Tata Chemicals stock slips over 6% as firm reduces prices of soda ash

Shares of Tata Chemicals slipped as much as 6.6 per cent to Rs 926.30 apiece on the BSE in the morning trade on April 18 after the company cut the prices of soda ash in India. The Tata Group company has announced a reduction in the prices of light and dense soda ash by up to 4 per cent with effect from April 17, 2023. This reduction comes amid a decline in soda ash prices in China announced in mid-March. 

Soda Ash or Sodium carbonate is a chemical compound which is one of the basic industrial chemicals. It is a key component in the production of powdered detergents and soaps as well as in the manufacture of glass, glass containers, and fibreglass insulation, among other things.

As per Zee Business research, a cut in soda ash prices is a matter of concern as the company's India operations of soda ash constitute 15-20 per cent of the company's EBITDA. EBITDA stands for earnings before interest, taxes, depreciation, and amortisation.

Besides, the analysts also note that the firm's capacity expansion in China’s Inner Mongolia in May 2023, which is much before the scheduled date could pose a risk. Further, the financial results for the next two quarters look strong but the outlook for the second half of the calendar year has analysts worried.

That apart, a fall in the prices of soda ash in the international market may affect the company's exports. However, a cut in coal prices could offset the impact of a price cut, analysts say further.

At 11:51 am, the stock was trading 6.50 per cent lower at Rs 927.60 apiece on the BSE. In comparison, the benchmark S&P BSE Sensex was trading at 59,753.98 levels, down 157 points, or 0.26 per cent.