ASSIGNMENT 2: THREE CORPORATE ACTION ANALYSIS OF TATA STEEL

Assignment Submission by –
Sumit Jha_ Roll No 46
Corporate Action: Any action by a public-listed company that causes a significant change or has the potential to
create a change in the securities issued by the company and influences its stakeholders is called corporate action.
All types of corporate actions have an impact on the stock
price and helps investors understand the mindset of the
management.
For the given assignment we would be taking three
corporate actions of Tata Steel and will be highlighting
its details and its impact on the capital structure and
stock price.
➢ Rights Issue
➢ Dividend Pay-out
➢ Share Split
1) Rights Issue: The right issue is an offering of subscription rights given to existing shareholders to buy additional
securities in a company before it is offered to the general public. A Right Issue is usually in the form of a Stock
Split and the existing shareholders are being given an opportunity to take the first advantage of the new
development in the company.
The rights issue is the fastest and the most economical method of raising capital for the company. The company
saves a significant amount of money on expenses such as underwriting fees, advertisement costs, and so on that
it would have incurred in any other kind of fundraising.

From regulators perspective also it is less stringent. The rationale is that a current shareholder already knows a
reasonable amount about the company; she doesn’t need the same level of scrutiny and disclosures compared to
selling shares to new shareholders.

Also, in a rights issue, the promoter holding does not get diluted, unlike any other fundraising method via equity.
Usually, promoters commit to fully subscribing to their portion of the rights and the undersubscribed portion.

Rights Pricing & Ratio: Generally, rights offers are priced at a discount to the market, and allotment is assured.
If the rights are issued around the current market price, existing shareholders may not be too interested.

Tata Steel Rights Issue Analysis:

The Issue has been authorised by a resolution
of the Board of Directors of our Company
passed at its meeting held on December 18,
2017 and December 19, 2017 pursuant to
Section 62 of the Companies Act, a circular
resolution dated January 9, 2018 passed by
the Executive Committee of the Board on
January 12, 2018 and a resolution of the
Executive Committee of the Board passed at
their meeting held on January 19, 2018.
Record Date: 1st February 2018
Impact of the Right Issue:
Increase in Equity Capital: The Equity Share Capital of TSL was 971. 2 Crore in Mar’2017 which increased to
1145 in Mar’2018 after the receipt of the Rights Issue money.
Indicator Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22
Total ShareHolders Funds Annual Cr 42616.2 34172.2 40532 31349.4 41457.6 35544.3 58595.6 66650.1 71301.3 73460 114443
Equity Share Capital Annual Cr 971.4 971.4 971.4 971.4 970.2 970.2 1145 1144.9 1145 1197.6 1221.2
Total Share Capital Annual Cr 971.4 971.4 971.4 971.4 970.2 970.2 1145 1144.9 1145 1197.6 1221.2

Repayment of Debt: The proceeds were used for repayment of liability to the company. The leverage of
company significantly reduced 2.3 to 1.5.
Capital Structure Efficiency: The ROA & ROE also improved significantly in the year of Rights Issue.
Indicator Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22
Book Value Per Share Annual Rs 449.9 369 435.1 340.3 435.3 382.9 520 602.8 645.3 640.7 958.9
RoA Annual % 3.67% -4.80% 2.09% -2.46% -0.21% -2.44% 6.40% 4.37% 0.62% 3.05% 14.06%
ROE Annual % 12.64% -20.65% 8.86% -12.52% -0.92% -11.93% 22.92% 15.33% 2.18% 10.19% 35.08%
Total Debt to Total Equity Annual 1.2 1.6 1.7 2.2 1.9 2.3 1.5 1.4 1.6 1.1 0.6

Increase in Shareholding of the Promoters: The promoters holding in the company increased from 31.35 in
Mar’17 to 32.04% in Mar’18 after. Specifically, Tata Sons shareholding increased from 29.75% in Mar’17 to
30.46% in Mar’18

2) Dividend Pay-out: Most financially sound firms pay their shareholders a part of their profits in the form of
dividends. This is, however, not a compulsion for the firm. The company may choose to reinvest the profit to further
growth. When it is issued, shareholders can select either cash dividends or stock dividends. If the shareholders
don’t submit their preference within the prescribed time, then the default option is applied – which is cash dividends.
A firm's financial health and share price can be affected through dividends. Businesses may decide to pay
dividends to reward shareholders, boost their financial performance, or increase investor interest in their stock.

Tata Steel Dividend Pay-out Analysis: For the year

ending March 2022 Tata Steel has declared an equity
dividend of 510.00% amounting to Rs 51 per share.
There was a cash outflow of Rs.

Record Date: 15th June 2023

At the current share price of Rs 104.50 this results in a
dividend yield of 4.88%. The company has a good
dividend track report and has consistently declared
dividends for the last 5 years.
Impact of Dividend on Price of TSL: The price of TSL was trading at Rs.95.95 on 15th June 2022 (Ex-Dividend
Date) lower than the previous close of Rs. 99.61, which shows the impact of dividend pay-out on the stock.

3) Share Split: A stock split is a situation in which a corporation declares that its shares’ face value will be
divided. The stock’s market price may decline due to this practice, while the company’s market
capitalisation remains unchanged.
The impact of a stock split on a company's share price depends on various factors such as investor sentiment,
the company's financial performance, and market conditions. In some cases, a stock split may lead to increased
demand for the stock as a lower price per share may make it more affordable for retail investors. Additionally, a
stock split may signal to the market that the company is confident about its future growth prospects.
Tata Steel Stock Split Analysis (Date of Announcement 3rd May 2022): The Board considered the proposal
for sub-division of 1 equity share of the Company having face value of ₹10/- each into 10 (Ten) equity shares
having face value of ₹1/- each, subject to regulatory/statutory approvals as may be required and the approval of
the shareholders of the Company.

Record Date: 29th Jul 2022

Rationale Behind the Split: To enhance the liquidity in the capital market, to widen shareholder base and to
make the shares more affordable to small investors.
Impact on Price: Tata Steel stock was trading near Rs 1,000 before the stock split on Thursday (28th July 2022).
On 29th July 2022 the stock is trading at Rs 107.60, up 7% per cent. The stock before the split had logged a 52-
week high of Rs 1,534.60 on August 16, 2021 and a 52-week low of Rs 827.10 on June 23, 2022. the stock before
the split had logged a 52-week high of Rs 1,53.460 on August 16, 2021 and a 52-week low of Rs 82.71 on June
23, 2022. After the stock split the price has gone upto Rs.124.30 on Jan 20, 2023.
Source:
Tata Steel Annual Report
Tata Steel Investor Presentation
Tenderly, Moneycontrol, Screener