According to the report of Tata Steel, Usha Martin (UML) steel business acquisition as a smart move has given the attractive discount of 30%. It has given to greenfield cost for a well-integrated asset providing product diversification and synergy benefits. It has been observed that that Net Debt/EBITDA for consolidated operations including both Bhushan (BSL) and UML (excl. European business which is getting shifted to JV) is likely to remain in a safe zone of 3.1x in FY20E (vs 2.9x at FY18 end) led by strong cash flows of domestic business given the favorable steel cycle and low cost metrics. It has expected TSL to leave any further inorganic acquisition efforts in the medium term given its five-year goal of doubling capacity in India is well within reach now.


Upgrade to Buy with a SOTP based TP of Rs 800 as analyst expect both Bhushan Steel and Usha Martin acquisitions to be value adding in the medium term.

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