Tata Steel Limited

Tata Steel Limited
Hold (Target Price: Rs.811)

Market Data
Price on reco. date (Rs)	630 (BSE)
CMP - BSE / NSE (Rs)	630 / 630
Change since reco.	-0.1%
52-week High/Low (Rs)	737 / 434
NSE Symbol	TATASTEEL
BSE Code	500470
No. of shares	887.2 m
Free float	68.7%
Market cap (Rs m)	558,936

Rs 100 invested is now worth

Stock price performance
	Tata Steel	Index*
1-Yr	18.2%	18.4%
3-Yrs	-2.4%	5.5%
5-Yrs	11.5%	19.2%

Returns over 1 year are compounded annual averages * BSE Sensex

Shareholding (Jun-2010)
Category	(%)
Promoters	31.3
Banks & mutual funds	26.5
FIIs	15.5
Public	26.3
Other	0.4
Total	100.0

Investment Rationale

Domestic steel demand to remain robust: Amongst all the metals, steel arguably has the highest co-relation with a country's GDP growth. Thus, if we expect India's GDP to grow in the region of 7%-8% in the foreseeable future, then the consumption of steel has to increase at a proportionate rate. As per industry reports, between 2003 and 2015, the demand for steel is expected to triple, translating into a healthy CAGR in the region of 10%. One more argument that can be put in favour of robust growth in steel demand is the per capita consumption levels in the country. Per capita steel consumption in India is way behind other developed nations. Even China has per capita levels, which are almost 7 times India's. Thus, it should come as no surprise that steel demand in India will continue to head northwards for quite some time to come and Tata Steel, by way of being one of India's leading manufacturers would continue to benefit from the same. Tata Steel Europe to provide downstream technology and synergy: In what was the biggest deal by any Indian corporate, Tata Steel in FY07 acquired 100% of the shares of Corus Group Plc, a 21 m tonne capacity steel producer with plants in UK and Netherlands. The move, in one fell swoop, pushed the company into the global league of steel producers, making it the world's sixth largest integrated steel producer with a capacity of about 31 m tonnes. The synergies that will be derived from Tata Steel and Corus (now Tata Steel Europe) coming together will be of tremendous strategic value to both organisations. The leveraging of low cost intermediate products from India with further processing at Europe to produce high-end finished products, along with several operation-related initiatives will improve the competitiveness of Tata Steel Europe in the European markets, while India will benefit from high-value, sophisticated finished products developed in R&D facilities in Europe. Meaty plans for the future: Not one to rest on its laurels, the company has realized the need to grow in size and regional diversity to match its global peers. This was also made necessary by the impending entry of several global players in the domestic market and increased consolidation in the industry. Thus, expansion plans and that too gargantuan, could no longer be deferred. Realizing these imperatives, in 2005, the company made long-term plans of becoming a 50 m tonne steel producer by 2015 having multi-locational manufacturing facilities with strong regional presence focusing mainly on auto, packaging and construction sectors across the global markets. The company plans to achieve these objectives through various strategic initiatives such as retaining its pre-eminent position in Indian markets by significantly expanding capacities through both brownfield as well as greenfield expansion routes, linking low cost steel production facilities with the most favorable steel consuming markets and having a balance between the growing markets of the developing countries and the mature markets with high end products and technology. Considering the company's previous track record, it would not be out of place to think that the company would be able to meet most of these objectives, thus significantly enhancing shareholder value in the process.