The Hindu Business Line : Tata Steel gains on growth prospects

STRONG fundamentals and robust growth prospects brought on by Tata Steel's future plans have seen the stock edge up on the bourses in the recent past.

Additionally, firm steel prices are likely to sustain interest in the counter. Notwithstanding fears of a Chinese slowdown, the market is bullish on Tata Steel.

The stock of Tata Steel has appreciated 16 per cent since September 1; it rose from Rs 249.60 on September 1 to the current close of Rs 289.35 on the BSE.

Tata Steel has been on a major expansion drive. Having announced its plans in mid-August to acquire the steel businesses of the Singapore-based NatSteel Ltd for Rs 1,313 crore, it has put a proposal to set up a six million-tonne integrated steel plant in Orissa with an investment of Rs 15,000 crore.

Industry sources said the company has already received in-principle approval for this project and the Orissa Government is expected to consider the Tata Group favourably for granting mining leases.

"An allocation of mines for Tata Steel is certainly on the cards,'' said a company source. Various other groups have also put forward proposals to set up steel plants; leading ones being Posco, BHP Billiton, Sterlite Group.

Tata Steel's proposed investment in Orissa will be in the areas of mines, raw material processing, setting up of captive power plant, blast furnace and a steel rolling mill.

The company is currently putting through an expansion of capacity at its Jamshedpur plant from 4.5 million tonnes to 7.5 million tonnes. With the Orissa project and the recent acquisition of NatSteel, Tata Steel is clearly poised to emerge as a leading steel player. Tata Steel also has the wherewithal to take through a reduction in prices because of its low cost of production and backward integration.

Brokers said that the company's statement that it will not hike steel prices until March 2005 augurs well for it in terms of demand.