Analysts give thumbs-up to Tata Steel’s MoU with Klesch Group

MUMBAI: Tata Steel’s talks with the Klesch Group, to undertake "detailed due diligence and negotiations" for sale of its long steel business and associated distribution activities in Europe is being seen as a big positive for the company.

After making a $12.04-billion bid for the Corus Group, the company has been struggling to wring profits out of the European steel maker. Tata Steel is looking to sell parts of its European steel operations as well as lower interest costs.

Brokerage CLSA believes this development is a re-rating event for the company. It believes that if sale is valued at EV/tn of $200 then FY17 EPS is likely to rise by 16-19 per cent. It believes the valuations of the company could improve by Rs 28/share.

JP Morgan is of the view that sale European Long business will be a major positive for Tata Steel as it will improve profitability of Tata Steel.

The deal addresses long-standing question of company’s debt reduction management. The dela will open possibility of listing of Tata Steel Europe, the brokerage said.

BofA- ML on Tata Steel believe the deal size may not be large as Scunthorpe BV is $560 million. It doesn’t see large impact on on net gearing & valuation of the company. The brokerage has maintained ‘Underperform’ rating on the stock.

At 10:50 a.m.; the stock was at Rs 456.80, up 0.14 per cent, on the BSE. It touched a high of Rs 468 and a low of Rs 456 in trade today.