Accumulate Tata Steel, target of Rs 425: Dipen Shah

Dipen Shah of Kotak Securities told CNBC-TV18, "Tata Steel's October-December quarter results have been a mixed bag for us. The negative came in the form of higher debt burden which the company has reported, nearly Rs 6,000 crore of additional debt. We think that probably that is the peak level of debt.”

He further added, “The debt has increased because of higher working capital. The company despite being a seasonally weak quarter has maintained production levels. In anticipation of liquidating the inventory in the current quarter which is the March quarter where the guidance for sales in Europe has increased significantly. So probably that was an inventory build-up which the company took in the previous quarter, but knowing that it should be able to liquidate it in the March quarter."

“Apart from that we have had the raw material price reductions which are coming in, so to that extent the inventory or the working capital requirement next quarter onwards should be that much lower," Shah said.

He further said, “On the other hand there was about Rs 7000 crore capex which the company took up on Orissa, which was higher-than-anticipated. But going ahead if we have to look at the guidance from the company, over the next 15 months the capex for this plant is just going to be about Rs 9000 crore. So we think there has been some munching up of debt in this current quarter and probably this is the peak level of debt which the company had achieved may be over the near future. So that is something which we look at with some sense of optimism going ahead."