Angel recommends ‘Subscribe’ to Tata Steel FPO

MUMBAI: Angel Broking has advised investors to ‘Subscribe’ to the follow-on public offer of Tata Steel. The brokerage has a ‘buy’ recommendation on the stock with price target of Rs 766.

“We like Tata Steel for its buoyant business outlook, driven by a) higher sales volume in FY2013E on completion of its 2.9mn tonne brownfield expansion project in Jamshedpur, b) raw-material projects at Mozambique and Canada and c) cost-reduction initiatives at Tata Steel Europe (TSE).

We believe Tata Steel’s FPO offers a good entry point to investors even at the upper price band of Rs 610, where it trades at 5.9x FY2011E and 5.1x FY2012E EV/EBITDA. Thus, we recommend Subscribe to the issue and reiterate our Buy recommendation on Tata Steel with a Target Price of Rs 766,” the report said.

The steel giant plans to raise between Rs 3385.8 crores to Rs 3477 crores by offering shares in the price band of Rs 594-610/share. The proceeds would be utilised mainly for part-funding of capex at Jamshedpur and payment on maturity of debentures in FY12.

The issue closes Friday.