15 August 2020
1QFY21 Results Update | Sector: Metals
Tata Steel
Neutral
Estimate change
TP change
Rating change
Motilal Oswal values your support in the
Asiamoney Brokers Poll 2020 for India
Research, Sales and Trading team.
We
request your ballot.
CMP: INR418
Margin improving in Indian operations
TP: INR433 (+3%)
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
TATA IN
1,145
475.8 / 6.3
506 / 251
19/5/13
5863
But Europe to continue to post losses
Tata Steel’s (TATA) 1QFY21 consolidated EBITDA at INR5b (-91% YoY) was
the weakest in the past 10 years. The COVID-19 crisis led to a sharp
decline in both volumes and margins across all entities.
Margin outlook in Indian operations, however, is much better with prices
bouncing back to near pre-COVID levels. Europe, though, should remain a
drag with EBITDA losses expected to continue in the near term.
We have raised FY21/FY22E EBITDA estimates by 16%/7% to factor in the
improved outlook in Indian operations. However, leverage remains
unfavorable at 6.8x FY21 EBITDA. Maintain
Neutral.
Weak results in line with expectation
Consol. reported EBITDA plunged 89% QoQ (-91% YoY) to INR5.1b (v/s est.
INR10.3b) in 1QFY21, led by significantly lower profitability in Tata Steel’s
India operations and losses in Europe. Adjusted EBITDA (eliminating impact of
forex movement on investments) was also weak at INR10.4b (-81% YoY).
Consol. sales volumes declined 24% QoQ to 4.86mt. Consol. PAT loss stood at
INR44.3b v/s Adj. profit of INR13.8b in 4QFY20.
Standalone:
EBITDA declined 66% QoQ to INR12.5b (v/s est. INR11.6b),
primarily due to 28% QoQ decline in volumes at 2.11mt and 9% QoQ
decline in realization to INR44,344/t (on account of weak pricing, adverse
product mix and higher exports at ~50% of volumes). Lower volumes
resulted in higher fixed cost/t (~INR3,600/t as per management). As a
result, EBITDA/t declined 53% QoQ to INR5,940/t (v/s est. INR5,529/t).
Adj. PAT loss stood at INR3.9b (v/s Adj PAT of INR13.2b in 4QFY20).
Tata Steel Europe (TSE):
Tata Steel Europe reported EBITDA loss of
INR6.3b (v/s profit of INR650m in 4QFY20), despite profit of INR7.6b from
sale of carbon credits and receipt of INR4.4b government support.
Operational EBITDA loss, thus, was much higher at INR18b. Volumes
declined 19% QoQ to 1.94mt. Per ton EBITDA loss stood at USD44/t (v/s
est. USD50/t and positive USD4/t in 4QFY20).
Tata Steel BSL:
Tata Steel BSL’s EBITDA plunged 81% QoQ to INR 1.5b (v/s
est. INR3.0b) due to lower volumes (0.69mt, -81% QoQ) and realization
(INR38,862/t, -11% QoQ). EBITDA/t declined to INR2,163/t (-73% QoQ).
Net-debt stood flat QoQ at INR1,070b. However, Net-debt to TTM EBITDA
increased to 8.5x (6.1x at end-FY20).
Management commentary highlights
Management has guided for 2QFY21 EBITDA loss in Europe at similar level
as reported in 1QFY21 i.e. USD44/t.
For Indian operations, management has guided for improvement in
realization by >INR3,000/t QoQ (due to better pricing/product mix) and
capacity utilization >95% for 2QFY21.
Financials & Valuations (INR b)
Y/E MARCH
2020E 2021E 2022E
Sales
1,398 1,291 1,481
EBITDA
175
155
238
Adj. PAT
10.4
-9.9
66.6
EBITDA Margin (%)
12.5 12.0 16.1
Cons. Adj. EPS (INR)
9.1
-8.7
58.1
EPS Gr. (%)
-89.8 -195.8 -769.7
BV/Sh. (INR)
587
567
613
Ratios
Net D:E
1.6
1.6
1.5
RoE (%)
1.6
-1.5
9.8
RoCE (%)
5.8
4.0
8.1
Payout (%)
89.3
-93.2
13.9
Valuations
P/E (x)
46.1
-48.2
7.2
P/BV (x)
0.7
0.7
0.7
EV/EBITDA(x)
8.9
9.9
6.3
Div. Yield (%)
2.4
2.4
2.4
FCF Yield (%)
20.4 21.6 23.9
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Jun-20 Mar-20 Jun-19
34.4
34.4
33.1
30.0
29.9
30.4
11.8
12.4
13.8
23.7
23.3
22.7
FII Includes depository receipts
Amit Murarka - Research analyst
(Amit.Murarka@motilaloswal.com)
Basant Joshi - Research analyst
(Basant.Joshi@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
Tata Steel
Capex guidance for FY21 was maintained at INR50b. However, 1QFY21 spends
were higher than guidance run-rate at INR18.5b due to payment of outstanding
balances toward certain projects.
1QFY21 consol. FCF stood at ~INR7b in 1QFY21. Working capital release during
the quarter was INR25.8b (INR22b in India).
Valuation and view
Outlook for Indian operations is much improved by better domestic demand and
prices. However, FCF generation would likely be limited as working capital has
already been squeezed out and may now expand on higher receivable days.
Tata Steel Europe should remain a drag, with EBITDA loss expected in FY21 and
PAT loss in FY22E.
Despite curtailing growth capex, we expect net debt to EBITDA to remain high at
6.8x in FY21 and 4.3x in FY22E.
At CMP, the stock trades at 6.3x FY22E EV/EBITDA. Maintain Neutral with TP of
INR433/share based on FY22E EV/EBITDA of 6.5x for Indian operations and 5x
for Europe.
Quarterly Performance (Consolidated)
INR m
Y/E March
FY20
FY21E
FY20
FY21E
vs Est
1Q
2Q
3Q
4Q
1Q
2QE
3QE
4QE
1QE (%)
Net Sales
3,59,471 3,45,792 3,55,204 3,37,700 2,42,885 3,19,723 3,54,326 3,73,937 13,98,167 12,90,871 2,40,582
1
Change (YoY %)
-5.0
-20.6
-13.8
-20.4
-32.4
-7.5
-0.2
10.7
-11.3
-7.7
-33.1
EBITDA
53,769 38,196 36,197 46,469
5,055 44,010 51,201 54,600 1,74,631 1,54,867 10,347
-51
Change (YoY %)
-16.9
-57.2
-46.2
-38.2
-90.6
15.2
41.5
17.5
-40.6
-11.3
-80.8
12
(% of Net Sales)
15.0
11.0
10.2
13.8
2.1
13.8
14.5
14.6
12.5
12.0
4.3
EBITDA(USD/tss)
122
83
70
100
14
94
101
104
93
87
28
-50
Interest
18,064 18,714 19,306 19,251 19,983 19,819 19,202 18,892
75,335
77,896 19,380
3
Depreciation
20,828 21,272 20,187 22,241 21,108 21,055 21,001 20,905
84,407
84,069 21,326
-1
Other Income
2,511
1,836
929 13,159
1,926
1,583
1,541
1,848
18,435
6,898
1,363
41
PBT (before EO Inc.)
17,387
46 -2,366 18,136 -34,110
4,719 12,539 16,651
33,324
-200 -28,995
18
EO Income(exp)
160
-336 -3,286 -34,059
584
-37,521
584
PBT (after EO Inc.)
17,547
-290 -5,652 -15,923 -33,526
4,719 12,539 16,651
-4,196
383 -28,995
16
Total Tax
11,238 -40,500
6,210 -2,633 12,715
-590
1,775
3,008 -25,684
16,909 -7,539
% Tax
64.6
-263
-14.5
-37.3
-12.5
14.2
18.1
-77.1
26.0
Reported PAT
6,309 40,210 -11,863 -13,290 -46,242
5,309 10,764 13,643
21,488 -16,526 -21,457
116
Adj. PAT (after MI & asso)
6,771
-537 -7,005 13,802 -44,320
7,728 13,227 16,084
10,373
-9,938 -19,986
122
*Note:
Sum of quarterly Adj. PAT does not match with full year due to pref. dividend accounted in full year
Quarterly Performance (Standalone)
Y/E March
Net Sales
EBITDA
(% of Net Sales)
Spreads
Conv. Cost
EBITDA(INR/tss)
EBITDA(USD/tss)
Interest
Depreciation
Other Income
PBT (before EO Inc.)
EO Income(exp)
PBT (after EO Inc.)
Total Tax
% Tax
Reported PAT
Adjusted PAT
1Q
1,60,913
39,569
24.6
37,790
24,631
13,159
189
7,231
9,677
1,778
24,439
-408
24,032
8,642
36.0
15,390
15,797
INR m
FY20
FY21E
FY20
FY21E
vs Est
2Q
3Q
4Q
1Q
2QE
3QE
4QE
1QE
(%)
1,48,712 1,52,620 1,42,114 93,388 1,55,757 1,59,093 1,62,999 6,04,360 5,71,237 93,373
0
34,782 37,778 36,487 12,510 40,029 43,157 44,540 1,48,616 1,40,235 11,644
7
23.4
24.8
25.7
13.4
25.7
27.1
27.3
24.6
24.5
12.5
7
33,938
28,374
37,298 32,181
34,075
34,175
34,175
34,124
33,798 30,701
5
22,235
17,354
24,760 26,241
21,831
21,061
20,852
22,058
22,121 25,172
4
11,703
11,020
12,538 5,940
12,244
13,114
13,323
12,066
11,677 5,529
7
166
155
176
81
167
179
182
171
165
75
7
7,200
7,839
8,040 9,083
8,811
8,194
7,883
30,310
33,972 8,281
10
9,703
9,799
10,023 9,693
9,674
9,654
9,593
39,201
38,613 10,023
-3
1,035
515
714 1,212
869
827
1,134
4,041
4,041
714
70
18,914 20,655 19,138 -5,054 22,413 26,135 28,198 83,146 71,691 -5,946
-15
-26
3,492 -20,095 20,589
-17,036
20,589
18,888 24,147
-957 15,535 22,413 26,135 28,198 66,110 92,280 -5,946
-361
-19,490
6,109
3,411 3,602
5,603
6,534
7,049
-1,328
22,788 -1,546 -333
-103.2
25.3
-356.5
23.2
25.0
25.0
25.0
-2.0
24.7
26.0
38,378 18,038
-4,368 11,933 16,810 19,601 21,148 67,438 69,492 -4,400
-371
14,074 14,546 13,227 -3,882 16,810 19,601 21,148 57,644 48,903 -4,400
-12
Source: MOFSL, Company
15 August 2020
2
 Motilal Oswal Financial Services
Tata Steel
Operational Table
Y/E March
Sales ('000 tons)
Change (YoY %)
Change (QoQ %)
Realization (INR/tss)
Change (YoY %)
Change (QoQ %)
EBITDA(INR/Ton)
Change (YoY %)
Change (QoQ %)
1Q
3,007
1.2
-16.2
53,513
-3.1
0.4
13,159
-22.9
-4.5
FY20
FY21E
2Q
3Q
4Q
1Q
2QE
3QE
4QE
2,972 3,428 2,910 2,106 3,269 3,291 3,343
-6.4
15.3
-18.9
-30.0
10.0
-4.0
14.9
-1.2
15.3
-15.1
-27.6
55.2
0.7
1.6
50,038 44,522 48,837 44,344 47,644 48,344 48,758
-11.2
-22.9
-8.3
-17.1
-4.8
8.6
-0.2
-6.5
-11.0
9.7
-9.2
7.4
1.5
0.9
11,703 11,020 12,538 5,940 12,244 13,114 13,323
-38.0
-28.0
-9.0
-54.9
4.6
19.0
6.3
-11.1
-5.8
13.8
-52.6 106.1
7.1
1.6
FY20
12,317
FY21
12,009
vs Est
1QE (%)
2,106
49,067
47,567 44,337
12,066
11,677
5,529
7
Exhibit 1: Quarterly Performance (TSE & Other subsidiaries)
Y/E March
Sales (000 tons)
Europe
SEA
Bhushan
Sponge Iron
Change (YoY %)
Avg. NSR (USD/t)
Europe (USD/t)
SEA (USD/t)
Bhushan (INR/t)
Sponge Iron (INR/t)
Net Sales
Change YoY (%)
EBITDA
As % of Net Sales
Europe
SEA
Bhushan
Sponge Iron
Other India
Others
Interest
Depreciation
Other Income
PBT (after EO Inc.)
Total Tax
% Tax
Reported PAT
Minority Interests
Adj. PAT (after MI & asso)
Change (YoY %)
1Q
3,333
2,260
860
93
-6.9
857
922
FY20
2Q
3,558
2,290
1,040
118
-16.2
787
871
3Q
3,882
2,350
1,260
162
-3.4
733
826
4Q
3,590
2,390
980
140
-8.7
765
798
1Q
2,754
1,940
694
120
-17.4
740
788
FY21E
2QE
3QE
3,083
3,611
1,832
2,115
988
146
-13.4
725
818
1,197
162
-7.0
737
838
FY20
4QE
3,807
2,313
1,171
178
6.0
755
838
14,363
9,290
4,140
513
-8.9
783
INR m
FY21
13,255
8,200
4,050
606
-7.7
769
50,381
43,795
39,985
43,609
38,862
42,362
42,862
43,362
43,959
42,199
75,806
65,914
61,686
72,021
54,425
59,425
60,425
61,425
68,039
59,290
1,98,558 1,97,080 2,02,584 1,95,585 1,49,497 1,63,967 1,95,232 2,10,938 7,93,807 7,19,634
-7.3
-23.1
-15.8
-16.0
-24.7
-16.8
-3.6
7.8
-8.8
-9.3
14,200
3,413
-1,581
9,982
-7,455
3,981
8,045
10,061
26,015
14,632
7.2
1.7
-0.8
5.1
-5.0
2.4
4.1
4.8
3.3
2.0
620
1,647
-9,560
650
-6,259
-6,051
-3,881
-1,698
-6,644 -17,889
7,850
550
1,988
3,192
10,833
11,152
733
-6,484
2,597
-40.0
-9,081
-100
-9,027
153.9
5,265
-401
1,604
-4,702
11,514
11,568
801
-19,178
-21,010
109.6
1,832
-1,013
3,379
134.0
2,838
365
2,186
2,591
11,467
10,388
415
-29,800
101
-0.3
-29,901
-1,367
-21,551
-3,999.2
7,750
1,321
3,022
-2,760
11,211
12,219
12,446
-14,966
-6,044
40.4
-8,922
-1,405
7,375
-992.0
1,501
146
420
-3,263
10,899
11,415
714
-49,061
9,113
-18.6
-58,174
-2,356
-35,663
295.1
7,282
875
1,876
11,008
11,381
714
-17,694
-6,193
35.0
-11,501
-1,880
-9,081
-368.8
9,182
972
1,772
11,008
11,347
714
-13,596
-4,759
35.0
-8,837
-2,118
-6,375
-70.4
23,703
27,298
1,835
3,062
8,799
5,423
-1,678
-3,263
11,008
45,025
43,924
11,313
45,206
45,456
714
14,394
2,857
-11,546 -70,306 -91,897
-4,041 -24,356
-5,879
35.0
34.6
6.4
-7,505 -45,950 -86,018
-1,999
-3,884
-8,353
-5,064 -19,702 -56,184
-168.7
710.0
185.2
Source: MOFSL, Company
9,333
1,069
1,356
Highlights from management commentary
Operational highlights and Outlook
India domestic steel demand declined ~55% in 1QFY21 due to the lockdown.
As a result, Tata Steel India sales volumes declined ~27% QoQ as the company
exported nearly half of its volumes.
Domestic demand is improving – in Jul’20, demand recovered to ~75% of FY20
average monthly demand.
Automotive steel demand is picking up, which is evident from auto customers
revising their orders upwards on weekly basis. However, recovery in Medium
15 August 2020
3
 Motilal Oswal Financial Services
Tata Steel
and Heavy Vehicle (M&HCV) segment – a key driver of steel demand from the
auto segment – is likely to be slow.
Domestic steel inventories have declined to normal levels, which bodes well for
domestic prices.
Management has informed that HRC prices are higher by INR2,000-2,500/t (v/s
end-Jun’20). It has not ruled out the possibility of further hikes as HRC prices are
still lower than pre-COVID levels.
Share of exports would remain at ~25% in 2QFY21. It would gradually decline
and come in line with domestic demand improvement.
The company has guided for realization improvement in excess of INR3,000/t
QoQ due to improved pricing and product mix in 2QFY21.
Capacity utilization for 2QFY21 in India operations has been guided to be higher
than ~95%.
Demand and pricing in Europe is improving slowly. Europe Steel demand is
projected to decline ~16% in CY20.
Tata Steel Europe is operating at ~75% utilization.
EBITDA was impacted due to lower volumes and prices.
During the quarter, idle fixed costs of INR24b were absorbed. Adjusting for the
same, consol. EBITDA would have stood at INR29b. In standalone operations,
idle costs were INR7.66b.
Operational performance in Europe was hit by the double whammy of – (a)
lower demand leading to lower volumes and adverse mix (less of auto volumes),
and (b) lower spreads due to low prices and higher iron ore prices. As a result, it
reported EBITDA loss of INR6.3b during the quarter.
European operations positively benefitted from the government aid of EUR50m
(INR4.4b) and one-off profit on sale of carbon credits of GBP78m (INR7.6b).
Adj. for these benefits, European loss would have been substantially higher at
INR18.3b.
TSE cash flows were aided by sale proceeds of carbon credits worth GBP132m
(INR12.9b) and deferral of payments to the government of ~GBP80-100m for
two quarters. However, it may have to incur cost on carbon credits if capacity
utilization improves.
Capex spend in 1QFY21 stood at INR18.5b due to outstanding payment toward
certain projects. However, management has maintained its capex guidance for
FY21 at ~INR50b.
The company generated FCF of INR7.0b in 1QFY21. Working capital release
during the quarter stood at INR25.8b (India – INR22b). It expects working capital
release in India operations to sustain.
TSE’s 2QFY21 performance is expected to improve. It has been guided to report
EBITDA similar to 1QFY21 level (without benefit of carbon credits).
Employee cost in Tata Steel BSL was higher by 27% YoY to INR1.28b due to
payment of incentives related to previous year.
Net-debt stood flat QoQ at INR1,070b. However, Net-debt to TTM EBITDA
increased to 8.5x (6.1x at end-FY20). The company raised long-term debt of
INR59.3b during the quarter.
Debt maturities for FY21/FY22E stood lower at ~USD250m for each year.
The next hearing on the Tata Steel-BSL merger is scheduled for end-Aug’20. The
company expects to close the merger process in FY21.
Financial highlights
Other highlights:
15 August 2020
4
 Motilal Oswal Financial Services
Tata Steel
Valuation and view
Play on steel prices:
With Tata Steel further deferring capex for Tata Steel
Kalinganagar (KPO), the former does not provide for volume growth in the near
future. With COVID-19 denting domestic demand and Tata Steel’s high exposure to
the Auto industry in the India (~10% of volumes) and Europe business (>30% of
volumes), we expect volumes to decline ~3% YoY in FY21 and rise 7% YoY in FY22E,
implying a CAGR of only 2% over FY20-22E. However, robust integrated domestic
operations allow Tata Steel to reap the benefit of higher prices, thereby making it a
play on steel prices.
Tata Steel Europe to continue weighing down overall profitability in FY21:
With
weak demand outlook for European steel, outlook for TSE remains challenging. Steel
spreads are likely to remain under pressure in Europe due to lower steel prices and
higher iron ore prices. As a result, we expect Tata Steel Europe to post EBITDA loss
in FY21 and PAT loss in FY22E.
Net debt to remain elevated, but low maturities in FY21-22E to provide comfort:
Tata Steel’s net debt increased by INR358b to INR1,071b over FY18-20 on
acquisitions and high capex. With a weak profitability outlook in the near term, we
expect Tata Steel’s net debt to remain elevated. However, capex curtailment amid
weak cash flow should keep overall debt levels in control. Tata Steel’s net debt to
EBITDA is expected to reach 6.8x in FY21 (6.1x in FY20); however, low maturities of
USD500m in FY21-22E provides comfort.
Valuation:
The stock trades at 6.3x FY22E EV/EBITDA, which we believe factors in
concerns on profitability and high leverage for the company. We, therefore, rate it
Neutral.
We value Tata Steel on an SOTP basis, allocating 6.5x FY22E EV/EBITDA
multiple to India operations and 5.0x FY22E EV/EBITDA to Europe operations, to
arrive at a target price of INR433/share.
Exhibit 2: SOTP Valuation
Y/E March
India
EBITDA per ton (USD)
EBITDA per ton (INR)
Sales (m tons)
EBITDA-India
Target EBITDA multiple
EV (India) - (a)
INR/share
Subsidiaries
EBITDA - India subs
Target EBITDA multiple
EBITDA - Europe
Target EBITDA multiple
EV (Subsidiaries) - (b)
INR/share
Target EV (c=a+b)
Net Debt (d)
INR/share
Total equity value (c-d)
Target Price (INR /share)
2017
201
12,976
12.2
1,57,790
2018
232
16,180
12.7
2,05,629
2019
171
12,066
12.3
1,48,616
2020E
165
11,677
12.0
1,40,235
2021E
186
13,145
12.8
1,68,255
6.5
10,93,658
955
49,519
6.5
20,479
5.0
4,24,264
371
15,17,922
10,22,709
893
4,95,213
433
28,298
37,920
34,068
54,136
32,659
-6,644
32,520
-17,889
7,13,229
623
9,72,250
849
10,71,164
936
10,54,359
921
15 August 2020
5
 Motilal Oswal Financial Services
Tata Steel
Story in Charts
Exhibit 3: Standalone volumes to remain flat over FY19-22E
Standalone Sales (mt)
11.0
12.2 12.7 12.3 12.0 12.8
15,126
15,050
11,444
7,557
Exhibit 4: Tata Steel S/A EBITDA/t to improve in FY22E
Standalone EBITDA/t
16,180
12,066
13,145
12,976
11,677
10,818
7.5
8.5
8.7
9.5
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E
Source: Company, MOFSL
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E
Source: Company, MOFSL
Exhibit 5: Europe profitability to remain weak in FY21-22E
EU - EBITDA/t (USD)
70
36
11
-8
51
80
59
30
Exhibit 6: FCF post interest not enough to reduce debt
FCF - INR b
88
1
-19
21
23
38
-10
-56
-41
-72
-73
-30
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 7: Net-debt to EBITDA to remain elevated in FY21
Net DEBT (INR b)
Net debt/EBITDA (x)
10.1
5.7
EBITDA (INR b)
Exhibit 8: Return ratios to improve in FY22E
24.0
16.0
RoE (%)
RoCE (%)
4.8
6.1
4.4
3.3
3.3
6.8
4.3
4.4
8.0
0.0
-8.0
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Source: Company, MOFSL
Source: Company, MOFSL
15 August 2020
6
 Motilal Oswal Financial Services
Tata Steel
Financials and valuations
Income Statement (Consolidated)
Y/E March
Net Sales
Change (%)
EBITDA
% of Net Sales
Depn. & Amortization
EBIT
Finance cost
Other income
PBT before EO
EO income
PBT after EO
Tax
Rate (%)
Reported PAT
Minority interest P/L
Share of asso. PAT
PAT (After MI & asso.)
Div. on Pref. /Hybrid Sec.
Adjusted PAT
Change (%)
2017
11,22,994
10.1
1,70,078
15.1
56,729
1,13,349
50,722
5,275
67,902
-43,242
24,660
27,780
112.7
-3,120
722
77
-3,766
2,661
36,815
-275.3
2018
13,21,558
17.7
2,18,905
16.6
59,617
1,59,289
55,018
9,095
1,13,365
95,991
2,09,357
34,054
16.3
1,75,303
43,285
1,741
1,33,759
2,671
79,619
116.3
2019
15,76,688
19.3
2,93,833
18.6
73,418
2,20,415
76,601
14,206
1,58,020
-1,210
1,56,810
67,184
42.8
89,626
-10,962
2,247
1,02,835
2,654
1,01,390
27.3
2020
13,98,167
-11.3
1,74,631
12.5
84,407
90,224
75,335
18,435
33,324
-37,521
-4,196
-25,684
612.0
21,488
-3,884
1,880
27,251
2,658
10,373
-89.8
2021E
12,90,871
-7.7
1,54,867
12.0
84,069
70,798
77,896
6,898
-200
584
383
16,909
4,410
-16,526
-8,353
1,476
-6,697
2,658
-9,938
(INR M)
2022E
14,80,907
14.7
2,38,252
16.1
84,228
1,54,024
73,620
7,082
87,485
87,485
22,705
26.0
64,780
-4,177
252
69,209
2,658
66,551
Balance Sheet (Consolidated)
Y/E March
Share Capital
Reserves
Net Worth
Minority Interest
Total Loans
Deferred Tax Liability
Capital Employed
2017
9,702
3,45,741
3,55,443
16,017
8,50,709
91,091
13,13,260
12,65,617
3,80,498
8,85,118
1,57,841
67,840
34,947
5,78,376
2,48,038
1,15,868
1,05,942
1,08,528
2018
11,450
5,74,507
5,85,956
9,365
9,41,697
94,689
16,31,708
13,99,263
4,79,209
9,20,054
1,66,144
29,905
40,995
9,29,472
2,83,310
1,24,155
2,28,468
2,93,538
2019
11,449
6,55,051
6,66,501
23,645
10,30,912
1,15,170
18,36,228
17,30,400
5,25,947
12,04,453
1,86,412
32,133
39,966
8,63,431
3,16,561
1,18,110
58,662
3,70,097
2020
11,450
7,01,564
7,13,013
25,866
11,86,030
78,479
20,03,388
19,15,315
6,10,354
13,04,961
1,94,968
28,533
40,545
9,21,051
3,10,687
78,849
1,14,866
4,16,649
2021E
11,450
6,78,504
6,89,953
17,513
11,86,030
76,702
19,70,199
19,76,488
6,94,423
12,82,065
1,83,795
30,009
40,545
9,04,048
2,82,931
72,798
1,31,671
4,16,649
4,70,264
1,97,401
2,72,863
4,33,784
19,70,199
2022E
11,450
7,31,350
7,42,800
13,336
11,86,030
81,646
20,23,812
20,66,661
7,78,651
12,88,010
1,78,622
30,260
40,545
9,85,698
3,24,582
81,146
1,63,321
4,16,649
4,99,324
2,26,461
2,72,863
4,86,374
20,23,812
(INR M)
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Investments
Goodwill on consolidation
Curr. Assets
Inventory
Account Receivables
Cash & liquid investment
Others
Curr. Liability & Prov.
Account Payables
Provisions & Others
Net Current Assets
Appl. of Funds
4,10,863
1,85,745
2,25,118
1,67,513
13,13,260
4,54,862
2,04,138
2,50,724
4,74,610
16,31,708
4,90,167
2,17,170
2,72,998
3,73,263
18,36,228
4,86,672
2,13,809
2,72,863
4,34,380
20,03,388
15 August 2020
7
 Motilal Oswal Financial Services
Tata Steel
Financials and Valuations
Ratios (Consolidated)
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share (ex goodwill)
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
Return Ratios (%)
EBITDA Margins (%)
Net Profit Margins (%)
RoE
RoCE (pre-tax)
RoIC (pre-tax)
Working Capital Ratios
Fixed Asset Turnover (x)
Asset Turnover (x)
Debtor (Days)
Inventory (Days)
Payables (Days)
Working Capital T/O (Days)
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Net Debt/Equity
E: MOSt Estimates
2017
37.9
96.4
330.3
8.0
25.2
2018
69.5
121.6
476.0
8.0
11.6
2019
88.6
152.7
547.2
10.0
9.1
2020
9.1
82.8
587.3
10.0
89.3
46.1
5.0
0.7
1.1
8.9
2.4
15.1
3.3
15.7
9.4
13.3
1.3
0.9
38
81
60
58
1.4
2.2
2.3
16.6
6.0
17.2
11.6
14.6
1.4
0.8
34
78
56
56
2.0
2.9
1.3
18.6
6.4
17.3
13.7
15.9
1.3
0.9
27
73
50
50
1.8
2.9
1.6
12.5
0.7
1.6
5.8
5.6
1.1
0.7
21
81
56
46
1.9
1.2
1.6
2021E
-8.7
64.7
567.2
10.0
-93.2
-48.2
6.5
0.7
1.2
9.9
2.4
12.0
-0.8
-1.5
4.0
4.3
1.0
0.7
21
80
56
45
1.9
0.6
1.7
2022E
58.1
131.7
613.3
10.0
13.9
7.2
3.2
0.7
1.0
6.3
2.4
16.1
4.5
9.8
8.1
9.4
1.1
0.7
20
80
56
44
1.9
1.9
1.6
Cash Flow Statement (Consolidated)
Y/E March
EBITDA
Reconciliation income (loss)
(Inc)/Dec in Wkg. Cap.
Tax Paid
CF from Op. Activity
(Inc)/Dec in FA + CWIP
Free Cash Flow to Firm
(Pur)/Sale of Non-cur. Invest.
Acquisition in subsidiaries
Int. & Dividend Income
others
CF from Inv. Activity
Equity raised/(repaid)
Debt raised/(repaid)
Dividend (incl. tax)
Interest & equiv. paid
CF from Fin. Activity
(Inc)/Dec in Cash
Add: opening Balance
Closing Balance
2017
1,70,078
5,736
-48,907
-18,427
1,08,481
-77,156
31,324
3,552
-10,814
754
-1,450
-85,113
6,519
27,041
-9,498
-49,986
-25,924
-2,557
1,08,499
1,05,942
2018
2,18,905
-17,034
-43,468
-28,882
1,29,521
-74,785
54,736
-9,366
-2,208
3,219
9,745
-73,394
90,872
41,454
-11,800
-54,127
66,399
1,22,526
1,05,942
2,28,468
2019
2,93,833
-15,437
25,905
-50,942
2,53,360
-90,910
1,62,450
4,392
-3,51,036
3,422
17,694
-4,16,438
-60
81,745
-14,239
-74,173
-6,727
-1,69,806
2,28,468
58,662
2020
1,74,631
6,154
41,962
-21,059
2,01,687
-1,03,980
97,707
4,451
-40,542
3,811
7,723
-1,28,537
1,875
76,181
-18,152
-76,850
-16,946
56,204
58,662
1,14,866
2021E
1,54,867
17,400
-18,685
1,53,581
-50,000
1,03,581
(INR M)
2022E
2,38,252
-20,939
-17,761
1,99,552
-85,000
1,14,552
6,898
-43,102
7,082
-77,918
-13,705
-80,554
-94,259
16,221
1,14,866
1,31,087
-13,705
-76,278
-89,983
31,651
1,31,671
1,63,321
15 August 2020
8
 Motilal Oswal Financial Services
Tata Steel
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products.
MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are available on
www.motilaloswal.com.
MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading
Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity
& Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository
Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory &
Development Authority of India (IRDA) as Corporate Agent for insurance products.
Details of associate entities of Motilal Oswal Financial Services Limited are available on the
website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and
buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have
any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should
be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant
banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from
MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or
use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong
Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst
Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of
research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity
to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these
securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not
located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under
applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act"
and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and
investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is intended for
distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional
investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document
relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule
15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order
to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities
International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in
respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of
which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the
SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
15 August 2020
9
 Motilal Oswal Financial Services
Tata Steel
********************************************************************************************************************************
The associates of MOFSL may have:
- financial interest in the subject company
- actual/beneficial ownership of 1% or more securities in the subject company
- received compensation/other benefits from the subject company in the past 12 months
- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies)
discussed herein or act as an advisor or lender/borrower to such company(ies)
- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and
may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of
MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature.
The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,
representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The
report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed,
in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose
and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report
constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities
discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives,
financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document
should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including
the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be
suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial
risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions
contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as
endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and
alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from time to time, effect
or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment
banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and
independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already
available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the
views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other
person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of
or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject
MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category
of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors,
employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may
arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any
and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold
MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,
expenses that may be suffered by the person accessing this information due to any
errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.CIN
no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,
Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:
INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company
Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management
Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of
Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a
group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory
services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee
of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj
Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.
15 August 2020
10