1:10 Split, 360% Dividend: Tata's Steel Stock Falls 11% In 1 Month, Big Merger Update; Time To Buy On Dip

 Tata Group-backed steelmaker, Tata Steel has witnessed a sharp correction in one month, falling by nearly 11% on BSE. While Tata Steel's weekly performance is also down by 8.5%. This brings a buy-on-dips opportunity to Tata Steel. Brokerages have recommended BUY for a target price ranging from Rs 175 to Rs 190. At the latest, Tata Steel has made a merger update related to Indian Steel & Wire Products.

Tata Steel's share price on August 7 ended at Rs 153.85 apiece, up by 2.40% with a market cap of Rs 1,92,057.77 crore. The latest boost in Tata Steel comes ahead of its merger update. Accordingly, Tata Steel's share price will be in focus on August 8. 

The stock's 52-week high and low are at Rs 184.60 apiece and Rs 114.25 apiece respectively. Tata Steel's share price has been on a bearish trend after its Q1 results. On a week-on-week basis, the stock is down by 8.5%, while in a month, the downfall is about 10.71%. However, year-to-date, the stock is still up by 10%, but gains have been squeezed in due to the latest correction.

Tata Steel Merger Update: 

As per the regulatory filing, after market hours of August 7, Tata Steel informed that the NCLT Mumbai bench has approved the scheme of amalgamation with Indian Steel & Wire Products. 

The approval is a step closer for Tata Steel to consolidate its metal and resources business into one single entity. In 2022, Tata Group commenced the process of merging six subsidiaries into Tata Steel. 

These included three listed companies such as Tata Metaliks, Tata Steel Long Products and The Tinplate Company of India. While Indian Steel & Wire Products is part of the other three unlisted companies including Tata Steel Mining and S&T Mining Company.

As per the latest document, the amalgamation will ensure the creation of a combined entity, hosting value-added products, leading to 'One-Tata Steel' to customers which will improve shareholders' value of the merged entity. Also, such restructuring will lead to simplification of group structure by eliminating multiple companies in similar businesses. 

Indian Steel & Wire Products is an unlisted subsidiary of Tata Steel, engaged in products such as rods, TMT rebars, wires and wires products among others.

 Tata Steel Corporate Actions: Tata Steel turned ex-dividend recently for final final dividend of Rs 3.60 per share for FY24, the same as the payout in FY23.

Since its bonus issue, Tata Steel has delivered a huge Rs 299 per share dividend. However, its highest dividend payout was Rs 51 per share in 2022, and cumulatively it paid Rs 63.75 per share in that year.

Meanwhile, Tata Steel has issued 1 free bonus share on the existing 1 equity share, taking the ratio to 1:1. Additionally, Tata Steel stock has also turned ex-split in 2022 in the ratio of 1:10.

Tata Steel Results: 

In Q1FY25, the company's consolidated revenue were at Rs 54,771 crores and EBITDA was Rs 6,822 crores with an EBITDA margin of around 12.5%. The company has spent Rs 3,777 crores on capital expenditure during the quarter. The phased commissioning of the 5 MTPA expansion at Kalinganagar is progressing well towards blast furnace start-up in September 2024.

PAT is at Rs 919 crore in the first quarter of FY25. On geographical basis, UK revenues were £646 million and EBITDA loss stood at £91 million. Liquid steel production as well as deliveries were 0.68 million tons.

While Netherlands revenues were £1,344 million and EBITDA for the quarter was £43 million. On per ton basis, EBITDA improved by £48 per ton on QoQ basis. Liquid steel production was 1.69 mn tons and deliveries were at 1.47 mn tons, up QoQ and YoY basis.

In India, the company's revenues were Rs 33,194 crores for the quarter and EBITDA was Rs 7,029 crores, which translates into an EBITDA margin of 21%

BUY/Accumulate Tata Steel Share:

 JM Financial On Tata Steel Share: