Tata Steel drops as Corus bid to meet stiff competition

Tata Steel dropped nearly 2% to Rs 466.90, after Brazil's CSN late on Friday approached Corus' board with a proposal to pay 475 pence per share in cash. This more than Tata Steel's 455 pence per share. As many as 1.5 lakh shares changed hands in the counter on BSE.

Tata Steel shares had declined in the past few days ahead of Friday's announcement of the counter bid. From a high of Rs 502.55 on 10 November, it had declined to Rs 475.95 by Friday (17 November).

Corus shares surged on Friday on hopes of a bidding war for the company amid a wave of consolidation in the fragmented global steel industry. It closed 4.8% higher, at 495-1/2 pence, a premium to CSN's terms. Reports suggest that Tata Steel may revise its offer for Anglo-Dutch steelmaker Corus Group after Brazil's Companhia Siderurgica Nacional (CSN) submitted its bid that topped the one by Tata. Reports also suggest that Tata Steel may have to raise the offer by 10% or so in the event of counter bids.

Tata Steel won approval from Corus on 20 October 2006, for its offer to create the world's fifth-largest steelmaker. Corus agreed to Tata's offer after spending a year looking for a strategic partner in Brazil, Russia and India. The bid, if successful, will be India's largest-ever foreign takeover.

CSN said its proposal will also create a top-five steelmaker with an initial annual production capacity of 24 million tonnes. Output will surge to about 50 million tonnes a year due to expansion projects already underway in Brazil.

CSN owns 3.8% stake in Corus.

The bids for Corus follows Mittal Steel's $32 billion acquisition of rival Arcelor this year.

Weak opening on tighter RBI norms for capital market exposure

The Reserve Bank of India (RBI)'s draft circular prescribing tighter guidelines for banks' capital market exposure, weakness in Indian ADRs on Friday and mostly subdued Asian markets caused a weak opening today.

At 10:20 IST the Sensex was down 164 points, at 13,264.

The market-breadth was quite weak. For 1,272 shares declining on BSE, 353 rose. As many as 31 shares were unchanged. Losers outpaced gainers by a ratio of 3.6:1.

The BSE clocked a turnover of Rs 642 crore.

In a draft circular issued late on Friday, the central bank has restricted banks' lending to a single borrower for subscribing to IPOs to Rs 10 lakh. Advances other than IPOs to any borrower against security held in the physical and demat form, have been restricted to Rs 10 lakh and Rs 20 lakh respectively.

RBI has also stipulated uniform margin of 50% on financing of all IPOs/issue of guarantees for capital market operations. The regulator has also proposed that banks limit their capital market exposure to 40% of their consolidated net worth at the end of each March, when the financial year ends. It proposed treating investments in venture capital funds as capital market exposure. However, banks with sound internal controls and robust risk management systems can seek permission for the limits to be relaxed, it said.

Tata Steel lost 2.7% to Rs 463, after Brazil's CSN late on Friday approached Corus' board with a proposal to pay 475 pence per share in cash, more than Tata Steel's 455 pence per share.

Metal shares were weak. Hindustan Zinc plunged 5.7% to Rs 841 even as the top zinc producer raised zinc prices 0.13% to Rs 2,21,000 a tonne from Saturday.

Sterlite Industries lost 3.5% to Rs 493, Hindalco shed 1.4% to Rs 172 and National Aluminium Company lost 2% to Rs 215.55.

Dr Reddy's Lab lost 2.3% to Rs 718, after its ADR declined for the second day in a row on Friday. The company had on Friday priced its ADR at $16 per ADS.

HDFC Bank shed 1.8% to Rs 1,104, after its ADR dropped 2.1% on Friday to $75. ICICI Bank lost 1.7% to Rs 859, as its ADR shed 2.5% on Friday to end at $38.07.

Infosys shed 1% to Rs 2,162. Its ADR lost 2.1% on Friday to close at $55.07.