Sensex Opens Firm; Tata Steel Gains on Deal of its UK Arm

Fri, 10 Feb 09:30 am

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Asian markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 2.36% while the Hang Seng is up 0.55%. The Shanghai Composite is trading up by 0.33%. Stock markets in the US & Europe ended their previous session on a firm note.

Meanwhile, share markets in India too have opened the trading day on a firm note. The BSE Sensex is trading higher by 79 points while the NSE Nifty is trading higher by 27 points. The BSE Mid Cap index and BSE Small Cap index have opened the day up by 0.2% & 0.5% respectively.

The rupee is trading at 67.01 to the US$. Barring oil & gas, auto and FMCG stocks, all sectoral indices have opened the day on a positive note. Capital goods and metal stocks are among the top gainers on the BSE.

Steel stocks have opened the day on a mixed note with Maharashtra Seamless and Jindal Saw being the most active stocks in this space. As per an article in a leading financial daily, Tata Steel Ltd's British arm has signed a definitive agreement to sell its speciality steel business to Liberty House Group for 100 million pounds (US$125.55 million).

The agreement includes the Rotherham electric-arc steelworks, a steel-purifying facility in Stocksbridge, a mill in Brinsworth and service centers in the UK and China. The speciality division is one of the world's biggest suppliers for the aerospace industry, with customers including Rolls-Royce, Boeing and Airbus.

The sale is part of Tata Steel's efforts to pare its debt, which is the highest among steel producers in India. The company has been seeking to sell or turn around its UK operations after years of losses, and is talking with Thyssenkrupp AG and other companies for a joint venture of its European operations.

Although the speciality steel business does not form a significant chunk of Tata Steel's revenues (only 4% of their overall revenues). The speciality unit employs 1700 people and caters to the aerospace, automotive and oil & gas industries. The speciality steels business is largely independent of European strip products supply chain and the deal would be an important step towards securing future projects under new ownership. The company's strip products business will continue to employ 9,000 people in the UK, manufacturing advanced products for sectors such as the automotive industry.

The company is taking steps to restructure and refocus on higher value added markets. On completion of the deal, Tata Steel will employ some 9,000 people in Britain, around half of them based in Port Talbot, Wales, home to Britain's largest steelworks. This would bring down the losses on a day to day basis that Tata Steel was seeing with regards to these businesses, the reports noted.

To know more about the company's financial performance, subscribers can access to Tata Steel's latest result analysis (Subscription Required) and Tata steel stock analysis on our website. Tata Steel share price began trading up by 1.7%.

Moving on to the news from stocks in hotels sector. According to an article in leading financial daily, in a major rebranding exercise, Indian Hotels Company Ltd (IHCL) is planning to bring its Vivanta and Gateway hotels under the 'Taj' brand and exit the other two brands.

The new plan involves having just a single brand Taj across all hotel categories like luxury, resorts and spas, safari and business. Under this new initiative, the company is upgrading all the 53 premium hotels of Vivanta and Gateway in India and abroad, and migrating them into Taj brand. The decision would also mean additional investments, not only by IHCL but also its partners in upgrading the hotels to conform with the benchmark set by brand Taj, the reports noted.

Further, these hotels will now be divided into four sub-categories Taj Hotels, Palaces, Resorts and Safaris. Both these brands have existed for almost a decade. While Gateway was launched in 2008, Vivanta was introduced in 2010.

IHCL's strategy to upgrade and leverage on the Taj brand comes as at a time when the company is seeing growing threats from major international hotels in India in the recent past. This is part of the major restructuring exercise the company started more than a year ago which also includes becoming more streamlined in reporting structure, getting more cost-efficient, to be able to return to profitability.

Notably, the new brand architecture was originally scheduled to be announced on 10 November 2016, but was postponed at the last moment after the exit of Cyrus Mistry as group chairman. Cyrus Mistry may have been quickly ejected as Chairman of Tata Sons, but he very much continues to be the boss in many important individual Tata Group companies.

Which Tata Company has done the best under Cyrus Mistry?

He has made some correct moves post his appointment like the exiting of certain loss making and non-core operations. Indian Hotels Co share price began the trading day up by 0.3%.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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