Important Update: Change in our stock recommendation

1. 

   mjranadive

   February 2, 2022 at 9:43 pm

   Thanks for your prompt reply.
   I agree that against reserve price of Rs.5000 crs, the bid at Rs.12000 crs is expensive and industry experts have also opinioned it so. That’s why the stock got beating in market.

   One remark I read is that Rs.12000 crs includes acceptance of Rs.5000 or so crs of debts. Does it mean, the cash payout would be around Rs.7000 crs only ? And if so, was it really that expensive bid w.r.t. reserve price ?

   Anyways, we will wait for further updates on funding & other plans by the Company.
   1. 

      N V Chandrachoodamani

      February 2, 2022 at 10:05 pm

      Yes, you are right. 12,000 crores includes debt also. Debt is 6,600 crores as of now.
      Bank debt is less than 2,000 crores and remaining is to creditors (mainly MMTC).

      It may be better to wait for further updates as the Co is planning large expansion also (4.5 Million TPA) after the acquisition
2. 

   mjranadive

   February 2, 2022 at 9:41 am

   Hi,

   I understand that such bidding for acquisitions of Govt companies identified for disinvestment must be in form of “open bidding” and hence TSPL would have informed Stock Exchanges about such move. So how this bidding was not captured in earlier analysis ?
   1. 

      N V Chandrachoodamani

      February 2, 2022 at 10:03 am

      Welcome your query sir

      TSLP had mentioned its intentions of inorganic growth earlier itself and we had mentioned that in our report. Further, we had also mentioned that NINL would be one of the PSU assets on block and TSLP had expressed interested in it

      But, the bidding has happened recently only in Dec 21. Further, the reserve price set for the asset was only Rs. 5,600 crore

      So, what came as a surprise here are 1) higher bidding amount and 2) aggressive expansion plan on top of that

      Otherwise, acquiring a 1 Million TPA integrated steel plant for a lower sum (close to reserve price) would have been easily manageable and a great deal as well for the company, which is almost debt free now

      Hope this clarifies your query sir

      We are awaiting more details on the funding and capital structure to put out a detailed update

      Thank you
      1. 

         Sunil Bandameedapalli

         February 5, 2022 at 9:53 am

         Hello Sir,

         Thanks for writing a short update and analysis immediately after the news.

         If possible, could you kindly mention how much time it could take tentatively for the clarity to emerge from the company side so that you can provide more clear guidance to us? Will it be within a week or it could take several weeks?

         The context is that if the stock gets corrected significantly by the time clarity emerges then selling the stock could end up in lot of losses (if your final call is going to be Sell). I know it is difficult to assess immediately.

         Thank you.
         1. 

            N V Chandrachoodamani

            February 5, 2022 at 6:20 pm

            Welcome your query sir

            TSLP has mentioned that the deal has to be closed within 2 months. So, some details should come within a month.

            In any case, beyond the acquisition (1 Million TPA plant), there is a major expansion plan also (4.5 Million TPA) which will require further capital investment. So awaiting funding details to understand the eventual capital structure

            It now becomes a case for a much longer term investment through the steel cycle.

            Thank you

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