The company’s net debt in the end of March 2018 declined to Rs 69,200 crore, thanks to the rights issue of Rs 12,500 crore.
ET Intelligence Group: Firm steel realisations, mainly in its Indian operations, helped Tata Steel report robust March quarter numbers. Consolidated turnover stood at Rs 3,6132 crore, 8 per cent higher quarter on quarter and operating profit or EBIDTA (earnings before interest depreciation and tax) was Rs 6,579 crore, 13 per cent higher. Estimated EBIDTA was Rs 5,900 crore.
Realisations for Indian operations improved 16 per cent sequentially. The Indian operations remain important, accounting for nearly three-fourths of the company’s operating profit. Along with strong demand, better product mix too helped improve blended realisation for its Indian operations.
The company said it introduced 38 new products, and enriched or value-added products accounted for 68 per cent of the total deliveries. This helped Tata Steel deliver better than expected EBIDTA in its Indian operations. Despite blast furnace outage at its Kalinganagar plant, EBIDTA (Indian business) stood at Rs 4,823 crore, up 4.2 per cent quarter on quarter.
Realisations remained firm for its the European business as well. This along with higher delivery volumes — up by 4.3 per cent quarter on quarter, helped Tata Steel Europe deliver a 77 per cent jump in its EBIDTA. “The Europe business is improving with restructuring, plant upgrades and support from better pricing in the EU,” said Koushik Chatterjee, CFO, Tata Steel.
The company said its Kalinganagar plant expansion has commenced. The brownfield expansion will add 5MT capacity taking the total to 18 MT. It also said that approval from Competition Commission of India for acquisition of Bhushan Steel’s assets have been received. This acquisition will take Tata Steel close to its target of doubling its total capacity.
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The company’s net debt in the end of March 2018 declined to Rs 69,200 crore, thanks to the rights issue of Rs 12,500 crore. Bhushan’s acquisition could raise concern on the company’s debt. Post transaction, net debt could soar to Rs 1.2 -1.3 lakh crore. But in the near term, the market is likely to overlook this given the robust performance which gives higher cash flows visibility at least for the next two years.
Given better than expected performance, the company’s stock which has corrected over 15 per cent from its peak, could attract strong investor interest. At the current price of Rs 620, the company’s stock is trading at 6.3 times FY20 EV/ EBIDTA which does not appear expensive.
