Tata Steel rose 2.3% to Rs 310.90 at 12:12 IST on BSE after the company said it has decided to explore all options for portfolio restructuring including the potential divestment of Tata Steel UK, in whole or in parts.
The announcement was made before market hours today, 30 March 2016.Meanwhile, the S&P BSE Sensex was up 253.21 points or 1.02% at 25,153.67.
On BSE, so far 4.27 lakh shares were traded in the counter as against average daily volume of 12.28 lakh shares in the past one quarter. The stock hit a high of Rs 311.15 and a low of Rs 305.40 so far during the day. The stock had hit a 52-week high of Rs 384.20 on 6 May 2015. The stock had hit a 52-week low of Rs 200 on 29 September 2015. The stock had outperformed the market over the past one month till 29 March 2016, surging 22% compared with Sensex's 8.25% rise. The scrip had also outperformed the market in past one quarter, advancing 19.11% as against Sensex's 4.52% fall.
The large-cap company has equity capital of Rs 971.22 crore. Face value per share is Rs 10.
Tata Steel said that its board of directors after reviewing the recent performance of the European business of the company noted with deep concern the deteriorating financial performance of the UK subsidiary in the last twelve months. The management has advised the board of its European holding company Tata Steel Europe to explore all options for portfolio restructuring including the potential divestment of Tata Steel UK, in whole or in parts. Given the severity of the funding requirement in the foreseeable future, the Tata Steel Europe board will be advised to evaluate and implement the most feasible option in a time bound manner, Tata Steel said in a statement.
While global steel demand, especially in developed markets like Europe has remained muted following the financial crisis of 2008, trading conditions in the UK and Europe have rapidly deteriorated more recently, due to structural factors including global oversupply of steel, significant increase in third country exports into Europe, high manufacturing costs, continued weakness in domestic market demand in steel and a volatile currency. These factors are likely to continue into the future and have significantly impacted the long-term competitive position of the UK operations in spite of several initiatives undertaken by the management and the workers of the business in recent years.
Further, the Tata Steel board also reviewed the proposed restructuring and transformation plan for Strip Products UK, prepared by the European subsidiary in consultation with an independent and internationally reputed consultancy firm. Based on the review conducted, the Tata Steel board came to a unanimous conclusion that the plan is unaffordable, requires material funding support in the next two years in addition to significant capital commitments over the long term, the assumptions behind it are inherently very risky, and its likelihood of delivery is highly uncertain. Therefore, the board concluded that it would not be able to support the investment necessary to proceed with the proposed transformation plan for strip products UK.
Tata Steel further said that the company's discussions with Greybull in relation to a sale of the UK Long Products business would continue.
On consolidated basis, Tata Steel reported net loss of Rs 2127.23 crore in Q3 December 2015 as against net profit of Rs 157.11 crore in Q3 December 2014. Net sales declined 16.5% to Rs 27818.73 crore in Q3 December 2015 over Q3 December 2014.
Tata Steel is Europe's second largest steel producer. The combined Tata Steel group is largest steel producer in the world.
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