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The Equitymaster Research Digest

Meeting Metals Behemoths, IPO Madness, and More...
Dec 24, 2015

Meeting two commodity companies back-to-back can be quite taxing but interesting also. Just ask Sarvajeet Bodse, our new metals analyst. Sarvajeet, who joined us recently, isn't quite accustomed to tracking metal stocks, so he thought it would be a good idea to meet Tata Steel as well as Hindalco and get a sense of where the industry and these companies are headed.

Neither steel nor the aluminium industry is going through the best of times right now. There's constant pressure on the topline. But it was enthusing to know that both companies are among the lowest cost producers of their respective products and are therefore in much better shape than the rest of the global players.

It's also a relief that both companies are almost done with their respective capex plans. This will reduce pressure on cash flows and help fight the slowdown.

However, the international operations of both of these companies are proving to be a drag.

Corus, the European subsidiary of Tata Steel, has been struggling with low realisations and high debt for quite some time. It would be fair to say that even after all these years, the company is barely out of the woods. And the premium Tata Steel paid to acquire Corus back in 2007-08 only compounds the problem.

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