Edelweiss has ‘Buy’ rating on Tata Steel FPO

MUMBAI: Edelweiss reiterated ‘Buy’ recommendation on Tata Steel after the company announced its follow-on public offer. The brokerage has set a target price of Rs 781/share on the stock

“The equity dilution is near term negative for the stock. However, we believe balance sheet de-risking will improve the stock’s valuation multiples in the
longer term. We currently value the European operations at EV/EBITDA of 5x. Considering the already executed refinancing (which has reduced cashflow stress) and the proposed FPO (which would reduce balance sheet risk), we believe the valuation drag of the European business on the stock would reduce further. We have a ‘BUY’ rating on the stock with a price target of Rs 781/share,” the report said.

The company has entered the capital market to raise between Rs 3385.8 crores to Rs 3477 crores by offering shares in the price band of Rs 594-610/share.

The issue closes Friday.