The Telegraph
Since 1st March, 1999
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Tisco bonus leaves markets hungry

Mumbai, June 7: The board of Tata Steel today proposed a bonus issue of one share for every two held, a decision that failed to fulfil expectations of investors.

The stock market, which wanted the firm to be more generous, saw the Tata Steel share slide 2.12 per cent to Rs 308.75. The stock hit a high of Rs 322.70. The swings came as 76.17 lakh shares, worth Rs 238.75 crore, changed hands on the Bombay Stock Exchange.

“We expected a bonus of two shares for every three held,” an analyst who has been tracking the company said. Shareholders’ approval will be sought at the company’s annual general meeting, scheduled for July 22. A record 100 per cent dividend has already been declared.

The share bonanza from Tata Steel, the country’s largest private sector steel company, follows a year of robust growth in sales and profits. Its 2003-04 topline increased 23 per cent, while its bottomline swelled 73 per cent.

More remarkable, say analysts who have kept an eye on the company for years, is the fact that Tisco’s operating margins improved 630 basis points to 33 per cent.

Managing director B. Muthuraman has been at the forefront of an initiative to change the steel maker’s product profile, adding more value-added items. The change has seen the company manufacture steel panels that are even used by Malaysian auto major Proton.

Tisco reported an income of Rs 10,842 crore and a net profit of Rs 1746.22 crore. The performance marks the firm’s makeover from a traditional manufacturer of a cyclical commodity to a nimble-footed profitable player.

Announcing the results last month, Muthuraman said the company was looking at fresh capacities for acquisitions both in India and abroad to emerge as a global entity. It also plans to expand the steel capacity by 1 million tonnes at Jamshedpur to over 5.5 million tonnes.

The expansion plan, likely to be completed by September 2005, is expected to cost Rs 2,000 crore. This cost is far more economical as a project of similar capacity would normally cost Rs 4,000-4,500 crore, Muthuraman had said.

In the subsequent phase, the company plans to further jack up steel capacity by 2.4 million tonnes. Apart from having a strong product mix, Tata Steel has also been focussing on branded steel.

Sales of branded steel products, which shot up to Rs 2,363 crore in 2003-04 from Rs 836 crore in 2000-01, is expected to touch Rs 3,000 crore this financial year. The company is also making efforts to plug any gaps in the supply of raw materials.

Plaudits flow in

A survey conducted by Financial Times and PricewaterhouseCoopers slots Tata Steel among World’s Most Respected Companies’ known for corporate social responsibility. It has ranked 34th in the poll.

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