Tata Steel heavily invested in UK post acquiring Corus in multibillion
£ deal. The buyout during peak metal bubble trapped Tata Steel and became cash
burning business. Tata Steel kept on investing billions of £ before putting
it's foot down by May this year post incurring heavy losses due to UK business.
They tried to go for fire sell of UK business but somehow it
did not materialised. Now that business
may generate profitability post steep
fall in £. It will make the UK made Tata Steel product more competitive in the
market place and at the same time Tata Steel cost of supporting UK business
will come down by 30 %.
At the same time, Tata Steel went for debt based buyout of
Corus and it's the right time to repay that debt. Even though they sell bonds
in India and funnel that in paying £ denomination debt then also they will be
able to reduce their debt level drastically and save interest cost.
On books, their debt level will be lower given the £
valuations. In my point of view, £ will continue to fall in coming
quarter and it's a golden opportunity for Tata Steel to be more competitive in
the market place.
We have observed that Tata Steel share price jumped more
than 18% in the last one Quarter and expected to do well as Indian economy is
also recovering. One may accumulate share with medium to long term view.
Disclaimer: consult your financial advisor before investing
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