Angel Broking likes Tata Steel for buoyant biz outlook

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Angel Broking likes Tata Steel for buoyant biz outlook

The world's seventh largest steel maker Tata Steel's follow-on public offer has opened for subscription. Angel Broking also likes Tata Steel for its buoyant business outlook.

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The world's seventh largest steel maker Tata Steel 's follow-on public offer has opened for subscription. Anchor investors looked optimistic about the company after looking at their response to the issue on Tuesday.

Angel Broking also likes Tata Steel for its buoyant business outlook, driven by a) higher sales volume in FY2013E on completion of its 2.9mn tonne brownfield expansion project in Jamshedpur, b) raw-material projects at Mozambique and Canada and c) cost-reduction initiatives at Tata Steel Europe (TSE), according to its report dated January 18.

The company aims to raise Rs 3,385.8-3,477 crore as against offering of 5.7 crore equity shares. Country's largest steel company received commitment of Rs 507.825 crore from anchor investors at higher end of price band of Rs 594-610 a share.

Angel Broking believes Tata Steel's FPO offers a good entry point to investors even at the upper price band of Rs 610. "At Rs 610, it trades at 5.9x FY2011E and 5.1x FY2012E EV/EBITDA. Thus, we recommend subscribe to the issue and reiterate our buy recommendation on Tata Steel with a target price of Rs 766," the report says.

Tata Steel intends to use issue proceeds for partly financing the company's share of capital expenditure for expansion of existing works at Jamshedpur; and payment of redemption amounts on maturity of certain redeemable non-convertible debentures issued by the company on a private placement basis.

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To read the full report click on the attachment