Tata Steel net-debt/EBITDA now stands at just 0.8x as against 6.1x in March 2020, well below the cycle average target of 2.0x, placing the company in a comfortable position to pursue capex growth is, the brokerage and research firm is highlighted. Axis Securities.
“Tata Steel achieved massive deleveraging, after which the net debt of the company has come down , 62,869 crore till December 2021 from the peak of Rs. 1 lakh crore in FY20. In March 2022, it further reduced net debt 51,049 crore strong steel prices, disciplined capital expenditure outflow and working capital management have kept the balance sheet of the company at a solid level,” the note said.
share as top stock picks For the week, the brokerage placed . Your purchase recommendation is maintained with a target price of 1,415 each.
Tata Steel intends to increase its capacity from 19.6 MTPA to 40 MTPA primarily through organic expansion in India. Management highlighted several options to keep CAPEX in capital-efficient and value addition modes and is confident of increasing efficiencies through internal cash flows without any debt issuance.
In addition, the intensity of capital expenditure for brownfield organic projects will be less. Axis Securities said the company has a substantial land bank to grow organically, which allows it to accelerate the outflow of its capex in line with the steel cycle.
“The organic growth optionality allows Tata to scale capex in line with the steel cycle. Management said it would balance deleveraging, return to shareholders, and capex growth, and reiterated that it would use leverage for growth.
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