Friday, February 16, 2018
Tata Steel Rights Issue & Valuations
Tata Steel has fixed February 1,2018 as the record date
for the right issue and the issue will be open until February 28,2018. The issue comprises
15,53,94,550 crore fully paid-up ordinary shares not exceeding Rs 8,000 crore
at Rs 510 per scrip, and up to 7,76,97,280 crore partly paid-up ordinary shares
not exceeding Rs 4,800 crore at Rs 615.
Fund Application : Tata steel has an
expansion plan with capex of Rs 235 bn over four years, which it can fund with
existing cash flows, a rights issue and some debt. As many distressed steel
assets that are up for sale, it may also bid for it. If it doesn't bid, it may
see its domestic or global rivals gobble them up and grow their share in the
Indian market. With an improved outlook for steel has helped Tata Steel's
performance improvement , But an aggressive bid to grow inorganically could
again land the company in balance sheet troubles..
Valuations : At the current price of Rs 688, Tata Steel is fairly priced at 1.25 times of estimated FY20 book value. So, If you do not own the stock consider buying it only at lower levels.
Valuations : At the current price of Rs 688, Tata Steel is fairly priced at 1.25 times of estimated FY20 book value. So, If you do not own the stock consider buying it only at lower levels.
At the offer
price of Rs 510 for the fully paid shares, the stock offers CAGR of over 15%
per annum over next 2 to 3 years. So, if you are eligible to participate in the rights
issue to apply for the fully paid up shares.
At the offer price of Rs 615 for the partly paid shares, the compounded returns are not attractive even over a period of 2 to 3 years. Hence it is better to avoid this offering.
At the offer price of Rs 615 for the partly paid shares, the compounded returns are not attractive even over a period of 2 to 3 years. Hence it is better to avoid this offering.
Thursday, February 15, 2018
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