The mines and minerals development and regulation or MMDR Bill 2015 was passed by the Lok Sabha in parliament today and the changes proposed in the bill are likely to ease bottlenecks in the sector.
Reacting to the news, RK Goyal, MD, Kalyani Steel said it will not only bring in much more transparency but also create a level playing field.
While, Chintan Mehta, Metal Analyst, Sunidhi Securities believes it will be a positive for metal manufacturers who don't have captive mines but could be a set back for players like NMDC.
Below is the transcript of RK Goyal and Chintan Mehta's interview with Menaka Doshi & Anuj Singhal on CNBC-TV18.
Menaka: Could you list for us the big changes that you think will impact your business?
Goyal: It will bring much larger transparency in the business and it will create a level playing field. Today people who have captive mines, they are much better placed, their cost is much lower and it is very difficult to compete with them, so it's a very welcome move, we are very happy now. Now we will have a level playing field.
Menaka: Those who have captive mines currently will they have to give up their mines under this new act or new law once it is enacted?
Goyal: My understanding is those who have captive mines including the public sector sales, they have to account this mining profit separately. I expect government to come out in future with separate taxation or royalty laws for that.
Menaka: You say that this increases the opportunity for companies like Kalyani Steel to be able to access resources that's ore resources as it makes the process of sanctioning these mines through prospecting and licensing agreements more transparent?
Goyal: That's right. Now the process is much more transparent and companies like us will have a better chance to bid in the auction and acquire mines.
Menaka: Which companies do you see being impacted negatively? The head of Kalyani Steel just informed us that there will be a negative impact on those who have captive mine so far and those that you see impacted positively because now the process of acquiring a mine becomes easier and more transparent?
Mehta: There are two things to it, how we look at it. Definitely it is positive for those metal manufactures who don't have their captive mines this will definitely be a bit of setback for NMDC and that was quite evident in today's prices, they reduced by Rs 500. This will bring an additional supply for merchant miners as well.
The bill states that those who have had a mining lease renewed before this MMDR would get an extension till 2020 and with captive till 2030. This clears a bit of uncertainty for players like Tata Steel , is positive for Sesa Sterlite which are waiting for their mines to restart in Goa.
The merchant miners have to compete as we can see some additional supply of ore coming up, but the second thing is that it still is passed by Lok Sabha, Rajya Sabha has to go through it and we might see a resistance from BJD because they have been opposing that because they were planning to auction those mines coming up at second renewal but that won't happen with this MMDR act. So it still has to go to Rajya Sabha.
Kalyani Steels stock price
On March 03, 2015, Kalyani Steels closed at Rs 147.80, up Rs 1.40, or 0.96 percent. The 52-week high of the share was Rs 179.10 and the 52-week low was Rs 54.00.
The company's trailing 12-month (TTM) EPS was at Rs 18.46 per share as per the quarter ended December 2014. The stock's price-to-earnings (P/E) ratio was 8.01. 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 1.62.
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