Tata Steel shares were up 5% at Rs 100.45 on the BSE in intraday trade on Thursday after the stock turned ex-date for subdivision of shares in a ratio of 1:10 today.
The company set Friday, July 29, 2022 as the ‘Record Date’ for determining the eligibility of shareholders for the purpose of subdividing/splitting each fully paid-up equity share in the company’s share capital into ten fully paid-up equity shares with face value Rs 1 each.
On May 3, 2022, Tata Steel’s board of directors approved a proposal to subdivide the company’s equity shares with a face value of Rs 10 each to Re 1. The rationale for the split is to increase capital market liquidity, broaden shareholder base, and make shares more affordable to small investors, according to the company.
A stock split is a business action in which a company divides its shares into multiple new ones. Split shares neither add new value nor dilute the shareholders’ ownership stake. They do, however, increase the number of shares in the company.
The main advantage of a stock split is that a company’s shares become more liquid. Because shares are now more accessible to retail investors, there will be more demand for them, potentially increasing liquidity in the market. After a stock split, buying and selling shares will be much easier.
Tata Steel was 4% higher at Rs 99.75 at 11:30 a.m., compared to a 1.5% rise in the S&P BSE Sensex. On the NSE and BSE, a total of 72.52 million equity shares have changed hands. Before the stock split, an average of less than 7 million shares were traded on the counter in the previous two weeks.
The stock has gained 13% in the last month, compared to a 6.5 percent rise in the Sensex. However, the stock has underperformed the market in the last three months, falling 21% versus a 1.6% drop in the benchmark index.
Meanwhile, Tata Steel’s profitability is expected to fall in Q2FY23 (Q2FY23E EBITDA/t of Rs 14,300), with lower steel prices offset marginally by lower coking coal costs and higher volume. Lower coking coal prices will have their full impact in Q3FY23, improving margins. Tata Steel Europe’s profitability is also expected to decline due to lower prices and higher coking coal costs due to the lag effect, according to Centrum Broking analysts in Q1 result update.
“We expects release of working capital in H2FY23. A 6mtpa pellet plant and 2.2mtpa cold rolled mill is expected to be commissioned in H2FY23.High operating profits will help Tata to deleverage further in FY23 with net debt of ~Rs 533 billion at FY23‐end (FY22E‐end: ~Rs 576 billion) after including effect of NINL acquisition (~Rs 121 billion) which was completed on July 4, 2022. We do not foresee any further major acquisition by Tata in FY23,” the brokerage firm said.
Source:BS