The Indian government is reportedly preparing to raise funds by selling stakes across 5 of its PSUs: NALCO, MMTC,NMDC, BEL and MOIL. Until the valuations are released, we can take a quick look at how healthy these companies are looking, for an investor.
NALCO, the aluminum manufacturer, is gaining from a shortage of alumna in China, which has spiked up prices for the pale metal. China has emerged as one of the biggest purchasers of alumina, as it moves into manufacturing of aluminum based products in aerospace and auto, as well as lower-end products like soda cans. Nalco is the second-lowest cost producer of alumina and stands to benefit from the aggressive buying. However, its long term prospects depend substantially on how much the global demand for aluminum shifts in the coming months.
MMTC, the commodity trading firm, also has some government shares now on the block. The company however has taken quite a beating in its second quarter results announced today, where net profit fell 77%. Its net income fell from 4884 crore last quarter to Rs 1389 crore. The government is unlikely to see much interest here.
NMDC, another commodity based PSU, has gained from soaring prices for the iron ore it mines, and the rise of domestic steel firms who it counts among its customers for the ore. Recently the company had moved to building steel plants as well, and acquired land in Karnataka and Jharkhand for plant construction. However the government announced a week ago that it will explore a strategic sale of its 3 million ton under-construction steel plant in Chattisgarh. There is little clarity yet on whether the company has completely put steel plant building on hold.
BEL has had a consistent track record in the defense sector, and their revenues remain predictable thanks to their strong order book that has the company well placed all the way to 2020. These orders are likely to only increase as the government earmarks more money for defense spending. This is the kind of stock that investors are looking to buy even on small dips, since its prospects look very good.
Around end November, MOIL touched a 52 week high on rising prices on manganese ore. The company managed to up its prices for the ore thrice in three months, and logged strong growth in net incomes in its September quarter. However, much of its gains so far have come from increased sales of low grade ore. There are also signs that the rally in prices may break in the coming months, as producers are reportedly beginning to release their stocks of manganese into the market.
