Tata Steel shares fall below follow-on offer price

Our Bureau Mumbai | Updated on February 09, 2011


Tata Steel shares on Wednesday fell three per cent to Rs 598, below its follow-on public issue price of Rs 610 issued in January.

The company had allotted 5.7 crore shares in the follow-on public offer to raise Rs 3,477 crore.

The newly-issued shares were admitted for trading on February 2. The follow-on offer was part of Tata Steel's fund-raising programme of Rs 7,000 crore to reduce its debt and invest in expansion projects.

State-owned Steel Authority of India Ltd (Sail), which had planned to raise Rs 8,000 crore with a follow-on offer before Tata Steel, had to delay its issue as SBI Caps, Kotak Mahindra, Deutsche Bank and HSBC — the merchant bankers short listed by Sail — were engaged by Tata Steel.

“Sail had roped in these merchant bankers last September, much before Tata Steel announced its plans. The Steel Ministry had issued a show-cause notice to the banks and sought Law Ministry's opinion on the possibility of imposing a penalty on the merchant bankers. The development delayed the filing of the offer documents by Sail which was slated for January 20,” said an analyst.

Sail's follow-on offer was part of the Government's divestment programme to raise Rs 40,000 crore in this fiscal. However the Government had managed to raise just about Rs 22,000 crore.

Metal stocks dip

Besides Tata Steel, most of the metal stocks on Wednesday were hammered because of the concern over slowdown in demand amidst rising input costs.

Jindal Saw lost seven per cent at Rs 188, Hindalco and Sesa Goa dipped six per cent to Rs 220 and Rs 298, Bhushan Steel and JSW Steel were down five per cent each at Rs 362 and Rs 783, Nalco and NMDC lost three per cent each at Rs 405 and Rs 264, while Sail was down two per cent at Rs 154.

Steel manufacturers have reported a disappointing performance in the third quarter of this fiscal largely because of sharp increase in raw material prices. Price of coking coal, a key raw material, almost doubled to $205 a tonne in the December quarter from $128 a tonne last year.

JSW Steel's net profit was down 26 per cent at Rs 383 crore in the December quarter despite logging in the highest ever quarterly sales of Rs 5,771 crore and production of 1.59 million tonnes. Bhushan Steel reported a 23 per cent increase in net profit at Rs 280 crore, due to 30 per cent surge in sales volume to 4,67,000 tonne, mainly on sale of 94,000 tonnes of hot roll coil from the under-trial Orissa plant.

Tata Steel will announce its financial results on February 15.

Published on February 09, 2011

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