HSBC retained its Buy rating and Rs 260 target for Tata Steel, arguing that strong domestic operations, falling debt and healthy cash generation are being overlooked by investors.
HSBC has kept its “Buy” rating on Tata Steel and left its target price unchanged at Rs 260 a share, saying the market is placing too deep a discount on the company’s valuation compared with Indian steel peers.
The brokerage said Tata Steel’s strong domestic operations, improving balance sheet and healthy cash generation should support performance over the next two years. It argued that investor worries about long-term profitability in India, possible market share losses and pressure from European operations have driven a sharper de-rating this year than is justified by the fundamentals.
HSBC pointed to a clear shift in valuation. Between 2023 and 2025, Tata Steel’s one-year forward enterprise value to EBITDA multiple traded at a 14% discount to JSW Steel and a 3% discount to Jindal Steel, while still carrying a 28% premium to Steel Authority of India Ltd. In 2026, that gap widened materially, with Tata Steel trading at a 29% discount to both JSW Steel and Jindal Steel, and at an 11% discount to SAIL.
The bank said three concerns are weighing on sentiment: the risk that Tata Steel loses some of the benefit from captive iron ore mining after 2030, the chance of market share erosion if upstream expansion remains limited, and the possibility of heavy spending at its Netherlands business. HSBC said those fears are overstated, adding that the company should still have more than 25% captive iron ore availability after 2030 and that operational efficiency gains, plus a greater focus on higher-value steel products, could help protect profitability.
HSBC also expects Tata Steel to expand at Neelachal Ispat Nigam Ltd. and possibly advance a Maharashtra project, steps that could support its position in key customer segments. At the same time, it said the company is unlikely to commit major capital to its Netherlands operations until there is more clarity from regulators and better visibility on cash flow.
Debt reduction is another likely support for the stock, according to HSBC, which expects Tata Steel’s consolidated net debt to fall over the next two years as operating cash flows stay strong and capital spending remains limited. The brokerage said robust domestic demand, especially for flat steel, along with import protection measures, should help keep domestic steel spreads elevated. It added that a fuller recovery in the UK business may take another two to three years after the new electric arc furnace begins operating.
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