How is Tata Steel stock valuable as a long-term investment?

Tata Steel Limited is one of the largest steel producers in the world. The company claims to be the second-most geographically diversified producer of steel. One of the most remarkable things about the company is that it controls all aspects of the supply chain when it comes to steel production. This includes having a hand in locating and mining deposits, to refining and manufacturing, ending with the final marketing of the finished goods. This makes it easier for the company to achieve a lower operating cost compared to other companies. The stock price of the company, as of 24 September 2018, was about Rs.607.

History of the company

The story of Tata Steel began in 1907. When it was first formed, the company was known as TISCO, which stood for the Tata Iron and Steel Company. Mr. Dorabji Tata established the company. The company grew to great heights even before India attained Independence from British Rule. From the 1950s, the company began a drive to modernise its factories and to increase output substantially. This led to large-scale employment in India. The company expanded to begin international operations in 1990. The name of the company was changed from TISCO to Tata Steel in  2005.

Financial performance

From the audited standalone financial results for the first quarter of the financial year 2018–2019, it can be seen that:

  • Total revenue from operations increased compared to the previous quarter. Total revenue from operations in the first quarter of FY19 was Rs.16,405.46 crore while it was Rs.16,280.94 crore in the previous quarter.
  • The total income of the company also rose in the first quarter of FY19 compared to the final quarter of FY18. The total income in the final quarter of FY18 was Rs.16,500.80 crore. This was lower than the total income in the first quarter of FY19 which was Rs.16,911.49 crore.
  • The company managed to reduce its total expenses over the quarter. The total expenses for the first quarter of FY19 was less than the total expenses for the final quarter of FY18. The total expenses for the final quarter of FY18 was Rs.13,137.53 crore while the total expenses for the first quarter of FY19 was Rs.13,003.63 crore.
  • Profit before tax increased by a lot in the first quarter of FY19 compared to the previous quarter. The profit before tax for the previous quarter was Rs.1,755.87 crore. The profit before tax for the current quarter was Rs.3,573.17 crore.
  • Net profit for the first quarter of FY19 was almost double the net profit in the previous quarter. Net profit in Q1 FY19 was Rs.2,318.15 crore while it was Rs.1,030.93 crore in the previous quarter.
  • The total comprehensive income for the first quarter of FY19 was more than double that of the previous quarter. The total comprehensive income for Q4 FY18 was Rs.1,043.79 crore and for Q1 FY19, it was Rs.2,340.62 crore.

From all this, it can be seen that the company has extremely strong financials that indicate that the company is set on a strong growth path that is sustainable in the coming future.

Other positive markers

  • Tata Steel is part of the larger and more famous Tata conglomerate.
  • The company has control over every part of its supply chain, lowering operating costs.
  • Tata has a number of other allied mining, production, and sale operations such as one for chrome and another for manganese.
  • Tata does not restrict itself to only mining and production of metals and alloys. The company also manufactures equipment such as the ones used in agriculture.
  • Tata improved its sinter net production, leading to a large savings of Rs.20 crore in the financial year spanning 2016–2017.
  • Tata has ways to reduce transition losses by almost 50% which will, in turn, give a savings of about Rs.30 crore.
  • The company reduced the costs of transporting its material through road by achieving a 12% reduction in the year 2015–2016.
  • The company is led by Emeritus Chairman Mr. Ratan Tata who has proven experience in running the conglomerate the Tata Group.
  • The company has invested in a number of innovative technologies that will help it improve the number of grades of steel that it produces.
  • The company has tie-ups with top universities around the world that allow it to recruit top talent with exposure to cutting-edge technology.
  • As of late September 2018, the company has bought a competitor, Usha Martin Limited, in order to double current capacity.

Should you invest in Tata Steel?

Considering all the points given above, it can be seen that the company which has a rich 111-year history is still going strong. The company has lasted for so long by remaining at the top and seeing the steps it has taken for the future, it is clear that the company is intending to continue at the top. In addition, the company appears to provide good value for investors since it has strong numbers going for it. This can be gleaned from the financial results of the company which look extremely positive. Considering that the price of the stock has reduced over the course of the fourth and final week of September 2018, it might be the right time to invest in the stock. There are definite indications that the stock will, if all other factors work out well, probably rise in price over the course of time. This will make Tata Steel stock a good investment for the longer term. To know more on tata steel company’s wealth and performance visit the website Bankbazaar.com