Tata Steel shares rise after Fitch lifts Tata group steelmaker's long-term rating with 'stable' outlook

Tata Steel shares rose on Tuesday after Fitch upgraded the steelmaker's long-term issuer default rating (IDR) to  'BBB-’ from 'BB+' while maintaining its 'stable' outlook, citing easing uncertainty at the company's UK operations. The stock of the Tata group company gained by as much as Re 1.6, or 1.3 per cent to Rs 125.4 apiece on BSE, coming within Rs 10 of a 52-week high touched last month. Tata Steel Long Products shares strengthened by Rs 9.6, or 1.2 per cent, to Rs 793.2 apiece. 

Fitch said it expects the profitability of Tata Steel's business in the United Kingdom to improve significantly.

The rating agency also said the company's strong cost base gives it a competitive advantage in the domestic market. It expects Tata Steel's average annual capital expenditure for the financial years 2023-24 through 2025-26 to be around 30 per cent from the 2022-23 levels.

Fitch also upgraded Tata Steel subsidiary ABJA Investment to 'BBB-' from 'BB+'.

In a separate development, Tata Steel reported a four per cent year-on-year increase in its production volume in the domestic market to a provisional 4.99 MT in the quarter ended September 30. However, the steel major's production in Europe and Thailand declined 17 per cent and 6.6 per cent to 1.99 MT and 0.28 MT, respectively.  

Its domestic delivery volume decreased 1.8 per cent to 4.82 MT in the second quarter of the current financial year.

Tata Steel is yet to report its financial results for the September quarter. 

Last month, the UK government announced a joint investment package worth 1.25 billion pounds with Tata Steel, including a grant of 500 million pounds for the country's largest steelworks in Wales that will help protect thousands of jobs and boost the British economy. The UK's grant has been dubbed as one of the largest British government support packages in history and a defining moment for the country's steel industry.

Should you buy, sell or hold Tata Steel shares?

Zee Business analyst Varun Dubey gave a near-term 'buy' call on Tata Steel futures for a price target of Rs 128 with a stop loss at Rs 123. 

Morgan Stanley maintained its 'equal-weight' rating on Tata Steel this week with a target of Rs 110, which implies a downside of 11 per cent from Monday's closing price.   

In a research report dated September 25, BOB Capital Markets analysts wrote that they estimate the incremental fair value from Tata Steel's deal with the UK government at Rs 6-7 per share. 

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