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Tata Steel Shares Trade Ex-Split; Good Opportunity to Buy The Tata Stock?

By: Business Desk

News18.com

Last Updated: July 28, 2022, 10:57 IST

New Delhi, India

Tata Steel is splitting its stock in the 1:10 ratio

Tata Steel is splitting its stock in the 1:10 ratio

Tata Steel shares will turn ex-split on Thursday ahead of its record date; Should you invest?

Tata Steel shares started trading ex-split on Thursday ahead of its record date. The company has announced a stock split in the ratio of 10:1 on its equity shares. Tata Steel has fixed July 29 as the record date for a stock split of 10:1. Thereby, the shares will turn ex-split on July 28. The 10:1 ratio means Tata Steel will give 10 equity shares having a face value of Re 1 each on every one existing share having a face value of Rs 10 each.

Tata Steel Stock Split: Explained

Tata Steel’s stock split is a 1:10 ratio, this means a shareholder’s one equity share in the company will increase to 10 shares and the price of the shares on the ex-split date will also decrease ahead. This will make a shareholder have more shares in the company at a cheaper price.

In the Tata Steel case, the stock split will help the company to increase liquidity, thus beating the impact of rising commodity prices on profitability to some extent. It is also observed that when the share price of a company is high, it splits its stock to make the shares more affordable to small investors. Once the Tata Steel stock is altered and becomes cheaper, it will attract more investors and the trading volume will increase.

Financials

Tata Steel declared a consolidated profit after tax (PAT) of Rs 7,765 crore for the quarter ended June 2022. The net profit was lower by 12.8 per cent, compared to Rs 8,907 crore recorded a year back.

The performance for the quarter was impacted by the higher pet coke prices which resulted pushed up operating costs, while the export duty imposed by the government choked the exports which had a negative impact on the volumes.

Should you Invest?

Punit Patni, Equity Research Analyst, Swastika Investmart Ltd., said: “Tata Steel Ltd. has started trading EX Split starting from today. We have a neutral view on the company from a short to medium-term perspective as the normalization of profitability has commenced due to the steel prices witnessing a cool-off, the subdued global demand because of the rate hike regime by the global central banks, and the export duty imposed by the GOI which will create a supply glut in the domestic markets. However, long-term investors with moderate to high-risk appetite can accumulate the stock on dips as the demand outlook remains positive in the long term and Indian steel makers are expected to gain due to curtailment of steel production by China and their competitive advantage in terms of low iron ore and labor costs.”

Analysts at at Centrum said, “TSI’s profitability is expected to decline in Q2FY23 (Q2FY23E EBITDA/t of ~Rs14,300) driven by lower steel prices marginally offset by lower coking coal cost and higher volume. The full effect of lower coking coal prices will be reflected in Q3FY23, thereby improving margins. TSE’s profitability too is expected to fall due to lower prices and higher coking coal cost due to lag impact.”

The duo added, “We expect release of working capital in H2FY23. A 6mtpa pellet plant and 2.2mtpa cold rolled mill is expected to be commissioned in H2FY23. High operating profits will help TATA to deleverage further in FY23 with net debt of ~Rs533bn at FY23‐end (FY22E‐end: ~Rs576bn) after including effect of NINL acquisition (~Rs121bn) which was completed on 4th July 2022. We do not foresee any further major acquisition by TATA in FY23. TATA’s stock split 10:1 will be on 29th July. We retain BUY, with a target price of Rs1,368.”

Manoj Dalmia founder and director-Proficient Equities Limited, said “We recommend buy rating as due to the split the stock might appear cheaper and there can be some buying.”

The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

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first published:July 28, 2022, 10:47 IST
last updated:July 28, 2022, 10:57 IST