Prabhudas Lilladher reccommended  'Accumulate' on Tata Steel at a target price of Rs 530 compared to market price of Rs 466 on November 26.

Govt of Odisha recently suspended mining lease (ML) of Tata steel's (TATA) Joda East and Katamati iron ore mines. These mines were producing 2/3rd of TATA's iron ore production. The key reason behind the suspension was the expiry of stipulated time period during which TATA was required to secure all the statutory clearances.

TATA's Forest clearance (FC) became ineffective due to want of approval for diversion of forest land in safety zone, as required by the revised guidelines of the earlier Govt. Acknowledging this anomaly, the new Govt withdrew the condition for the mines having approval for rest of the forest land on the merit that impact of diversion in safety zone were well assesesed while awarding approval for the mine under the previous provisions.

Commenting on the investment rationale, Prabhudas Lilladher said, ''We are confident that TATA's leases would be executed during next couple of months given the supportive policies of new Govt. Margins to normalise in FY16 after steep fall in H2FY15: We expect EBITDA/t in Indian operations to fall by 11%/Rs 1,600 in H2 over H1FY15, primarily due to higher iron ore cost. With the resumption of chrome and iron ore mines, we remain confident that margins will resume to Rs 15k/t level in Q1FY16.''

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