Tata Steel shares hit 52-week high on reports of £500-mn deal with U.K. govt

Shares of Tata Steel extended their winning streak for the second straight session and touched a fresh 52-week high on Thursday amid report that the company is in advanced talks with the United Kingdom government to get around 500 million pounds in government-backed funding. The Tata Group firm is in negotiations with the British government to raise capital to secure the future of Port Talbot plant in South Wales, the U.K.’s largest steelworks.

The steelmaker earlier demanded 1.5 billion pounds in financial support from the government for its new plan of building a scrap-based steel manufacturing plant in the U.K. However, the U.K. government offered 300 million pounds in January 2023, and the company has since been in discussion with the government to increase the support.

As per the report, the funding deal is likely to be finalised by the end of this week. The funding would be alongside 700 million pounds to be invested by Tata Steel India as it plans to build an electric arc furnace for environment-friendly steel production. The company previously warned that Port Talbot plant, which currently employs 4,000 workers, nearly half of Tata Steel's entire U.K. workforce, may need to make 3,000 redundancies in future as electric arc furnaces require less labor-intensive processes for steel production compared to traditional blast furnaces.

“Tata Steel has had active and detailed discussions with the U.K. government in relation to the future of the U.K. business. Given the U.K.'s decarbonisation journey and rising carbon costs, it has been clear that for the continuity of steel-making in the long-term, it is necessary for Port Talbot to transition to alternative green technologies,” the company management said in the recent annual report.

Reacting to the news, Tata Steel shares rose as much as 3.7% to hit a 52-week high of ₹134.25 on the BSE. Early today, the steel stock opened higher at ₹131 against the previous closing price of ₹129.5, continuing its uptrend for the second day. The market capitalisation climbed to ₹1.61 lakh crore, with over 16 lakh shares changing hands over the counter during the session so far.

At the day’s high level, Tata Steel shares trade 41% higher than its 52-week low of ₹95 touched on September 28, 2022. The steel heavyweight has risen 21.5% in a year; 11% in the calendar year 2023; 24.5% in six months; and 12% in a month.

For the April-June quarter of FY24, Tata Steel reported a consolidated net profit of ₹525 crore, down 93% from ₹7,714 crore in the same quarter a year ago. In the March 2023 quarter, the company's net profit stood at Rs ₹1,566 crore. The profit was impacted by a weak performance by its Europe operations as well as non-cash deferred tax charges on account of buy-in transactions at the British Steel Pension Scheme.

The consolidated revenue from operations dropped 6.3% to ₹59,490 crore compared with ₹63,430 crore in the year-ago period, dented by lower volumes, partly offset by higher realisations across geographies. Sequentially, the revenue was down around 5.5% from ₹62,961 crore posted in Q4 FY23.

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