Tata Steel impairs half of its FY2012 goodwill - Angel Broking

Tata Steel has announced that it will write off goodwill and will impair asset worth USD1.6bn (FY2012 goodwill stood at US$3.2bn) during FY2013. A significant portion of this write off is attributable to its loss-making European operations and some impairment is attributable to ferro chrome business in South Africa and mining blast furnace in TS Thailand. The company does not expect any major impact on financial covenants due to this write off. In our view, taking goodwill write off is justified as its European operations continue to make losses and we do not foresee a financial turnaround at its European operations over the coming few years. Although goodwill write off would affect its FY2013 financial performance, there will be no impact on its cash flows.

Hence, we maintain our estimates until Tata Steel reports its 4QFY2013 results and maintain our Buy rating on the stock with a target price of Rs. 430.

Source : Equity Bulls

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