It’s never a steel

The undertone among Indian analysts examining the India-based Tata Steel fighting the Brazil-based Companhia Siderurgica Nacional (CSN) in order to acquire the UK-based Corus Group is veering mildly on irrational patriotism laced with irrational exuberance. That an Indian company is there, slugging out billions, negotiating its long-term strategic interests with short-term financing, dealing with private equity majors and global banks to raise equity or debt, while sitting on what looks like a global auction of the Sistine Chapel, is heady.
The pin stripes point to Tata Steel’s potential wealth erosion — higher interest payments will eat into profits, equity dilution will lower EPS; either way, stock prices will fall. And they have: between October 20 when the deal was announced and yesterday, the share price of Tata Steel fell 14.2 per cent in a market that rose 1 per cent.

Opinion in The Indian Express, December 15, 2006