Tata Steel shares fall below ₹1,000 for the first time in 2022 this week – here’s why
Jun 15, 2022, 16:41 IST
- Tata Steel, one of the largest steelmakers in India, has seen a considerable decline in its share price over the last few weeks.
- After capitalizing on steel demand from Europe and other regions since the Covid pandemic, Tata Steel now finds itself in a tough spot.
- From hefty export taxes to weak domestic demand, Tata Steel is the second most indebted company in the Tata Group.
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Tata Steel shares have been under pressure for a while now. This week, they finally fell below the ₹1,000 level for the first time in 2022. However, the decline today is not due to the company’s fundamentals or a worsening outlook.Tata Steel’s share price declined nearly 4%, marking a decline of over 30% since peaking in April.
Another Tata Group company – Tata Chemicals, also witnessed a 4% fall today. The common thread between both the Tata companies is that their stock went ex-dividend today.
While Tata Steel declared a dividend of ₹51 per share, Tata Chemicals announced ₹12.5 per share dividend.
What does a stock going ex-dividend mean?
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A stock going ex-dividend means that the value of the dividend is no longer included in the stock price of the company. This happens after the company declares a dividend and announces a record date. The record date is when the stock is said to be ex-dividend.
All things remaining constant, if a stock is trading at ₹100 per share, and the company declares a dividend of ₹15, then the ex-dividend price will be ₹85.
What are the analysts saying?
According to research reports, the revenue boost that Tata Steel and other steel companies got due to the post-Covid and Russia-Ukraine war disruptions – that boost is now all but over.
The reason behind it is the Indian government imposing a hefty export tax of 15% in order to cool down the steel prices in India, to tackle inflation. Shares of Tata Steel, SAIL and Jindal Steel nosedived by 16% after the news.
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The iron and steel product category has witnessed a net trade surplus in the last two years – since the outbreak of COVID-19 – with the total surplus standing at $14.1 billion (approx. ₹1,07,000 crore) in 2020-21 and 2021-22.
“The government imposition of hefty export duties on steel will lead to decline in realizations for steel companies which have been resorting to exports in the last few years,” said a report by IDBI Capital, stating that Tata Steel has been exporting 10-12% of its steel production.
Citing weakness in domestic demand, the brokerage firm downgraded Tata Steel to ‘Hold’. With a debt of ₹69,000 crore, the steelmaker will have to find better ways to ensure its revenue remains buoyant.
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