August 18,
The move by Anil Agarwal-controlled Vedanta Group to use its iron-ore mining subsidiary Sesa Goa’s cash to buy a part of Cairn India has got “thumbs down” from analysts at broking houses.
“The proposed acquisition is not synergistic, offers too little stake to Sesa Goa, and does not effectively utilise its cash,” said Edelweiss Securities.
Sesa Goa shares fell 10% in the last-three sessions after news of Vedanta buying Cairn first appeared in the media on Friday.
Analysts said the cash was a source of comfort for Sesa Goa’s investors, who expect iron-ore prices to weaken further. It has declined in the last couple of months, after doubling in a year, and analysts expect them to drop further as China attempts to slow down its economy to avoid ‘overheating’.
So, Sesa Goa’s diversification into an unrelated business to utilize its excess cash raises concerns regarding the growth prospects of its Iron-ore export business which is around 90% of its total production.
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