled to 33.6 bln rupees while other expenses jumped 40% on the year to 29.7 bln rupees.

The company said that the consolidated earnings before interest, tax, depreciation and amortisation, adjusted for one-time foreign exchange currency gain of 4.5 bln rupees, was 29.9 bln rupees which was lower by 33% on the year.

The EBITDA margin, as a result, shrank sharply to 19.7% in Apr-Jun from 25.4% in the year ago period.

Vedanta dividends to fund promoter’s debt servicing in FY23, says S&P

14 Jul 2022

Vedanta Resources, the ultimate promoter entity of Vedanta Ltd, may service half of its $1.7 bln (around 135.8 bln rupees) debt maturing in 2022-23 (Apr-Mar) through dividends from Vedanta and the rest through refinancing, said S&P Global Ratings today in its assessment of the company’s liquidity risk.

Vedanta Resources needed to service debt maturities of $3 bln at the start of the current financial year, and currently has an obligation to service debt of $1.7 bln maturing during the year, according to the rating agency.

The rating agency said that in case of the company’s inability to get refinance for this debt it will have to rely completely on dividends from Vedanta Ltd and group company Hindustan Zinc Ltd.

The promoter holding in Vedanta Ltd was 69.9% as of Mar 31 according to data from Informist Corporate Fundamental Database. The promoter entities, Twin Star Holdings and five others, held this stake collectively, and all or most of them are step-down subsidiaries of Vedanta Resources.

“We estimate Vedanta Ltd will have consolidated cash of slightly more than US$3 billion (around 239.7 bln rupees) as of March 2023, of which 80% will lie at its subsidiary Hindustan Zinc Ltd,” S&P said.

As of Jun 30 Vedanta Ltd had a 64.9% stake in Hindustan Zinc, the data showed.

The rating agency said that its assessment of Vedanta Resources' liquidity took into account the impact on earnings from a fall in commodity prices in recent months and the Indian government's imposition of a windfall tax on oil.

S&P estimates Vedanta Ltd's earnings before interest, tax, depreciation, and amortisation to be about US$5.5 billion (around 439.4 bln rupees) current fiscal 2023. The data showed that Vedanta Ltd’s consolidated EBITDA was 466.6 bln rupees in 2021-22 (Apr-Mar).

“We see the most downside in the aluminum business due to the sharp decline in prices in June, as well as higher input costs,” the rating agency said.my

Earnings Review:ACC volume up but PAT down on operating costs surge

14 Jul 2022
 
ACC Ltd had everything going for it in the quarter ended June with regard to demand-driven growth, but a surge in key input costs overwhelmed its profitability. The company even took a 4% hike in the net selling price but said that this could only marginally offset cost inflation.
 
Little wonder then that the company’s operating profit for the three months dived 50% to 4.3 bln rupees and the operating margin shrunk to 9.7% from 22.1% a year ago.
 
As a result, the consolidated net profit for the cement manufacturer was down 60% on the year to 2.3 bln rupees, well below the 3.4 bln rupees had expected on average.
 
In contrast, ACC’s Apr-Jun topline grew strongly by 15% on the year to 44.7 bln rupees, well clear of the average analysts’ estimate of 43.3 bln rupees.
 
This came on the back of a 11% growth in cement sales volume to 7.56 mln tn and a 43% rise in sales of ready mix concrete to 0.83 mln cu mtr. Revenue from cement sales was up 13% on the year to 41.5 bln rupees while ready mix concrete sales jumped by 50% to 3.9 bln rupees.
 
Aiding the topline growth was a 4% hike in the cement price to 5,337 rupees per tn, said the company which is currently being acquired by the Adani group.
 
But there was no respite from inflationary pressures on the key input costs during the June quarter. As a result, ACC’s operating profit, derived as earnings before interest, tax, depreciation, and amortisation, halved to 4.26 bln rupees.
 
The company said “soaring global energy prices led to a significant cost increase” in its power and fuel expenses, which surged 58% on the year to 13.12 bln rupees. Coal and petcoke costs make up for a bulk of the power and fuel costs for cement producers.
 
Power and fuel expenses, which accounted for nearly one-third of the total operating costs, rose 44% on the year to 1,708 rupees per tn.
 
Managing Director and CEO of ACC, Sridhar Balakrishnan, said that the company maintained “a positive outlook” for demand in the coming months on the back of government’s efforts to stimulate investments across several sectors and the impact of a likely normal monsoon on the rural economy.

ACC’s consolidated cash and cash equivalents stood at 45.17 bln rupees at the end of Jun 30.

ACC consol PAT Apr-Jun drops 60% YoY on sharp operating profit fall

14 Jul 2022

ACC Ltd’s consolidated net profit fell sharply in the quarter ended June on the back of significant rise in operating costs, even as revenues grew in double digits.

The cement company’s net profit fell steeply by 60% on the year to 2.3 bln rupees in Apr-June. It was significantly below analysts’ estimate of 3.4 bln rupees.

ACC’s consolidated net sales rose by 15% to 44.7 bln rupees and was slightly above analysts’ estimate of 43.3 bln rupees.

The company’s strong revenue growth was offset by a 34% rise in operating costs, excluding depreciation and finance costs, to 40.4 bln rupees.

Among the major operating costs, the power and fuel expenses rose sharply by 58% to 13.12 bln rupees. It indicated that the coal and petcoke costs, which make up for bulk of it, saw a substantial increase during the quarter.

The freight costs were up 17% on the year to 10.78 bln rupees.

As a result, the operating profit fell sharply by 50% to 4.3 bln rupees in the June quarter and the operating margin contracted steeply to 9.7% from 22.1% a year ago.

The sharp fall in profitability led to the 60% drop in the company’s net profit for the quarter.

Among ACC’s two main business segments of cement and ready mix concrete, the revenue growth was higher in ready mix concrete but it contributed only 8.6% of total revenues. The cement revenue rose 13% on the year to 41.5 bln rupees while ready mix concrete sales were up by 50% to 3.9 bln rupees.

Steel exports fall again in June on levy, domestic demand stays weak

13 Jul 2022

Exports of finished steel products covered with recent tariff hikes fell sharply by 53% on the year to 638,000 tn in June, data compiled by rating agency, ICRA, showed.
 
The fall came on the heels of a 39% fall in the previous month to 749,000 tn. For the Apr-Jun quarter the exports were down 40% on the year to 2.13 mln tn.
 
The government imposed export duties of 15% on several steel products on May 22. This led to a fall in their exports, said Ritabrata Ghosh, senior vice president at ICRA, who is also of the opinion that the current financial year will witness a 25% fall in total steel exports.
 
The tariffs cover a range of finished steel products such as hot rolled coils and strips, reinforced steel bars, wire rods but left out semi-finished products such as billets and ingots.

The tariffs were imposed after the government got worried about rising steel prices in the domestic markets and their impact on domestic inflation and consumption demand.
 
The tariffs seemed to have had their desired impact. Following a sharp uptick in March and April, domestic steel prices witnessed a steep downtrend from the end of May which continued till the end of the June quarter, ICICI Direct said in a recent report.
 
Since steel prices are down 15% from around the time the government levy took effect in May, said Ghosh, it will be beneficial for domestic consumption and that would likely provide the impetus to a pick-up in the government's infrastructure spending pace post-monsoon.

But currently the domestic demand has not warmed up to the fall in steel prices even as exports have come under a cloud.

Going forward, the pace of steel exports will likely only slow a bit but the growth will still be there, say analysts. Domestic steel companies such as Tata Steel Ltd have depended on exports growth during times of sluggishness in domestic demand.

In 2021-22, Tata Steel’s export sales were 2.61 mln tn, accounting for 15% of total sales volume of 17.62 mln tn from its Indian plants, according to the company’s annual report.

In the June quarter, Tata Steel’s crude steel sales from its domestic plants declined 2.2% on the year, and 21% on the quarter, to 4.06 mln tn. It said this was “due to moderation in exports following the imposition of 15% export duty.”

The operating performance of steel companies in the June quarter is likely to have been lukewarm, according to analysts’ preview reports.

Most of the steel companies will report a sequential fall in operating profit in Apr-Jun led fall in steel prices, lower realisations on exports for part of the quarter, and impact of high coking coal prices, said brokerage IDBI Capital Services in its preview report.

Jindal Steel consol PAT seen up due to one-time loss, high tax yr ago

13 Jul 2022

The bottomline of the Jindal Steel & Power Ltd in the quarter ended June is seen growing exponentially in the June quarter due to an extremely low base caused by high tax expenses and one-time loss in the year ago period.

The topline on-the-year growth is seen up on the back of higher realisations and a lower base effect.

Estimates by three brokerage firms peg Jindal Steel’s consolidated net profit between 7 bln rupees and 13.9 bln rupees in Apr-Jun with the upper end of the range being lower than the previous quarter’s net profit of 15.1 bln rupees.

In the year-ago period, the company’s consolidated net profit had plummeted to 413 mln rupees on account of a one-time loss of 12.4 bln rupees and tax expenses of 1.3 bln rupees from the divestment of its stake in subsidiary Jindal Power.

The consolidated net sales of Jindal Steel in the June quarter is estimated to be in the 99-141 bln rupee range, as compared to actual net sales of 106.1 bln rupees in the year ago period and 143.4 bln rupees in the previous quarter.

Jindal Steel will declare its results for the Apr-Jun quarter on Friday.

The steel sector experienced mixed fortunes in the June quarter with higher steel prices aiding the topline, and operating profit getting hit by higher international coking coal costs but getting benefitted by lower domestic iron ore prices.

Jindal Steel’s earnings before interest, tax, depreciation and amortisation is seen falling 48% on the year due to higher raw material costs by brokerage IDBI Capital Market Services.

Kotak Institutional Equities sees the company’s EBITDA per tn to fall 55% on the year, and 14% on the quarter, to 12,771 rupees in the June quarter, due to adverse impact of higher coking coal costs which would be partially mitigated by increase in realisations by 6% on the year and 2% on the quarter.

The market will watch for volume guidance for 2022-23 (Apr-Mar) by the company FY23E and seek an update on its debt reduction program.

Deepak Nitrite promoter shr buy will attract insider norms, says SEBI

12 Jul 2022

A tentative plans by the promoters of Deepak Nitrite Ltd to raise their stakes through open market buying of the company’s shares has not received the regulatory green light.

The promoters who were planning to buy the shares of the company included its chairman and managing director, Deepak Mehta, and its executive director and chief executive officer, Maulik Mehta.

As of Jun 30, the direct stakes of Deepak Mehta and Maulik Mehta were 16.01% and 0.1% respectively, and the total promoter holding was 45.7%, according to data from Informist Corporate Fundamental Database.

In February, Deepak Nitrite wrote to the Securities and Exchange Board of India in February seeking an interpretive letter under the informal guidance scheme norms.

The company asked SEBI whether open market purchase of its shares by its promoters would be in compliance with the insider trading norms given that the date and pricing of a qualified institutions placement issue the company was likely to make before Jan 26 was not announced yet.

A qualified institutional placement issue is an issue of fresh shares by a company made directly to eligible institutional investors and governed under separate provisions in the issue of capital rules.

SEBI’s reply to Deepak Nitrite in April, which was disclosed on its website today, clarified that promoters are covered in the definition of ‘insider’ and any selling or buying of the shares by them would attract the test of compliance with the insider trading rules.

The markets regulator said that information on details pertaining to any pending issue of shares that were only in the knowledge of insiders would qualify as unpublished price sensitive information.

The only exception to prohibition of trades by insiders under the SEBI rules is for specified insiders who are perpetually in possession of unpublished price sensitive information and who have publicly disclosed a trading plan in advance.

The trading plan, according to the rules, must stipulate basic parameters such as nature of trade, whether it will result in buying or selling, and the value of trades or the number of shares to be traded.

Deepak Nitrite has not disclosed any such trading plan for its promoters. Its promoters will, therefore, not be able to buy shares from the open market without complying with the insider trading rules.

Earnings Outlook: ACC consol PAT seen down on high input costs

12 Jul 2022

ACC Ltd's topline is seen as having recorded a double-digit growth on a low base in the quarter ended June, although sequentially it is seen flat on weak demand.

The company’s bottomline is seen having fallen on the back of contraction in operating profit due to rising input costs.

ACC's consolidated net sales in Apr-Jun are expected to be 43.3 bln rupees, 13.7% higher on year and 0.3% higher on quarter, according to an average of estimates by five brokerage firms.

The estimates put the company's consolidated net profit at 3.4 bln rupees, down 40% on year and down by 14% on quarter.

The company will declare its Apr-Jun results on Thursday.

ACC's volume in Apr-Jun is estimated at 7.5 mln tn by brokerage Kotak Institutional Equities. Low base of Apr-Jun quarter of 2021 will keep the on-year volume growth strong, the brokerage said.

Ramping up of new incremental capacity would be behind an on-year volume growth of 9%, brokerage Yes Securities said in its preview.

Sequentially, however, the volume is seen as having declined by around 4% by the two brokerages.

Sharp price hikes taken by the company during the quarter would have helped it clock better realisations, according to Kotak Institutional Equities, leading to a growth of 3% each on year and on quarter.

“We expect 12-15% QoQ (on quarter) increase in power-fuel cost led by higher pet coke and thermal coal prices in the past six months and a 5-7% QoQ increase in freight costs leading to 10% QoQ increase in costs/ton,” the brokerage said.

Rising input costs would have likely shrunk ACC’s operating margin in Apr-Jun and hit the net profit growth of the company. Tax costs are seen the uncertain factor that may buffer or worsen the fall in net profit.

Analysts will be closely watching management commentary on the future operations of the company given the big announcement during the June quarter that Adani Group will take over control of ACC, along with Ambuja Cement Ltd, in an all-cash buyout of Holcim Group’s stake.

SEBI Watch: Right to apply insider trading rule on trades in MF units

11 Jul 2022

The Securities and Exchange Board of India is keen to extend the applicability of insider trading rules to transactions in mutual fund units. It has made this clear through a paper released last week for public consultation.

Applying insider trading norms to mutual fund units represents a paradigm shift in regulations.

It promises to the retail investor in a mutual fund scheme that critical unpublished information pertaining to the scheme is not exploited by insiders to his detriment.

The mutual fund industry was managing 35.6 trln rupees of assets as of Jun 30, of which around 88% were in actively-managed schemes and the rest in index funds, index exchange traded funds and fund of funds.

SEBI is likely make its big move through the detailed proposals laid down in the consultation paper.

If and when these proposals see the light of day then every time anyone who is an employee of an asset management company, its trustee and any person connected with them enters into a transaction in the units of the relevant schemes then he will be subject to the new, extended insider trading rules.

If he bought, redeemed, or switched units, or traded in them in any other permitted form, because he knew something about the scheme that was going to materially affect the NAV of the scheme or the functioning of the scheme then he would have violated the insider trading rules.

The six-schemes-shut-down episode of Franklin Templeton Mutual Fund two years ago had revealed major failures of fiduciary responsibility by a few senior officials and directors of the AMC and the trustee companies managing the mutual fund.

These executives and directors, including their family members, had personal investments in some of the six affected schemes but they exited prior to the shut-down announcement.

When the schemes got shut down the other investors were stuck.

The domestic mutual fund industry is a large industry. One can appreciate the complexities in day-to-day management of the funds but that must be no reason to get undemocratic.

The whole scenario gets unfair when AMC and trustee company officials and directors enter or exit their own investments in the schemes of their employers using information they are privy to in their official capacities.

These officials must not lose sight of their fiduciary role at any time, even during times of crises. They must know that they are in their respective positions to ensure optimal use of funds invested by each and every investor in their schemes.

When violations such as those in the Franklin Templeton MF case happen it also raises concerns of malafide intent.

SEBI is, therefore, right in getting the fund industry officials into the ambit of insider trading rules.

It must also consider applying the same standards on the alternative investment funds industry whose assets are growing steadily every year.

The disclosures standards for the alternative investment funds are nowhere near the same as that for mutual funds, and the insider trading rules, if applied to them, will serve as an important check on their fiduciary standards.

Bajaj Hind to appeal SEBI order on non-disclosure of pollution orders

11 Jul 2022

Bajaj Hindusthan Sugar Ltd will appeal against a recent order by the Securities and Exchange Board of India imposing a 1-mln-rupee penalty for breaching disclosure provisions of the listing norms.

The SEBI order, passed on Friday, held that the company had not made material event disclosures as required by the listing norms.

The company failed to file with the stock exchanges information about action taken by the Central Pollution Control Board and state pollution control authorities on some of its units during 2018-19 (Apr-Mar) and 2019-20.

This happened in 14 instances and included show-cause notices, closure directions and penalties by the pollution control bodies.

These were material events and had to be disclosed to the stock exchanges, according to SEBI. It was also a breach of disclosures on environment, social and governance related matters.

“An appeal will be preferred by the Company to the Securities Appellate Tribunal in this regard,” the company said in a stock exchange filing today.

IIFL Wealth settles SEBI probe in Alkem Lab block deal rigging case

8 Jul 2022

Brokerage IIFL Wealth Management Ltd settled an ongoing probe against it by the Securities and Exchange Board of India for alleged price rigging by paying a settlement amount of 31.3 mln rupees.

Price rigging amounts to a breach of SEBI’s norms on prohibition of fraudulent and unfair trade practices norms.

SEBI’s settlement order today said that IIFL Wealth, along with another brokerage firm of the IIFL Group, IIFL Securities Ltd, allegedly manipulated the reference price considered for execution of block deals in shares of Alkem Laboratories Ltd during Apr-Sep 2019.

In February, IIFL Securities had settled this case by paying a settlement amount of 22.19 mln rupees.

The two brokerage firms were alleged to have manipulated the volume weighted average price of Alkem Lab shares in the cash market in order to meet a commitment given to both seller and buyer in the block deal.

Block deals are permitted to take place at a reference price that is determined by the volume weighted average price of a particular time period during a trading day.

The acts of the two brokers were alleged to be malpractices and in breach of SEBI's anti-fraud norms and stock broker regulations.

SAT orders SEBI to reconsider Cairn UK’s dividend claim on Cairn India

8 Jul 2022

The Securities Appellate Tribunal has directed the Securities and Exchange Board of India to hold an enquiry whether Cairn India, a subsidiary of Vedanta Ltd, violated the Companies Act and the regulator’s listing norms in withholding dividend of 3.41 bln rupees payable to Cairn UK Holdings

The appellate body, on Tuesday, ruled in a case filed by Cairn UK Holdings against SEBI’s rejection of its complaint against Cairn India for not paying dividends for three years from 2013-14 (Apr-Mar) to 2015-16.

Cairn UK Holdings held 9.8% stake in Cairn India during this period.

The market regulator had in an order in December 2019 rejected Cairn UK Holdings' complaint on the grounds that the company had handed over the unpaid dividend to the income tax authorities on their directions.

But SAT held in its order that the income tax department’s attachment order on the dividend payment expired on March 31, 2016, after which Cairn India could have paid the dividend due to Cairn UK Holdings.

In the wake of the SAT order, SEBI will have to reconsider Cairn UK Holdings’ claim and issue its order in the matter within six months.

If SEBI decides in Cairn UK Holdings favour, the 3.41 bln rupees dividend payment will reflect in the consolidated books of Vedanta.

Preponed shutdowns led to 3% QoQ fall in JSW Steel’s output Apr-Jun

7 Jul 2022

JSW Steel Ltd’s crude steel production from its domestic operations declined 2.6% on quarter to 5.72 mln tn in Apr-Jun, the company said in a quarterly update today.

The company said the sequential decline was “due to preponement of certain scheduled shutdowns during the financial year 2022-23.”

Compared to the year ago period, the production was up by 16%. In Apr-Jun 2021, the production of most sectors, including steel, were affected adversely due to renewed lockdowns in several states.

Of the 5.72-mln-tn production in Apr-Jun, 0.11 mln tn was in JSW Ispat Special Products, a jointly controlled entity.

JSW Steel’s production from its US plants was up marginally by 0.1% on quarter to 0.16 mln tn. In the year-ago quarter, the production was 0.14 mln tn.

Cement demand picked up in June but prices did not, say brokerages

6 Jul 2022

Cement dealers have indicated an uptick in demand in June according to the latest monthly surveys by brokerage firms.

But cement companies have not been able to take advantage and hike the selling price of cement due to a supply overhang in the market.

According to Jefferies India the average price of cement in the country declined by 1-2% on month in June even as dealers indicated improved demand. It said that supply increase in the markets were depressing the selling price of cement.

Apart from cement dealer checks, analysts have inferred a demand increase in cement from the railway freight data. According to JM Financial, cement volumes transported through rail freight were up 2% on month.

It was up by a larger quantum of 16% on year, but analysts have avoided using the on-year growth as any indication due to the fact that in June 2021 the cement sales were among the worst hit due to new lockdowns in various states during May-Jun.

Brokerage ICICI Securities attributed the increase in demand in June to “pre-monsoon push, pick-up in infrastructure projects, reduction in prices of steel, cement, etc. and better manpower availability.”

The brokerage also said cement companies would have got respite on the input costs front as pet coke prices were down in international markets, indicated by the fact that US pet coke prices fell 10% on month in June.

It also said that “increased sourcing of coal from low-cost destinations like Russia” may have allievated the cost pressures on sourcing overseas coal, which is another key input cost.

A report by Reuters news agency at the end of last month said that UltraTech Cement Ltd, the largest cement producer in the country, had imported 157,000 tn of Russian coal towards the end of the month.

Coal-importing domestic companies from cement, steel and other sectors usually source coal from Asian countries such as Indonesia and Australia.

For the entire quarter period from April to June, the railway freight data, according to JM Financial, indicated an on-quarter decline to 38.6 mln tn from 40.9 mln tn.

Going forward, the key to earnings improvement, said Jefferies, would depend on how stable the cement prices stay during the ongoing monsoon season and whether any cement price hikes post-monsoon can be effected and sustained.

Steel export fall in May, export duty hike may hit cos’ FY23 earnings

5 Jul 2022

The on-year fall in May in exports for finished steel products has increased concerns in the market that the hikes in export duties on steel products at the end of May will add to the challenges of domestic steel companies in growing their overseas sales.

The government had hiked the export duty on most steel products by 10-50% with effect from May 22.

In May, exports of the steel products, which were covered in the export duty hike, fell 39% on year to 749,000 tn, according to a metals sector analyst at a rating agency. Official commodity-wise exports data for May has not been released by the government so far.

The previous month too had seen an on-year decline in the exports

According to Ritabrata Ghosh, senior vice president at ICRA, the road for domestic steel companies will get bumpier in 2022-23 (Apr-Mar) leading to a fall in exports by 25% on year.

He said the export duty hike would likely make products of domestic companies less competitive in the international markets. Ghosh also expected international steel prices to be lower in the current financial year.

The May exports data, showing a on-year decline, is an indication that fundamental factors hit steel exports even before the government announced the duty hikes on May 21.

Tushar Shah, Co-Chief Executive Officer, CareEdge Research said the revenue and profit of steel companies will be affected due to the export duty hikes making their steel exports expensive and hard to grow. “In FY22 (2021-22), exports had contributed around 12% of the total steel production in India and had touched a record high of 13.5 million tonnes (mln tn) which aided the revenues and profits of steel companies during FY22.”

Shah is hopeful that the import duty cuts on key raw materials for the steel sector may partially support the cost structures of steel makers, but a decline in steel exports, which hold a considerable share in overall production – the decline of which would adversely affect the overall profitability.

In a quarterly update disclosed by Tata Steel today the company said its crude steel deliveries from domestic operations in Apr-Jun were lower by 2% YoY “due to moderation in exports following the imposition of 15% export duty.”

Steel companies’ reliance on driving sale growth through exports will depend on domestic demand. In its annual report for 2021-22 Tata Steel said that it had opted for higher proportion of exports during periods of softness in domestic demand.

In the company’s annual general meeting recently, its chairman N Chandrasekaran was emphatic that the domestic steel industry in India was globally competitive and therefore they “should be able to expand capacity in value-added steel products for both ‘make for India’ and ‘make for the world’”.

“This is a defining moment in history where the Steel Industry can leverage its competitive position and export its products globally,” he said.

But the ground reality is turning out to be different with lower steel prices and export duty hike.

Tata Steel Apr-Jun crude steel sales decline 2% YoY on exports fall

5 Jul 2022

Tata Steel Ltd’s crude steel sales from its domestic plants declined 2.2% on year to 4.06 mln tn in Apr-Jun, the company said in a quarterly update today. Compared to the previous quarter the sales were down by 21%.

The company said this was “due to moderation in exports following the imposition of 15% export duty.”

The steel major increased its crude steel production from domestic plants by 6.3% on year to 4.92 mln tn. Sequentially, it was marginally higher by 0.4%.

From its operations in Europe, Tata Steel’s crude steel sales fell 7.3% on year, and 10% on quarter, to 2.16 mln tn during the June quarter. The production in this region fell 9% on year to 2.43 mln tn.

Tata Steel’s Thailand plants also saw sales fall 11% on year and 8.8% on quarter to 0.31 mln tn. The production figures for these plants were the exact same as sales.

The company said that its automotive and special products segment deliveries increased by 22% on year in Apr-Jun, while those for its industrial products and projects segment increased by 8% on year.

UltraTech disputes JP Associates claim on 10-bln-rupee preference shares

4 Jul 2022

UltraTech Cement Ltd today disputed the claim made by Jaiprakash Associates Ltd that it had defaulted on redemption of preference shares issued to Jaiprakash Associates.

The redemption was due on Friday as per terms of the issue, Jaiprakash Associates said in its filing on Saturday.

UltraTech had made different issues of preference shares and non-convertible debentures of around 46.3 bln rupees in 2017-18 as part of its 161.9-bln-rupee deal with Jaiprakash Associates and Jaypee Cement Corporation to acquire their cement plants, spread across five states, having total annual capacity of 21.2 mln tn.

Of these issues, many had been redeemed in that year itself.

The preference share issue that was due to be redeemed on Saturday was for 10 bln rupees.

UltraTech said in its filing that it “had offered” redemption of the preference shares after “adjustment of costs to be borne by” Jaiprakash Associates, “in compliance with the transaction arrangements.”

UltraTech said that it was expecting Jaiprakash Associates “to honour its obligations and execute necessary documentation for the redemption.”

The company did not specify the quantum of costs that had to be paid by Jaiprakash Associates.

Grasim gets partial relief in tax dispute case on demerger of fin biz

1 Jul 2022

Grasim Industries Ltd has got partial relief from the Income Tax Dispute Resolution Panel in a capital gains case pertaining to shares issued to its shareholders when it had demerged its financial services business in 2017-18 (Apr-Mar).

The company said in a stock exchange filing today that an order passed by the tax dispute resolution body on Thursday “rejecting various objections of the Company and in partial relief allowed objection in the matter of Capital Gain Tax on the value of shares issued to the shareholders of the Company on demerger of Financial Services Business.”

On Sep 30 the Income Tax Department had issued an order adding capital gains tax claim on Grasim to its earlier claims in the demerger case. The company had, on Oct 1, said that the additional tax demand was estimated to be 83.3 bln rupees.

The company subsequently appealed against this order to the Dispute Resolution Panel which gave its ruling on Thursday. The Income Tax Department will have to quantify Grasim’s tax liability for 2017-18 based on the Panel’s ruling, Grasim said in its filing.

In 2017-18, Grasim’s consolidated profit before tax was 56.3 bln rupees and total tax expenses amounted to 19.5 bln rupees, data from Informist Corporate Fundamental Database showed.