Tata Steel shares jump, TRF hits lower circuit, Tinplate, Tata Metaliks fall after board okays mega merger

Tata Steel shares jump, TRF hits lower circuit, Tinplate, Tata Metaliks fall after board okays mega merger

Tata Steel share price jumped, while TRF, Tinplate, Tata Steel Long Products and Tata Metaliks shares fell on Friday after Tata Steel approved the amalgamation between seven of its group companies and itself. Tata Steel share price jumped around 3 per cent to hit an intraday high of Rs 107 on the NSE. In the previous session, the stock settled at Rs 103.60 apiece on NSE, down 0.81 per cent. Meanwhile, shares of TRF opened 5 per cent in the red and hit lower circuit. The scrip was quoting Rs 356 on the NSE. Tata Metaliks share price dropped over 3 per cent to Rs 771 and Tata Steel Long Products declined over 9.7 per cent to hit an intraday low of Rs 675.

Tinplate Company shares also plunged over 6 per cent to hit an intraday low of Rs 312 on NSE. This dip comes after the board of directors of Tata group on Thursday approved the amalgamation of all metal companies of Tata group into Tata Steel. The seven metal companies of  Tata group that will be merged with Tata Steel include Tata Steel Long Products Limited, The Tinplate Company of India Limited, Tata Metaliks Limited, TRF Limited, The Indian Steel & Wire Products Limited, Tata Steel Mining Limited and S&T Mining Company Limited. 

Swap ratios for the proposed amalgamation:

Tata Metaliks: Tata Steel to give 79 shares for every 10 shares of Tata Metaliks (Share swap at 2 per cent premium. In favor of Tata Metaliks)

Tinplate: Tata Steel to give 33 shares for every 10 shares of Tinplate (Share swap at 1 per cent premium. In favor of Tinplate)

Tata Steel Long Products: Tata Steel to give 67 shares for every 10 shares of Tata Steel Long Products (Share swap at 7.8 percent discount. In favor of Tata Steel)

TRF: Tata Steel to give 17 shares for every 10 shares of TRF (Share swap at 53 per cent discount. In favor of Tata Steel)

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Should you buy Tata Steel stock?

The proposed scheme would synergise – operational integration and better facility utilisation; improve customer satisfaction and services; efficiency in working capital and cash flow management; faster execution of projects in pipeline; rationalization of logistics costs, said Tata Steel in a regulatory filing. Analysts at Anand Rathi remain positive on Tata Steel stock after the event. The brokerage firm maintained its ‘buy’ rating on the stocks with a target price of Rs 146 apiece.

Analysts at Edelweiss Securities perceive the proposed amalgamation scheme in line with management’s strategic intent of simplifying the structure and unlocking value. “In our view, the benefits of lower iron ore royalty cost are likely to be immediate, but the more strategic ones such as portfolio optimisation, sharpened focus on long products and cross-functional benefits are likely to accrue over a period of time,” they said.

In terms of the stock reaction, for Tata Steel, the brokerage sees the benefits of incremental EBITDA from subsidiaries to be offset by dilution in shareholding. The stock prices of listed subsidiaries are, however, likely to recalibrate to the one suggested by the swap ratio. Edelweiss maintains its ‘hold’ rating on Tata Steel stock with an unchanged target price of Rs 98.5 per share.

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