Tata Steel is on a gaining spree. Thanks to doubling profits, huge debt reduction, and hopes from the union budget

• Tata Steel’s stock surged 3% on Monday after the company doubled its profit while also slashing its debt by ₹17,376 crore in the first nine months of FY22.
• Shares of the metal company rallied significantly in the last couple of days and so have many other metal stocks after the government allocated a huge capital allocation to infrastructure in the budget.
• The steel company made a profit of ₹9,598 crore in October to December.

Shares of one of the largest steel manufacturers, Tata Steel, has surged 10% in the last five days on improving outlook for the metal industry and huge profitability.

The steel making company, on February 4, announced a profit of ₹9,598 crore in October to December, which is an increase of 139% year-on-year. Moreover, the Tata Group’s metals company has slashed its debt pile by ₹17,376 crore in the first nine months of FY22.

The company said that the steel demand has picked up led by improving economic conditions as the third wave of COVID-19 settles down.

“India steel demand has begun to improve on the back of continued economic recovery as [the] 3rd wave of COVID begins to ebb. Our steel deliveries in India expanded by 4% in the first nine months of the financial year along with an improvement in product mix,” said T V Narendran, chief executive officer and managing director at Tata Steel.

Analysts at CLSA reportedly said that the steel major’s third quarter earnings before interest, taxes, depreciation, and amortisation (EBITDA) was largely in-line, profit in India business was a surprise, however, debt declined further despite working capital build-up.

Following this, Tata Steel’s stock surged 3% on February 7, to ₹1,202.
Not only Tata Steel, shares of other metal companies have also rallied significantly in the last couple of days after the government allocated a huge capital allocation to infrastructure in the union budget for 2022-23.

The government aims to spend ₹7.5 lakh crore in the next financial year on capital investments. India’s finance minister also revealed more details about the government’s Gati Shakti programme, which promises to modernise India’s infrastructure by the hundredth year of independence.

This could mean a lot more construction of roads, bridges, tunnels, metro rails and other such projects, and which in turn will mean more orders for the metal companies.

Aside from this, the extension of customs duty exemption on steel scrap by one year aided momentum in steel stocks.

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