RK Goyal, managing director, Kalyani Steel says the company hasn’t yet started importing iron ore prices, but it might if the ore shortage owing to a shutdown of Jharkhand and Odisha mines continues. Speaking to CNBC-TV18, Goyal says the company is now functioning at 75 percent capacity utilization. Below is the edited transcript of RK Goyal's interview with Sumaira Abidi and Reema Tendulkar on CNBC-TV18.
Reema: Has there been any change or improvement in the business fundamental or in the outlook of the company?
A: As far as the company is concerned there is no change, but in general sentiments for the country as a whole are improving and maybe the investments which are going to come from Japan or from China or from US by Prime Minister Modi’s visit and the interaction that is happening between the countries is playing on the sentiment and if all these investments comes up then definitely there will be much larger investment in infrastructure and hence in steel – maybe something to do with that but otherwise there is no change as far as we are concerned.
Sumaira: Globally the prices of iron more have softened quite a bit, currently closer to USD 80 per tonne mark and they have come off all the way from USD 135 per tonne but domestically we have not seen much softening in the prices. So, does Kalyani Steel have the bandwidth to import?
A: As of now we are not planning to import but if the situation arises then we will not hesitate in importing iron ore and the way the situation is in the country maybe we will be forced to import iron ore.
Reema: Could you tell us what the pricing is globally as well as domestically how the price situation is and if you do look to import what can be the benefit for Kalyani Steel?
A: We are in a situation where we can import but for the poor infrastructure from port to the plant and those costs are very high otherwise at the current prices it makes sense to import iron ore.
Sumaira: Even in Jharkhand some of the mines now been shut for fortnight. Can you take us through what is the impact on the availability of iron ore?
A: Availability has definitely gone down in and it has gone down substantially in Karnataka also and that’s why the prices were higher in the recent past.
Reema: Any numbers of what the domestic shortfall is on account of closer or mines in Jharkhand as well as in Orissa?
A: It is very difficult to comment because some of the plant which were worth producing sponge iron, have closed their operations and at the same time many of the steel plant are working on reduced capacity. So around 130 million tonne which was the production of last year’s 130-135 million tonne, now it is going down further. So, it’s definitely leading through its circulation in the price and at the same time some of the companies have already started importing to supplement this shortfall.
Sumaira: Could you tell us what were the prices at the last e-auction and when are you expecting the next one?
A: E-auctions happen three-four times in a month. I will not be able to tell specifically because for different grades of iron ore there are different prices for each lot, so it’s very difficult to say but for us the landed price of iron more fines is around Rs 4,800-5,000 and for lumps almost Rs 6,300-6,400.
Reema: Given the shortfall in iron ore, what is the current capacity utilisation at Kalyani Steel plant?
A: We are operating currently around 70-75 percent and we would like to increase it once iron ore is available at the right price?
Reema: Do you expect iron ore prices to continue to remain firm in India given the shortfall and what is happening in Jharkhand or do you think they will start inching lower inline with what is happening globally?
A: I think it will remain firm in India.
Reema: You also indicated that you will look to import iron ore if the situation arises. How soon could the company look to import?
A: We are continuously evaluating it. We will decide at an appropriate time. Right now we have not decided to import. Kalyani Steels stock price On September 19, 2014, at 10:47 hrs Kalyani Steels was quoting at Rs 148.25, up Rs 1.60, or 1.09 percent. The 52-week high of the share was Rs 152.90 and the 52-week low was Rs 42.55. The company's trailing 12-month (TTM) EPS was at Rs 14.60 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 10.15. The latest book value of the company is Rs 91.13 per share. At current value, the price-to-book value of the company is 1.63.
Source: http://www.moneycontrol.com