Religare: Metals & Mining Sector

Religare's sector report on Metals & MiningOur analysis of the Q1FY17 performance of six stressed steel companies (total borrowings of Rs 710bn) suggests that debt servicing will be possible only if banks take a 35-40% haircut on these loans. In Q1, the six players reported cumulative interest costs of Rs 19bn, 2.7x more than their combined EBITDA of Rs 6.9bn. While higher capacity utilisation could raise EBITDA levels, we expect most gains to be erased by lower steel prices and a near-doubling in coking coal costs, putting loan repayments at risk. We remain negative on the steel sector and on large corporate lenders ‎(Axis Bank, ICICI Bank, PSU banks).For all recommendations, click here Disclaimer: The views and investment tips expressed by investment  experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.