Report by- Sabyasachi Bhattacharya
Tata Steel could exit from South East Asia; could be a good move-
Tata Steel is in talks to exit its South East Asia (SEA) operations, which if successful could prove to be a huge step in correcting its faulty capital allocation, leading to several notable benefits. Among several subsidiaries and businesses that Tata Steel operates globally, the SEA operation is the weakest. During the last reported quarter, it had earnings before interest, tax, depreciation and amortisation (EBITDA) per tonne of Rs 1,736 as against Rs 4,886 in the case of European operation and much lower than the Indian operation’s EBIDTA per tonne of Rs 19,244. While lower profitability and growth have been matters of concern, in terms of size too, it has little significance. In the current fiscal till December, the SEA operation, which includes several facilities in Singapore, Thailand and Vietnam, produced mere 1.58 million tonne of steel as against total group steel production of 22 million tonne. Even the recently-acquired Bhushan Steel is twice the size in terms of the production and earns EBITDA per tonne of Rs 10,291, about six times higher compared to the SEA operation. This certainly suggests the exit would be earnings-accretive and rationalise the group’s focus. The other important aspect of this exit would be unlocking of capital. The funds and assets, which are deployed in the South East Asia operation, can be used for more productive assets. In FY18, it generated an EBITDA of Rs 437 crore. Even at about 5-6 times enterprise value to EBITDA, SEA would be worth about Rs 2,200-2,600 crore. SEA contributes close to 8 percent to group sales and makes less than 2 percent contribution to group EBITDA. Exit as higher valuations would essentially mean better returns for the remaining operation.
Source-Purple Trades Research Department
Indian markets move forward despite heavy selling-
Chart source- Upstox
Indian markets had a mixed day today as Nifty showed a lot of volatility. As you can see BULLS and the BEARS dominated at regular intervals. As you can see the markets had a gap up opening today. After the Gap-up opening the markets moved downwards. It consolidated a little before actually moving upwards and hitting today’s highs. But due to heavy half hour selling the markets moved downwards. It was due to the anticipation of Q3 results of various banks like IndusInd bank. But the markets soon recovered due to recovery in SBI. Equity benchmarks have closed the session with strong gains. The Nifty has ended the session around 10,850-mark. There was some weakness seen among metals and energy sectors, along with PSU banks. Meanwhile, banks, automobile and consumption names rose during the trade. The Nifty Midcap index ended with cuts of around one-tenth of a percent. Bharti Airtel, Axis Bank and ITC are the top gainers, while Yes Bank, Tata Steel, GAIL and HPCL lost the most.
Let’s take a look at the performance of major Indices-
Global markets had a bullish day today. Asian Indices along with European Indices CAC, FTSE and DAX were all seen in the GREEN. NASDAQ was also seen in GREEN.
Source- MoneyControl, Purple Trades Research Department
Key Points for Traders to watch out for while trading Nifty tomorrow-
- 10,750 is a short term support for Nifty.
- If Nifty breaks 10,750 then it has the potential to go down.
- 10,800 is a short term resistance for Nifty.
- If Nifty breaks 10,800 then it has the potential to go up.