We have seen good upmove in Sesa Goa Ltd. last few days & it has closed above Rs. 200 making a year high which shows outperformance compared to main indices.
Sesa Goa Ltd. has acquired, Goa’s largest industrial group, Dempo’s mining assets in Goa for nearly USD 350 million in cash through internal accruals. Dempo has nearly 65-75 million tonnes of minable iron ore reserves in Goa spread over 1,800 hectares and 19 mining leases licenses there.
Sesa Goa will benefit from this transaction because it has reserves of nearly 240 million tonnes that will increase by nearly 65-75 million tonnes which is 30% accretion to its reserves. Hence, this deal is EPS accretive and could expand by about Rs 2-3 in FY10 itself from Rs 15 now to Rs. 18.
In addition, Dempo also has long-term contracts with Nippon Steel for over 1 million tonne and Sesa Goa intends to continue this relationship with them.
Sesa Goa for this acquisition has paid about four times its EV/EBIDTA on an FY09 basis. . The enterprise value per tonne for the acquisition is USD 5. The cost of production for Dempo assets is about USD 20 per tonne. So, this is higher than Sesa Goa’s cost of production. The company sees huge scope of cost reduction over there. The average realization for Dempo is about USD 45 per tonne.
No comments:
Post a Comment