-------- Forwarded Message --------
Subject: TATA STEEL : Another Example Of India's Failed Globalisation
Effort ?
Date: Thu, 24 Dec 2015 09:49:44 +0530
From: Asis Ghosh <asis...@gmail.com>
Reply-To: asis...@gmail.com
*For TS, 268-282 may be a good resistance zone*
*
*
*Although the proposed UK deal may help the Co in reducing cash burn, *
*its too small amount for any significance deleverage for TS*
*CMP: 264*
*
*
*Sell either break below 262 or on rise around 268-282;*
*
*
*TGT: 236-223-215 (1-3M)*
*
*
*TSL>285*
*Note: Technically, for TS, consecutive closing above 285 for any
reason, the stock can further rally towards 295-300 & 320-340 area in
the near term. This is purely a technical trading idea, based on price
action for some recent new flow.*
TS and all the other metal/steel sectors are in news for the last few
weeks due to Govt's initiative to provide adequate protection of
domestic steel manufactures from Chinese aggression.
Moreover, TS came to the limelight amid news flow of its UK long
products division sale negotiation to Greybull Capital. Though the
negotiation is not finalized and a LOI has been executed, as par
reports, the deal value may be near GBP 500 mln. In consolidated BS of
TS, this long products div has zero BV and as par some estimates, this
is causing around $160 mln annualized loss for TS.
Thus the deal amount is too small wrt TS's huge consolidated debt of
around Rs.72000 cr as on Q2FY16, which is double its NW.
Although, there is some uncertainty about whether the deal goes through
and what price, the proposed sale of this loss making long products
units may help TS certainly to reduce its current cash burn. But the
deal amount is not so significant for overall deleveraging effort of the
company.
As par analysts at Jefferies, most EU steel companies are trading around
0.2-0.5 x P/B, the turnaround investor (Greybull) is unlikely to pay a
strategic premium for this long steel products assets of TS in UK. Also,
there are many headwinds for steel industry in EU/UK for currency
volatility, unfavorable demand supply situation and Chinese imports.
Analysts are also of the opinion that although, the above potential deal
could help curtail loses at TSE partly, there are other UK units, which
continue to weigh on its EBITDA.
Over the years many Indian corporates, went into globalisation spree at
2007-08 recession price, but even that is now causing headwinds for its
BS as most of these overseas assets are either making loses or
negligible profits and ROE is far less than standard in the domestic
market. Thus the Indian companies are trying to exit at any cost, even
in loss to repay massive debt.
For TS, this UK deal news was there in the market for the last few days
even before official announcement and that's why the stock broke the
previous strong resistance zone of 250 and now trading around 265. Still
this is more than 32% rally in the last three months from its recent
bottom of around 200.
*Technically, if TS fails to sustain above 268-282 zone, it may
consolidate and a fall below 262, it may again come down to 223-215 zone
in the near term, from where one can again buy for portfolio investment,
considering the favorable risk reward ratio.*
*Analytical Charts:*
<http://4.bp.blogspot.com/-u3WysVmXLrY/Vntm-2Def7I/AAAAAAAAFak/mI7QU2prTus/s1600/TS-23-12-2015.png>
<http://3.bp.blogspot.com/-oEoW5Mb9s78/VntnAxtCSeI/AAAAAAAAFas/VH-D5ZAHK_U/s1600/TS-FIBB-23-12-2015.png>
<http://1.bp.blogspot.com/-3VMm0WubSSI/VntnD5v5CcI/AAAAAAAAFa0/PnbhK97LUDg/s1600/TS-WK-23-12-2015.png>
<http://1.bp.blogspot.com/-YK4Lu7k1WG4/VntnFP0VuHI/AAAAAAAAFa8/hfyV7ZU-01w/s1600/TS-PATTERN-23-12-2015.png>
<http://3.bp.blogspot.com/-bfOharTXvUw/VntnMI_74AI/AAAAAAAAFbE/ttwdwzJMLVg/s1600/TS-TL-ST-23-12-2015.png>
<http://1.bp.blogspot.com/-3leT2Vv2DSI/VntnWiWIC0I/AAAAAAAAFbU/lqT7uBSxRCY/s1600/TS-TL-23-12-2015.png>
--
Thanks & Regards,
Asis Ghosh
(asisghosh.blogspot.com)
--
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