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Tata Steel: Debt Beneath the Wings

We initiate our coverage on Tata Steel Ltd (TATA IN) (“TSL”) with an UNDERWEIGHT recommendation on all of the TATAIN complex as we believe the complex is fully-valued against its domestic peers (See the Valuation section). We also expect the company’s leverage to increase materially (see the debt section). Among India’s steel producers, we see a better value proposition in the JSTLIN complex (JSW Steel) and expect TATAIN yield to increase in the near term on debt overhang (though we do not expect a rating downgrade).

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