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Invest in Tata Steel - Thanks to Fall in UK Currency Sterling Pound

Tata Steel heavily invested in UK post acquiring Corus in multibillion £ deal. The buyout during peak metal bubble trapped Tata Steel and became cash burning business. Tata Steel kept on investing billions of £ before putting it's foot down by May this year post incurring heavy losses due to UK business.

They tried to go for fire sell of UK business but somehow it did not materialised.  Now that business may  generate profitability post steep fall in £. It will make the UK made Tata Steel product more competitive in the market place and at the same time Tata Steel cost of supporting UK business will come down by 30 %.

At the same time, Tata Steel went for debt based buyout of Corus and it's the right time to repay that debt. Even though they sell bonds in India and funnel that in paying £ denomination debt then also they will be able to reduce their debt level drastically and save interest cost.

On books, their debt level will be lower given the £ valuations. In my point of view, £ will continue to fall in coming quarter and it's a golden opportunity for Tata Steel to be more competitive in the market place.

We have observed that Tata Steel share price jumped more than 18% in the last one Quarter and expected to do well as Indian economy is also recovering. One may accumulate share with medium to long term view.

Disclaimer: consult your financial advisor before investing

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About Devendra Prasad

20 years plus industry veteran of domestic and international ICT domain with the expertise in Business, Technology, Strategy and Analysis. Specializes in forecasting impact analysis, trends and recommendations for Investments, Technology and Regulations.
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