1:10 Split: Tata's 116-Year-Old Steel Co Up 521% Post-Covid, From Rs 25-To-155; Five Points Of Rs 2700 Cr NCDs

Tata Steel is a global leader in the steel market under the umbrella of India's largest conglomerate Tata Group. Tata Steel closed its FY24 on a positive with stock price crossing Rs 155 levels, and nearing its 52-week high of Rs 159.50 apiece. Brokerages are optimistic about Tata Steel with target prices between Rs 170-180.

While the steel player is on its path to breaking new records, it needs to be noted that investors who bought positions in Tata Steel in the first month of the first nationwide lockdown during the first wave of COVID-19 are sitting on hefty returns. To be precise, Tata Steel has teamed up to fly high by a whopping over 521% after Covid-19.

On BSE, Tata Steel's share price stood at Rs 155.90 apiece, up by 2% after market hours of March 28, 2024, which is the last trading day for FY24. The stock is near its 52-week high and low of Rs 159.50 apiece and Rs 101.65 apiece respectively.

But in the long-term, Tata Steel's gains are extraordinary. Since March 2020, to date, the lowest price level in Tata Steel was at Rs 25.09 apiece which was recorded on March 30, 2020, trading hours. The stock ended at Rs 25.41 apiece, down by 8.4% on this day.

From this level, Tata Steel's share price has skyrocketed by a breathtaking of 521.36% on BSE.

And that was not all, investors' portfolio in Tata Steel only shot up, thanks to the company's stock split ratio that it carried in July 2022.

It needs to be noted that even the Rs 25.09 price level is because of the adjustment of the 1:10 stock split. With effect from July 28, 2022, Tata Steel's 1 equity share with a face value of Rs 10 each has split to a face value of Rs 1 each with ten shares. Before the stock split, Tata Steel shares were between Rs 800-1000 per share.

So for instance, if you bought 1,000 shares of Tata Steel in March 2020. Because of the stock split ratio of 1:10, your 1,000 shares rose to 10,000 (1,000 x 10). And if you continued to hold Tata Steel shares up till now, then you have made massive gains post-COVID.

Because 10,000 shares on March 30, 2020, would be valued at Rs 2,54,100 at the closing price. The same 10,000 shares have climbed to Rs 15,59,000 at the closing price of March 28, 2024. That's better returns than traditional FDs.

Currently, Tata Steel is in focus for its fundraising of Rs 2,700 crore via non-convertible debentures. Here are 5 key points of the development.

1. Earlier this week, on March 27, Tata Steel announced that it approved the allotment of 2,70,000 Unsecured, Redeemable, Rated, and Listed, NCDs having a face value of Rs 1,00,000 each, to identified investors.

2. The NCDs have a fixed coupon rate of 7.79%. The issue is on a private placement basis and has a tenure of 3 years.

3. As per Tata Steel, the NCDs have been issued based on multiple yield allotment methods prescribed by BSE Limited and the Securities and Exchange Board of India, and the issue price of the NCDs has been determined accordingly.

4. The NCDs are proposed to be listed on the Wholesale Debt Market Segment of BSE Limited.

5. The 3-year tenure starts on March 27, 2024, and will end on March 26, 2027.

Tata Steel's share price has the potential for further upside. At the latest, three brokerages have set the highest target price between Rs 170-180. JP Morgan and Fisdom have set the target price of Rs 170 per share on Tata Steel, while the latest to join the bandwagon is Axis Securities which predicts a target of Rs 177 in the steel giant.

Tata Steel is unique because of its linchpin in the steel sector. Although, currently the company has been restructuring its UK business. The company's near-term scenario is expected to be challenging, however, long-term prospects look healthy.

Earlier, in its research note, Elara Capital said, TATA has started phase-wise commissioning of the upcoming 5mn tonnes expansion at the Kalinganagar plant (Odisha) and expects to produce 0.7mn tonnes in FY25, followed by further ramp-up in FY26. The brokerage also expressed caution on the near-term performance of India operations, due to delayed ramp-up of Kalinganagar capacity, higher coking coal prices and soft steel prices. Further, continued challenges in UK operations and the delayed start of Netherlands' blast furnace 6 remain concerns.

On the other hand, Fisdom's note pointed out that key factors for investment consideration include the strategic focus on sustainability, commitment to net zero by 2045, and investment plans in the UK for a state-of-the-art scrap-based EAF.

Further, Fisdom's note said, ongoing initiatives for responsible growth, cost, optimization, and the Kalinganagar expansion indicate a long-term commitment to operational efficiency. Also, it's important to note that the stock may attract attention for its potential turnaround and focus on sustainability in the steel industry.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.