The much talked about Joint Venture between Germany’s Thyssenkrupp and India’s steel major Tata Steel had got a thumbs up from global as well as Indian research and brokerage firms, as most of them have increased the target price for the shares of the company.
Saying that the Thyssenkrupp JV will be value accretive, Deutsche Bank has raised the target price for the stock to Rs 848, an increase of more than 10%. Shares of Tata Steel were trading at Rs 693.05, up by more than 0.7% on Thursday morning. Similarly, Credit Suisse has maintained an outperform on the shares, and believes than the synergies could increase the per share value by as much as Rs 100 per share. The global firm has raised the target price for the stock to Rs 800. CLSA has maintained a buy on the stock raising the target to Rs 850, from the earlier Rs 800. Deutsche Bank has a buy on the stock with a target of Rs 848. Indian brokerage firm Axis Capital has raised the target on the stock to Rs 765, from the earlier Rs 690.
The joint venture will have a turnover of Rs 1,15,000 crore.The company will be headquartered in Amsterdam, Netherlands. As per the company’s estimates, cost synergies for the company is expected to be in the range of 400-600 million euro per annum. “Cost synergies may be realized through integration of commercial functions, R&D and other supporting activities,” Koushik Chatterjee, Group Executive Director, Tata Steel said yesterday.
The proposed joint venture will result in significant de-leveraging exercise for Tata Steel as it will transfer 2.5 billion euros of debt to the joint venture company, which according to analysts represents nearly 35-40% of the debt in its European business. N Chandrashekaran, the chairman of Tata Sons said, “The strategic logic of the proposed joint venture in Europe is based on very strong fundamentals, and I’m confident that Thyssenkrupp and Tata Steel will have a great future.” According to the veteran, this augurs well for both the players, “This partnership is a momentous occasion for both partners, who will focus on building a strong European steel enterprise.” Shares of Tata Steel have returned a staggering 75% in the year so far, as compared to BSE Sensex returns of 22%.