Shares of Tata Steel advanced over 5 per cent in early trade on Monday after reports that Chinese steelmaker Jingye Group has expressed an interest in taking over the company’s UK operations.
The scrip traded 5.08 per cent up at Rs 383 at around 9.36 am (IST), while the benchmark BSE Sensex traded 1.13 per cent higher at 39,135 at around the same time.
“The Chinese conglomerate which took control of British Steel earlier this year has set its sights on an even bigger UK deal by lodging an interest in Tata Steel UK, the owner of the vast Port Talbot plant in South Wales,” leading UK-based television channel Sky News reported on Saturday.
The report, quoting a banker, said there are clear signs that Tata is open to getting rid of the UK business, and Jingye’s expression of interest is an obvious response to that.
In another development, brokerage firm Motilal Oswal said in a report that with the high cost of operations and weak demand in Europe, Tata Steel Europe (TSE) is expected to remain a drag on the company’s overall profitability.
“We estimate EBITDA loss in TSE to continue this year, albeit at a lower rate than Q1FY21 (loss of $44/t). Moreover, with the growing risk of a ‘second wave’ of Covid-19 infections in Europe, visibility for demand recovery remains uncertain in the near term. We, therefore, expect TSE’s margins to barely achieve breakeven in FY22 and clock an EBITDA/t of just $2/t, implying weak expected cash flows even next year,” Motilal Oswal said.