Tata Steel: take on a new lease of life 2021

About six month back Tata steel were categorically avoiding metal space and it was evident with the metal sector witnessing a long lull period. UK business — which has been bleeding the company red since it took over the Anglo Dutch steelmaker Corus in 2007 — in a big way.

It’s no surprise then that the stock of Tata Steel has gained 9 per cent since end-March when the company announced its decision to explore options for sale of its UK business. At ₹332, the stock trades at 0.9 times its trailing 12-month consolidated book value, lower than its five-year historical average valuation of one time. Investors can consider buying the stock.


The sale of the UK business will provide relief to the company’s ailing financials. Apart from that, Tata Steel’s capacity expansion in the profitable (though less than before) Indian market and the import protection measures by the Indian government too should help.

Tata Steel is one of the world’s most geographically diversified steel producers, with operations in 26 countries and commercial offices in more than 35 countries.

The Tata group was founded on the principle that its activities should always benefit society. Today Tata Steel is guided by the same long-term vision. Tata operate in a way that is safe for our people and respectful to the environment. Tata behave responsibly and with care towards the communities surrounding and impacted by our operations.

Understanding the company

Tata steel India’s second-largest private sector company has gone through many economic peaks and troughs since its inception in 1805. Tata steel became the 6th largest steel manufacturers in the world.

Expanding in India

While Tata Steel is winding up its UK business, it is expanding in India. It expects to commission the first three-mtpa phase of its six-mtpa Kalinganagar steel plant in Odisha, this fiscal. The plant which will run on captive iron ore, will manufacture high-end flat products.

Tata Steel is on a stronger footing in India, for two reasons. One, unlike in Europe, Tata Steel has access to captive mines to meet its entire iron ore requirement. Two, compared with the other big steel consuming countries, the Indian steel market looks better; the thrust on infrastructure sector is expected to spur steel demand.

A host of import protection measures introduced by the Indian government too should provide support to domestic manufacturers.

Measures such as imposition of 20 per cent safeguard duty (which has now been extended, with phased reduction up to March 2018) in September and introduction of minimum import prices on a wide range of steel products in February should help.

According to the World Steel Association, while global steel demand is predicted to contract 0.8 percent, Indian steel consumption is expected to grow 5.4 percent in 2016.

Published by Futurecaps Advisor

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