After a battering of two-and-a-half months, shares of Tata Steel staged a partial recovery with a gain of over 5 per cent with some market players speculating that the company might withdraw its bid to acquire Anglo-Dutch steelmaker Corus.
Tata Steel shares had lost about 20 per cent ever since the reports first poured early in October that it was planning to acquire Corus, as it was felt that the costly takeover would have an adverse impact in the company's balance sheet.
The brokers said the deal might have significant long-term synergies, but market players were worried about the adverse impact in the short term.
Tata Steel's share price closed 5.4 per cent higher at Rs 459.25, after hitting an intra-day high of Rs 461.45 at the Bombay Stock Exchange. However, the stock is still 14 per cent below the level it was trading at in the beginning of October.
Tata Steel shares have closed with losses during 45 trading sessions out of the total 54 trading sessions since October this year, while gains have been marginal during the positive sessions.
Market players believe the Corus deal has become costlier after Tata Steel revised its offer to 500 pence and Brazilian steelmaker CSN submitted a counter bid of 515 pence.
However, today speculations flowed in from London to the domestic market that Tata Steel was mulling over possibilities to withdraw from the race. This also led to a fall in Corus' share price on Friday, that has gone up by about 40 per cent since October.
Brokers in London said the investors had been expecting the Indian bidder to return with a higher bid after its last offer was trumped within hours by CSN earlier on Monday.
Corus' share price had soared above 515 pence per share, the highest bid so far, on Monday itself, while it jumped to as high as Rs 537 yesterday. However, the shares were still trading above 530 pence on Friday.
Until Thrusday, there were also reports that Tata Steel had started discussions with leading shareholders of Corus, including Standard Life. However, on Friday morning reports flowed in that Tata was planning to walk away from the bidding war as CSN was mulling over further raising its bid, leading to a fall of one per cent in Corus shares in morning trade.
However, some brokers also attributed the fall in Corus' share price to Thursday's reports about the company pleading guilty for breaking health and safety laws for a fatal blast at its Port Talbot plant in 2001.
Meanwhile, brokers in Mumbai said gains in Tata shares could also be attributed to a broader rally in the metal sector, which benefited from the overnight rally in global metal prices at London Metal Exchange and the reports about Tata Steel's plans to invest Rs 450 crore (Rs 4.50 billion) for setting up an iron ore smelting plant in Thailand.
The Thailand investment reports also fuelled speculations about Tata Steel's plans to withdraw from bidding war over Corus, as it comes on the back of doubts that the company's expansion plans could be pushed back with the private steel behemoth raising over $7 billion in debt to fund the acquisition of Corus.