Tata Chemicals slumps 6% on soda ash price cut

Mumbai: Shares of Tata Chemicals fell about 6% on Tuesday - the biggest single-day fall in over six months - after the world's third-largest producer of soda ash cut the price of the commodity by 3-4% across the country. The move follows the recent fall in Chinese soda ash prices amid the unexpected supply glut from the Inner Mongolia region.

The stock slumped as much as 6.5% with heavy volumes before closing the day at ₹932.80 apiece on the NSE, down 5.86% from the previous close.

More than 6.8 million shares exchanged hands on the BSE and NSE compared with the combined average daily volume of 500,000 shares over the last month. Among the BSE 500 stocks, Tata Chemicals was the biggest loser on Tuesday.

"The (price) cut comes amid falling soda ash prices in China since mid-March, as the market reacts to the unexpected news of substantial capacity addition in Inner Mongolia from May 2023," said Kotak Institutional Equities in a client note. In its note, Kotak maintained its buy rating on the stock with a price target of ₹1,210 per share. This represents a 30% upside from the current levels.

The soda ash business accounts for nearly 15-20% of Tata Chemicals' consolidated operating income. Also known as soda carbonate, the commodity has diverse uses ranging from food to the production of glass used in buildings, construction, and automobiles.

The unexpected capacity addition is negative for global soda ash prices, and the demand-supply of the commodity needs close monitoring, said Kotak.

Of the analysts tracking the stock, seven maintained a 'buy' rating, two recommend a 'hold' and three suggest 'sell' the stock, as per the Bloomberg data.