Tata Steel is afully integrated steel player, from mining to manufacturing to finished marketing products. It is also the world’s most geographically diversified steel producer.Tata Steel is also the 10th largest steel producer globally, with an annual crude steel production of 34 million tonnes per annum.
With its subsidiaries, associates, and joint ventures, its operations are spread across five continents with an employee turnover of 65,000. Tata Steel’s manufacturing and downstream facilities are in India, the United Kingdom, the Netherlands, and Thailand, while its raw material industries are in India and Canada.
Its Indian plants, located primarily in Jamshedpur, Kalinganagar and Dhenkanal, have a capacity of 20 MnTPA. They are better-run plants with higher margins and low operations costs thantheir European or Southeast Asian operations. Furthermore, in India, Tata Steel possesses and operates captive mines that ensure cost-competitiveness and production efficiencies.
It meets 100% of its iron ore requirements in India through its captive iron ore mines and about 21% of its coal requirements from its captive coal mines. In FY22, the Indian operations accounted for 62% of overall sales volumes for Tata Steel.These aspects give Tata Steel an edge over many of its competitors. This has resulted inexcellent Tata Steel share price performance in the last couple of years. The stock has delivered 61.32% returns to shareholders.
Though the Tata Steel share is down 13%, analysts, especially those at ICICIdirect, believe it is likely to continue its good performance as coking coal prices have softened. It is one of the raw materials used in the production of steel. The benefit of lower coking coal costs is likely to feed through in the cost base by September 2022 for Tata Steel India operations and by Q3FY22 for Tata Steel European operations.
Another positive for the company is that its subsidiary Tata Steel Long Products, has recently completed the acquisition of NeelachalIspat Nigam Limited. At this plant, Tata Steel is planning to ramp up production and capacity to 80-100 kilotonnes a month by March 2023.Moreover, to bring synergy and cut costs, Tata Group has announced it will merge seven companies into Tata Steel. This will likely be another booster for the stock in the long term.
The high debt pile has been a big concern for Tata Steel shareholders. However, analysts believe Tata Steel remains committed to its annual deleveraging target of $1 billion (about Rs. 8,200 crore) in line with its capital allocation strategy to reduce debt.ICICIdirect has a ‘buy’ rating on the NSE Tata Steel with a target of Rs. 130, based on the sum of the parts (SoTP) valuation.
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