Business Daily from THE HINDU group of publications
Thursday, Apr 19, 2007
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Business Daily from THE HINDU group of publications Thursday, Apr 19, 2007 ePaper |
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Steel Markets - Stocks Corporate - Preferential Allotments
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Kolkata April 18 Tata Steel opened down, melted over 6 per cent during the mid session on Wednesday, but managed to close above Rs 500 with a loss of around 3.15 per cent on major bourses. The sharp initial reaction was attributed to apprehensions over substantial dilution of equity, which some market players felt may dent its future earnings per share. Dealers said that the local market could not react on Tuesday as the company's announcement, after trading hours, regarding the fund raising plan for part financing acquisition of Corus Group Plc. Enam Securities in an internal report has estimated that the enhancement of capital may reduce Tata Steel's 2007-08 EPS by around 13 per cent. The proposed issue of convertible preference shares might further eat into FY-08 earnings per share by another 10 per cent, the Enam report mentioned. Tata Steel's decision to depend heavily on equity rather than on debt for financing the Corus takeover has also taken the market by surprise. "The market did not expect a very high equity dilution," said an analyst with a foreign brokerage. However, an institutional fund manager said that while Tata Steel might inflict a short-term pain, it could also provide a long-term opportunity for investors. "Considering the high rate of sensitivity of the company to swings in steel prices, informed investors should get to know the likely profitability of Tata Steel and Corus in the next three to four quarters". The stock finished at Rs 511 with a combined traded quantity of 1.78 crore shares on the NSE and BSE. About 41 per cent of traded shares were presented for delivery on the NSE. However, the Tata Steel futures ended in premium to the underlying equity at Rs 512.95 on the NSE and added over 3 per cent in open positions.
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