Tisco strengthens

Tisco has staged a recovery in recent sessions on renewed buying support despite reports that international steel prices have plateaued.

From a recent low of Rs 131.35 touched in intra-day trades on 28 March 2003, the Tata Iron & Steel Company stock has risen by 6.96% to settle at Rs 140.50 on the BSE on 4 April 2003, following renewed buying support from operators as well as institutions. Average daily volumes on the counter, however, have fallen to around 550,000 shares from over 1 million shares in the same period.

The recovery on the Tisco counter was due to reports that the Tata group steel major will increase product prices from 1 May 2003, unlike other steel majors who are planning to cut prices. The company is likely to raise prices by just under Rs 500 per tonne.

Earlier, the Tisco stock had shed around 10% from Rs 144.50 touched on 24 March 2003. It had touched its 52-week high of Rs 163.50 on 24 January  this year.

The recovery on the Tisco counter was also on expectations that the company's exports may increase in the coming months, especially to China, which is the biggest importer of steel in the world. The demand from China is also expected to peak, with the US cutting its exports to that country by 30%.

The domestic demand for steel is also expected to increase with government's major thrust on infrastructure development in the Union Budget for 2003-04. As per the Budget proposals, the initial government funding for new infrastructure projects will total Rs 2,000 crore (Rs 20 billion) for the next fiscal. Principally, investments will be made in railways, airports and sea ports through an innovative funding mechanism.

Meanwhile, the international steel prices have stagnated following a backlog in the Chinese market. The glut has resulted in prices of hot rolled (HR) coils coming down to $340 from around $370.

The Indian steel sector has witnessed a turnaround following sustained demand for steel (in both domestic and international markets) coupled with a huge hike in steel prices over the last year. Last month, steel majors effected a hike in flat steel prices by around Rs 1,000 per tonne, the third major price hike in 2003. Further, there were rumours that steel makers may hike prices further in the coming months, riding on the back of strong demand.

Tisco crossed the 4 million tonne crude steel production mark for the first time, with its Jamshedpur works rolling out 4.1 mt of crude steel in 2002-03, up 9.4% over last fiscal's output. The company's overall sales of steel stood at 3.8 mt for 2002-03, an increase of 8% over 3.6 mt in the previous year.

In a recent statement, Tisco said that steel prices in the domestic market may continue to rule firm during the current calendar year. The evaluation is based on the sustained growth in demand for steel within the country. At the same time, Tisco, which is already one of the lowest cost producers of steel in the world on an operating cost basis, is in talks with lenders for refinancing certain high-cost debt with cheaper loans. The company has already done some financial restructuring and is in discussions with some big lenders in this regard. It is  part of the company's ongoing efforts to bring down interest costs. Tisco has already reduced its interest costs by 21% to Rs 76.08 crore in the third quarter of the fiscal FY 2002-03.

Tisco, as on 31 March 2002, had Rs 4,056.93 crore (Rs 40.56 billion) of secured debts on its books, while the unsecured debts amounted to Rs 650.89 crore (Rs 6.5 billion). According to the company's 2001-02 balance sheet, some of the company's debts had interest rates as high as 18%.

For the third quarter ended 31 December 2002, Tisco posted an impressive net profit of Rs 280.23 crore as against Rs 34.54 crore in the corresponding period of the previous year.

BSE code: 500470