TATA Steel sees sufficient global appetite for good quality Indian companies and projects. Mr Kaushik Chatterjee feels that government spending will offset drag from Western economies although demand in Europe, US sis till significantly lower YoY.
Q - In the context of many different pieces of news that I have just described, how do you asses global demand right now are you seeing, thanks to all the positive noises we are hearing, a pick up in demand so to peak, because many parts of your business now are global?
A - As far as demand is concerned. Its certainly remained at that level especially for flat products because of the auto resurgence, not only in India but also in Europe there are various scrap page schemes which are enabling that, as far as the prices are concerned, those have also been a littler firmer than before, one has to look at it as to whether its destocking because we have come at the end of the destocking phase and how much of the underlying demand picks up. I would also say that the global liquidity is much more than what it used to be before. The movement of liquidity to the non financial or the manufacturing or the real sector is not yet as high as it should be and as you can see from the VIX it is substantially better than when we were say four to five months before but its still not to the level where it was at pre crisis which was around 14 which is now around 30. There is significant volatility but it is showing signs of improvement, is the best way to put it.
Q - What's the outlook on prices because all Indian players have announced hikes in prices, can we expect this to continue over the next few months in the context of all this global news that we are discussing?
A - The answer on pricing is always a very risky one because its determinant on the underlying demand as also various other factors and one has to watch how the situation flows across the year as far as Europe and US is concerned which are significantly lower than the last year. For example in the US, the demand levels would be 50% lower than on a year on year basis, on a month on month basis, however there are incremental increases, its about a percentage higher in June compared to May and in Europe it would be around 4-5% higher. So there are month on month increases, the fall has been very steep and therefore the recovery would be gradual.
Q - What about domestic demand? How are you assessing demand on ground in India?
A - The government spending is certainly going to be a key leverage for all sectors across the industry going forward in the next one year. As the recent IIP numbers show that the capital goods sector has been strong and infrastructure spending should be good so we would look at offsetting impacts from the monsoon deficit.
Q - You want to give me an assessment of how you see domestic demand?
A - As far as steel is concerned, the general consensus view is a band between 5% to 6% which will still hold even if there is a downgrade on the GDP. Which is more on the agriculture downgrade and the agriculture linked downgrade.
Q - You were just in the market raising USD 500 million via a GDR issue, why did you pick GDR versus QIP and what are your further fund raising plans?
A: There is not much of a difference between a GDR and a QIP in terms of timing, there is not so much of a difference between in terms of timing. We have been able to crash the timing for the listing which has often been a reason for doing a QIP and not a GDR. Second thing is given our diversified business portfolio across the various geographies, it was important to perhaps expand our listing base and that too in London where a lot of metals and mining people are invested in. So it's more of coverage between the two and there is no special reason and we didn't have a QIP approval in place, so those are the reasons why we took the GDR route.
Q - Do you see continued appetite you were talking about?
A - A general comment on the environment, the liquidity is there and there is appetite in the investors mind on investing in good quality projects etc, and that is something if companies are wanting to raise money it is available perhaps as we have seen from recent issues.
Q - Even now considering that we have mopped up many million dollars in the last two to three months when it comes to Indian companies raising money?
A - I would say that given where the global situation is, good Indian projects and good Indian companies can certainly still raise money and there is an investor's appetite. If it comes in a very crowded form, five issues per week and they will fatigue, but if it happens over a period of time and companies display or demonstrate credible investment stories and I am sure that India will continue to attract funds from global and domestic investors, so there is a liquidity that one can look at from an equity point of view and there is also perhaps a liquidity from a debt point of view. I am not sure as to how the inflation will pan out going forward after maybe six to ten month and what will happen to the rates. So I think there is liquidity and if one wants to be opportunistic, one can certainly tap into it and I have always believed personally that there is a strong deployment strategy behind that and if the deployment story is strong, I am sure investors will have faith.
Q - You mentioned interest rates in the context of six to ten months, does that mean I can assume that you expect neutral stance on rates to continue for at least the next two quarters?
A - I don't know whether my personal stance would have any bearing but I think it's expected that it will remain a bit neutral for some time.
Q - Are you readjusting your expectations based on the news flow we have had domestically that is to do with both the draught situation and then food price inflation?
A - That's true and I would just say that it would remain for a longer period of time than what one would have assumed.
(Sourced from CNBC-TV18)
