Tata Steel should look to sell Corus assets: CLSA study

27 Feb 2013

Tata Steel should look at the possibilities of selling a part or the whole of its stake in its overseas arm Tata Steel Europe (formerly Corus) to give a 'meaningful' uplift to the company's earnings and valuations, international brokerage house CLSA said on Tuesday.

The announcement immediately brought Tata Steel stock down by around 2 per cent.

The company's stock has been on the slide since the beginning of January, as its European operations continue to face weak demand and a substantial amount of the firm's cash going towards repayment of debt taken to finance its $12-billion acquisition of Corus in 2007.

The CLSA study noted that earnings in fiscal 2014-15 could see a 30-150 per cent jump, depending on which Corus assets are sold; while equity value could rise by $1.5-3.1 billion.

"Finding a buyer is obviously the crucial part here and will not be easy but the change in management stance is definitely a positive," the report said. It said there was a change in Tata Steel's thought process in recent months, with a much stronger focus on asset sales.

"The aim here is to deleverage the balance sheet and rid the portfolio of assets with questionable outlook, including Corus. We see this change as a positive and, if successful, can achieve a big reduction in risk profile, with large earnings and value accretion."