Why Nomura Is Bullish on Tata Steel Despite Global Slowdown Fears?
Nomura has initiated coverage on Tata Steel with a Buy rating and a target price (TP) of ₹215 per share, highlighting the company’s strong domestic positioning, improving European operations, and valuation comfort. This comes at a time when global steel prices remain volatile, but India’s demand and infrastructure-led momentum continue to provide resilience.
Tata Steel’s diversified footprint, raw material security, and upcoming capacity ramp-up at Kalinganagar make it one of the most attractive plays in India’s metals sector. Let’s understand what’s driving Nomura’s optimism and what it means for long-term investors.
Key Triggers Behind Nomura’s Upgrade
Nomura’s thesis rests on five pillars — each addressing both near-term strength and medium-term growth levers.
| Driver | Rationale | Impact Outlook |
|---|---|---|
| Strong domestic demand | Government capex, housing push, and auto recovery continue to support demand for long and flat steel products. | Positive — steady volume growth in FY25–26 |
| Higher Kalinganagar utilization | Expansion at Kalinganagar Phase II will lift output efficiency and margins as economies of scale kick in. | Positive — EBITDA accretive |
| EU operations turnaround | Operational streamlining and energy-cost normalization may improve profitability by FY26. | Neutral to Positive — structural recovery in margins |
| Lower iron ore costs post-FY30 | Benefiting from backward integration; captive mines ensure raw material security and cost savings. | Highly Positive — long-term cost advantage |
| Valuation comfort | At current levels, Tata Steel trades at an attractive EV/EBITDA multiple compared to peers. | Attractive — limited downside risk |
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Sector Dynamics: Why Steel Is Shining Again
The Indian steel industry is in a cyclical upswing driven by domestic demand resilience. Despite a correction in global iron ore prices, Indian prices have held firm due to infrastructure expansion and private-sector investment.
Key data points for September show strong production and demand trends, while H2 FY25 is expected to witness a pickup in both public and private capex.
Peer Comparison: Tata Steel vs. Other Large Players
| Company | EV/EBITDA (FY26E) | Leverage | Domestic Exposure |
|---|---|---|---|
| Tata Steel | 5.8x | Moderate (Net debt/EBITDA ~2x) | ~70% |
| JSW Steel | 6.5x | Higher | ~90% |
| SAIL | 6.8x | High | ~95% |
The table shows Tata Steel offers a balanced mix of global exposure, cost control, and moderate leverage — unlike peers that are more domestically concentrated.
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Technical Terms Explained for Readers
- EV/EBITDA: A valuation metric showing how cheap or expensive a company is relative to its earnings before interest, taxes, depreciation, and amortization. Lower ratios imply better value.
- Capex: Short for capital expenditure — spending by companies to expand or upgrade assets such as plants and machinery.
- Backward integration: When a company controls its raw material supply chain — for Tata Steel, this means mining its own iron ore.
- EBITDA Margin: A profitability measure showing operating earnings as a percentage of total revenue. Higher margins mean better efficiency.
Final Analysis: Buy, Hold, or Skip?
Considering Nomura’s arguments and the sector’s structural tailwinds, Tata Steel appears well positioned to benefit from domestic capex growth and efficiency gains. While global volatility remains a risk, valuation comfort and raw material integration make it a steady compounder candidate for the long term.
Hence, for investors seeking exposure to India’s industrial and infra themes, Tata Steel fits as a moderate-risk, value-oriented buy.
Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, notes that Tata Steel combines domestic strength with global diversification. The company’s balance sheet improvement and long-term cost visibility make it one of the sector’s most resilient bets. Investors can accumulate gradually, focusing on corrections below ₹140–₹150. Discover more insights and data-backed research at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
Related Queries
- What makes Tata Steel’s valuation attractive in FY25?
- How does Kalinganagar expansion improve Tata Steel’s profitability?
- Is India’s steel sector entering a new upcycle?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
