In an interview to CNBC-TV18's Senthil Chengalvarayan and Sonia Shenoy, Koushik Chatterjee, Group CFO of Tata Steel spoke about the market sentiment and his expectations from corporate India and new government.
Below is the transcript of Koushik Chatterjee's interview on CNBC-TV18.
Senthil: Today is the day when sentiment has changed but when are we going to see corporate India come back and with its chequebook and start capex again?
A: I think there are a couple of things that we know and I am not saying anything new at this point of time -- first is get the confidence to the bureaucracy to implement actions on the ground, get some of the policy niggles out.
The infrastructure industry has to come back, the projects which were half stopped and which were not being rolled forward needs to get completed and there is a huge pipeline of infrastructure projects, which can come into execution level. So we need to resolve some of the structural issues but more importantly if I look at the next six months-one year, there is an uncertainty on the monsoons and inflation issues may crop up again. So there are a host of things, which needs to be managed but form a corporate India perspective, the investment cycle has to start and that can only start when there is a confidence that the capital is going to get implemented well, the approvals and clearances are speedy, the cost of capital is not going to hurt the investors and there is a stability. So what we see today is obviously a strong mandate and hopefully a strong political mandate and therefore we need a strong governance, we need a strong government.
I think it is very early days but given these kind of strong mandates whenever it comes, it is important that that mandate is used to take on that responsibility of making things happen. If that happens then I am sure investment will follow, India is a great destination for investment both for domestic investors as well as for foreigners. So I think there is a huge opportunity and that needs to be leveraged and that needs strong bureaucracy and strong political leadership.
Senthil: For your sector and you are a very large players in the steel sector, what would be your priorities from this new government, what has been holding you back?
A: The clear thing is to ensure that the central and state machineries work together and the center-state relationship and the way in which they do business needs to enhance. In the last couple of years that had gone in kind of a freeze and because implementation of policy in India and governance from the center has to be strong. So strong center would hopefully ensure that the states do the right things and states also act as enabler and facilitator. That you can do fairly quickly and easily because all that you need is a mandate which has come. All that you need that there is to ensure that there is a good conversation that happens between the state and the center. Narendra Modi being a state chief minister earlier would himself understand what the issues are.
Secondly part is there are many policies but the implementation of those policies have been slow. For example approvals, environment clearances, ensuring that the mining allocations are done properly, ensuring that Greenfield projects come up faster, ensuring the capital is used much more effectively and quickly so that it starts generating revenues for the state as well for those company. There are a few things which are more like good governance can bring in and if that can be done quickly then you have lot more time to look at the structural things.
There is a day-to-day routine stuff, it goes much more smoothly than what it was in the past. If that happens then you would have investors who are carrying capital would understand that this money can get implemented quickly and I can get my desired project internal rate of return (IRR) on net present values (NPVs). That will accelerate the flow of capital into capital investment which has a lot more multiplier effect on economy including employment including more revenues and more funds with the government to do public spending. The government should take the higher risks project and not put it on the private sector.
That cycle of growth needs to get started and accelerated and then look at policy issues like the goods and services tax (GST) or DTC etc which is been in the freezer for sometime to bring that in because that the next stage of reform. One expectation that everybody will have is that this new government with such strong political mandate would be able to push through reform, push through better administration and do things like divestment
for example where better utilization of capital happens both for the economy and for the government and it gets rightly channalised into more productive creation of infrastructure.
Tata Steel stock price
On May 16, 2014, Tata Steel closed at Rs 437.65, down Rs 23.05, or 5 percent. The 52-week high of the share was Rs 484.85 and the 52-week low was Rs 195.40.
The company's trailing 12-month (TTM) EPS was at Rs 66.02 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 6.63. The latest book value of the company is Rs 634.48 per share. At current value, the price-to-book value of the company is 0.69.
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