Bhushan Steel Report (12 August,2014)

 

Sensex:	25670
CMP (Rs):	177
Target price (Rs):	125
Week h/l (Rs):	378/177.75
Market cap (Rs cr):	1207.80
Avg volume	4026.23
FV (Re):	2
P/E	64.87
Book Value	395.02
BSE code:	500055
NSE code:	BHUSANSTL
Prices as on 11 Aug, 2014

Company Overview:

Bhushan Steel Ltd formerly known as Bhushan Steel & Strips Ltd. is a globally renowned one of the leading prominent player in Steel Industry. Backed by more than two decades, of experience in Steel making, Bhushan Steel is now India’s 3rd largest Secondary Steel Producer company with an existing steel production capacity of 2 million tones per annum’s (approx.).

Shareholding pattern
JUNE ‘14	(%)
Promoters	71.3
Institutions	5.7
Public & others	23.0

 

STOCK SURVIVE AGAINST NEGATIVE NEWS:
As Bhushan Steel now once again in the news for some reasons. The alleged involvement of Bhushan Steel in the bribery case involving the Syndicate Bank CMD has seen the stock lost 50-60% in last week. The shares tumbled after a sessions court denied anticipatory bail to the company’s Vice-Chairman Neeraj Singhal in connection with the Syndicate Bank brivery case.

Syndicate Bank CMD, has some officials reasons involved two steel making companies (Bhushan Steel and Prakash Industries) have been named as accused in the bribery case.

Bhushan Steel is one of the prime accused in the bribery case which led to the suspension of Sudhir Kumar Jain, Chairman and Managing Director of Syndicate Bank.

However this is not the first time that Bhushan Steel has been found violating Government laws. Last year in Novermber, the Pollution Control Board (PCB) of Odisha had ordered the closure of Bhushan Steel’s blast furnance-2 at its Meramandali plant, which was operating without the necessary permissions. The blast furnance has been re-started after receiving clearance from the Odisha PCB in April 2014.

Company had pending 58 criminal proceedings against it for violations in previous year for the Factories Act, 1948.

CBI opposes move:
The arguments in front of Special Judge Swarana Kanta Sharma, Singhal’s counsel told the court that his client should be granted relief as he was ready to cooperate in the investigation. The counsel also argued that the allegations leveled against Singhal were incorrect. However, The Central Bureau of Investigation (CBI) arrested Bhushan Steel's Vice Chairman and Managing Director Neeraj Singal earlier last week in the Rs 50 lakh bribery scandal involving Syndicate Bank chairman S K Jain, who is also in custody.
Meanwhile, as per the reports, the State Bank of India (SBI) wants to bring in a management agency to run scandal-hit Bhushan Steel and is canvassing lenders for support in order to safeguard total outstanding loans of Rs 40000 crore from 51 banks. The consortium of lenders headed by Punjab National Bank will meet next week to discuss the move, reports added. SBI has a Rs 6000-crore exposure to Bhushan Steel, a sizeable chunk of the steelmaker's Rs 40000-crore borrowings from Indian banks.

Performance rel. to Peer GRP
(%)		Opm%		Npm%	EPS
Bhushan Steel		26.65		-0.78	-0.99
Tata Steel		32.97		16.23	---
Jindal Steel	33.87		8.55			3.35
Uttam Galva		9.51		0.59	0.67

Quarterly Result updates:
Bhushan Steel Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on August 12, 2014, inter alia, to consider and approve unaudited Financial Results for the 1st Quarter ended June 30, 2014 (Q1).

Highlights the NEGATIVE fact:

• CBI in its probe has found a layered approach was adopted through which alleged bribe of Rs 50 lakh, for not declaring bad loans of Bhushan Steel as non-performing assets, was handed over to two businessmen who were relatives of Jain thus covering the track of the black money.

• The SIT is responsible for investigating cases of black money stashed abroad through coordination of various members.

• State Bank of India (SBI) wants to bring in a management agency to run scandal-hit Bhushan Steel and is canvassing lenders for support in order to safeguard total outstanding loans of Rs 40000 crore from 51 banks.

• The scrip had also underperformed the market in past one quarter.

• Bhushan Steel was locked at 10% lower circuit at Rs 177.7. Now it finds lowest lows of the year.

• Presently stock was trading its Book value.

VALUATION & OUTLOOK:
Bhushan Steel have tumbled 55% from Rs 394.85 on 1 August 2014. The Central Bureau of Investigation (CBI) arrested Bhushan Steel's Vice Chairman and Managing Director Neeraj Singal earlier last week in the Rs 50 lakh bribery scandal involving Syndicate Bank chairman S K Jain, who is also in custody.

The consortium of lenders headed by Punjab National Bank  will meet next week to discuss the move,. SBI has a Rs 6000-crore exposure to Bhushan Steel, a sizeable chunk of the steelmaker's Rs 40000-crore borrowings from Indian banks.

CONCLUSION:


Bhushan Steel is one of the leading prominent player in steel industry. The company is now founded in negative news effect would drive more 25% down side in this counter due to this scandal. We remain ‘SELL’ in this counter with target objective of Rs 125 for the very short term period.