Tata Steel falls 5% after UBS downgrades stock to 'sell'

Shares of Tata Steel fell over 5 per cent in trade on Tuesday after UBS downgraded the stock citing rising debt.

The Swiss broker downgraded Tata Steel to ‘sell’ from ‘buy’ and slashed its target price on the stock to Rs 360 from Rs 675 as it expects weak India earnings to delay deleveraging.

The brokerage expects a de-rating from current levels given a domestic demand recovery is yet to materialize and European operations are still struggling with a subdued demand environment.


“Despite previous guidance to reduce debt by $1 billion per year, a subdued domestic environment and weak overseas operations in H1 FY20 (April-September) led reported net debt to increase from Rs 95,000 crore in March 2019 to Rs 1,07,000 crore in September 2019," UBS said in a note.

The recently concluded stake sale of NatSteel Vina (Vietnam) is positive but the brokerage remains concerned about divestment timeline in Thailand.

Year-to-date, Tata Steel is down 21.62 per cent against 12.84 per cent gain in Sensex.

The shares of the company closed 5.07 per cent lower at Rs 399.45 on BSE.