Tata Steel Limited is an Indian multinational steel-making company, based in Jamshedpur, Jharkhand and headquartered in Mumbai. It is a part of the Tata Group.
Formerly known as Tata Iron and Steel Company Limited (TISCO), Tata Steel is one of the top steel producing companies in the world with an annual crude steel capacity of 34 million tonnes. It is one of the world’s most geographically diversified steel producers, with operations and commercial presence across the world. The group (excluding SEA operations) recorded a consolidated turnover of US$19.7 billion in the financial year ending 31 March 2020. It is the second largest steel company in India with an annual capacity of 13 million tonnes after Steel Authority of India Ltd. (SAIL). TATA Steel, along with SAIL and Jindal Steel and Power, are the only 3 Indian steel companies that have captive iron-ore mines, which gives the three companies price advantages.

Tata Steel operates in 26 countries with key operations in India, Netherlands and the United Kingdom, and employs around 80,500 people. Its largest plant (10 MTPA capacity) is located in Jamshedpur, Jharkhand. In 2007, Tata Steel acquired the UK-based steel maker Corus. It was ranked 486th in the 2014 Fortune Global 500 ranking of the world’s biggest corporations. It was the seventh most valuable Indian brand of 2013 according to Brand Finance.

Quarterly growth in severe decline

Tata Steel reported an 89 percent year-on-year decline in consolidated net profit after tax at Rs 1,297 crore for the September quarter. Sequentially, the profit has declined by 83 percent.

Realisations have shrunk due to a global meltdown in commodity prices even as a fall in volumes in Europe was compensated by a gain in local volumes. A spike in input costs has heavily affected margins and profitability.

Despite these drawbacks, Tata Steel has historically given the best ever domestic sales in India supported by a strong product portfolio and an extensive distribution network which services end to end requirements in chosen segments.

Production & deliveries

The consolidated production for the quarter were at 7.56 million tons (MT) which is down 3 percent year on year and down 2 percent in comparison to the last quarter.

The consolidated deliveries were at 7.23 MT which are down 2 percent on year but have risen by 9 percent sequentially.

India deliveries were higher by 21 percent QoQ and 7 percent YoY primarily supported by record domestic deliveries while the European deliveries were lesser sequentially due to seasonal factors and reduced demand in Europe.

Increase in debt

Tata steel’s gross debt for the quarter ended September 30, 2022 stands at Rs 87,500 crore against Rs 82,600 crore in June quarter, which has increased by 6 percent. Considering a large cash pay-out of Rs 19,000 crore in Q2, on account of NINL acquisition along with FY22 dividend pay-out and growth capex has caused the increase in gross debt.

Notable highlights

The 6 MTPA (million tons per annum) Pellet plant will be commissioned in Q3FY23 and will be followed by the Cold Roll Mill complex in phases.  The company said that the 5 MTPA expansion at Kalinganagar is on track for commissioning by end FY24.

Tata Steel started the blast furnace of Neelachal Ispat Nigam (NINL)’s in October, within 3 months of completion of the acquisition and is being ramped up.

The Board of the company has approved the amalgamation proposal of seven listed and unlisted entities into Tata Steel, a value accretive merger with multiple benefits.

Technical Analysis

Tata Steel is moving up despite the poor quarterly performance which is very ironic. The rise is driven by the rally in the main Nifty stocks. The stock will face heavy resistance on the 50% retracement level at Rs 118 because the operators would control the price below Rs 120. This is based upon the high open interest on the call option of TATASTEEL 29-Dec-2022 CE 120. MFI is at 70 points which tells us that the stock has entered the overbought section and it might face selling pressure.

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