Sesa Goa has an important choice to make, of keeping its steel business as a small part of its operations, or making it much larger. The choice will have implications on its balance sheet and profitability. The steel business needs far more significant investments compared with the mining business. In the current operating environment, margins are also higher for iron ore producers. Sesa Goa's iron ore business earned a segment profit margin of 56% in the nine months ended December. Tata Steel Ltd's stand-alone steel business (which uses captive iron ore) earned a segment margin of about 36%. And, this is in spite of it being one of the lowest-cost producers of steel, with economies of scale, and a value-added product portfolio comprising flat and long products.