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My View On Tata Steel Ltd.


About The Company

The largest private sector steel company of India. The company has been headed by the well reputed group of country " TATA ". The company has been ever developing with lots of acquisition in India and overseas. The company is so well known that doesn't need an introduction. The name itself is its' intro.

About The Results


Tata steel has posted disappointing results for the third quarter ended 31st Dec 2008. It would have been naïve to have expected anything else. The only vagary was in the expectation of the fall in the profits. Obviously the market has expected the fall in profit to be quite sharp but the actual numbers were better and thus the stock reflected this with a rise in the share price. Despite the fall in the topline and bottomline for Q3FY09, the stock closed over 2% higher.

These are standalone results and do not include the performance of Tata Steel Europe Ltd. (Corus) for the quarter / nine months ended December 31, 2008.This would be published by the end of February 2009.

The company's standalone net sales declined to Rs.4,735.68 crore, a YoY fall of 4.8% and QoQ it fell 30%. Its sales volumes were down 13.8%. The company's exports dropped to Rs 404.30 crore from Rs 596.04 crore in the corresponding quarter last year.

Steel production for the quarter fell to 1.23 lakh tonnes as compared to 1.25 lakh tonnes, while steel sales dropped to 1.07 lakh tonnes from 1.24 lakh tonnes for the corresponding period of the previous year.

The operating expenses of the company have gone up and this only added on to the woes. YoY it surged 19.23% and the biggest increase was on account of the raw material cost which YoY rose 73% and 17% on a sequential basis. Cost of power rose 10% YoY and 5% on a QoQ. The staff cost went up 56% on a YoY but QoQ it showed a drop of 5%.

EBITDA on a YoY was down 37% at Rs.1359.64 crore and PBT was down 52% at Rs.760.13 crore. Net profit for the quarter was down 56% on a YoY at Rs.466.24 crore and this was down 74% on a sequential basis.

The margins have also been battered down substantially. OPM was down at 28.31% from 43.16% in Q3FY08 and NPM was down at 9.71% as against 21.48% in Q3FY08. Lower volumes, lower realisations and also higher inventory pile up led to the overall fall. Steel inventory increased to Rs.636 crore from Rs.61 crore on a YoY.

Notional exchange loss during the period includes an unrealized translation loss of Rs.153.56 crore for the quarter on Convertible Alternate Reference Securities (CARS) issued in September 2007. The liability has been translated at the exchange rate as on December 31, 2008. CARS are convertible into equity shares only between September 04, 2011 to August 06, 2012 and are redeemable in foreign currency only in September 2012, if not converted into equity, and are neither convertible nor redeemable till September 04, 2011.

During the quarter the company subscribed to 35,88,022 Rights Shares of Tayo Rolls and consequently it has now become a subsidiary of Tata Steel with effect from December 01, 2008.


About The Stock.

The stock need to be accumulated for long term prospective at every dip. There is no need to check the potential of the company. The bad phase in entire country and abroad is effecting its results , rest the whole story remains intact.

Disclaimer : I do not have any personal holding in this stock.