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Tata Steel sees revival in Europe
Fri, 28 May 11:30 am

Indian indices continue to tread higher after of paring some the opening gains during the previous two hours of trade. Stocks from metal and realty sectors are seeing maximum buying interest while some buying interest is seen in stocks from the banking and oil & gas space as well.

BSE-Sensex is trading up by 120 points while NSE-Nifty is trading 33 points above the dotted line. BSE-Midcap index is trading higher by 1.3% while the BSE-Smallcap index is trading 1.2% above yesterday’s closing. The rupee is trading at 46.61 to the US dollar.

Steel manufacturing major Tata Steel declared its FY10 results yesterday. The company’s consolidated top line fell by 31% YoY as a result of lower deliveries. The company, however, got a boost in the second half of the year on recovery in steel demand after a steep decline in the first half of the year. Operating margins of the company fell by 4.4% to close the year at 7.9%. This was due to lower selling price and change in sales mix. However, the second half was better than the first as a result of better utilization rates in Europe. As a result, the operating profits were 15 times higher in 2HFY10 than in 1HFY10. Bottom line for the company however turned in negative as a result of lower operating profits, higher tax outgo and restructuring costs. Going forward, the company is expected to perform better as demand for steel picks up.

As per a leading financial daily, wind turbine maker, Suzlon Energy, could issue fresh shares to raise money for paying off its debt. For this purpose the company is considering a rights issue. However, the company has not given any details for the same.

The company has been facing problem because of high debt and raising equity through a rights issue seems to be the only option for the company as of now. It may be recalled that the company had sold its 35% stake in Hansen Transmissions International NV in November 2009 to reduce its debt. The company has been grappling with high debt for quite some time. In fact, the company’s interest costs increased by 51% for 9mFY10 while sales fell by 14% YoY. The company has high financial and operating leverage. With no turnaround in business in sight, the company’s position seems to be quite precarious.

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