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Major Asian stock markets have opened the day on a negative note with stock market in Indonesia and Taiwan trading lower by 0.4% and 0.5% respectively. Major indices in Europe and US ended their previous session in green. The rupee is trading at 66.54 per US$.
Indian stock markets have opened the day on a flattish note. The BSE Sensex is trading lower by 8 points (down 0.03%) and NSE Nifty is trading higher by 3 points (up 0.03%). Both, BSE Mid Cap and BSE Small Cap are trading higher by 0.2% and 0.1% respectively. Barring, fast moving consumer goods sector, major sectoral indices have opened the day on a positive note with stocks from capital goods and automobile sectors witnessing buying interest.
As per an article in Livemint, steel makers may struggle to meet their March end debt obligation. Reportedly, nine out of twenty steel firms have already defaulted on one or more debt instruments. Further, total debt of these nine firms is almost two-fifth of the total debt of the twenty indebted steel manufacturers.
Weak global demand, cheap imports and falling prices have dented the financials of the domestic steel producers which in-turn have weighed on their debt servicing capability.
Having said that, the government has laid out certain measures to provide cushion to the domestic players. The measures include imposition of minimum import price (MIP) and safeguard duties. However, experts state that the impact of the same will start showing in the first quarter of the fiscal starting in April. To add to this, a financial package for the steel sector will be finalized in the next two months which would provide additional relief to this sector.
Jindal Steel and Power Ltd (JSPL) is one steel maker to be hit with a default rating. The company is now in talks with banks to refinance loans through the 5/25 route. The 5/25 scheme allows banks to extend long-term loans of 20-25 years to match the cash flow of projects while refinancing them every five or seven years.
However, we believe that such financial bailouts may not be the best solution as it could be a situation of kicking the can down a very long road - with no dead end in sight.
In another news update, India currently is at the leading edge of proposed pollution norms. Reportedly, emission norms for certain sulphur and nitrogen compounds from thermal power plants are stricter than the European Union and US standards. These norms have to be adhered to not only by the units under construction but also by the existing operational thermal plants.
However, adhering to such pollution norms may possibly lead to increase in the tariff. According to estimates from the Association of Power Producers, to meet these new emission norms, companies need to spend anywhere between Rs.50 to Rs. 150 million per megawatt (MW). This will translate into an increase in tariff by 50 paise to Rs 1.25 per unit.
With tariffs of renewable energy inching closer towards that of the thermal plants, increase of thermal tariffs might act as a dampener.
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