Sesa Goa: Digging Deep
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And it is not just Sesa Goa. Of the 18 companies in the peer group (see tables), a third are metals and minerals companies. Such companies have been the flavour of the decade from a stock return perspective.
|Anil Agarwal, Chairman, Vedanta Resources|
(BW Pic By Umesh Goswami)
Sesa Goa was already a large iron exporter, and demand from China took metal prices through the roof. Post-Lehman crisis, the world remained awash in money as governments provided huge fiscal boosts to keep their economies from collapsing; that kept commodity prices high. China alone set aside a phenomenal sum — about $500 billion — to buy materials (China is India's biggest market for iron ore exports, accounting for over 90 per cent, say some industry experts). Commodity prices have eased over the past two years, but are still high compared to 2003-04.
But recent events appear to have taken some of the shine off the materials industry, not the least being scandals over illegal mining. Sesa Goa is in the middle of a restructuring by Anil Agarwal's Vedanta Group; some of the terms have dented investor confidence in the stock. But there are people who believe that in the mid term, the restructuring will pay off. The next half-decade could be an interesting period for Sesa Goa.
(This story was published in Businessworld Issue Dated 28-05-2012)