It is learnt that the Tata group flagship is in preliminary discussions with a steel transnational and is thrashing out the feasibility of spreading its wings beyond India, in a scenario where international financiers have chosen to shy away from greenfield steel projects.

A senior Tata Steel official, confirming the development, said: "We have received an offer from a leading international steel company to set up a joint venture to manufacture HRC. We are in the initial stages of negotiations." He declined to divulge further details citing the sensitivity of the proposal. It is learnt that the proposed venture could be set up in North America, though no official confirmation to this was available.

No detail on the proposed capacity or the size of investment could be ascertained at this stage.

Tata Steel's move to venture outside India is the second initiative from the Rs 33,000-crore Tata group to stamp its presence on the global map, which earlier in the year, through Tata Tea, made a 280-million bid to acquire Tetley of UK, the world's second-largest tea company. It is the largest acquisition bid ever made by an Indian company.

Tata Steel is the country's largest private sector steel company, and despite its huge work force, its operational cost is among the lowest in the country. The company, with the help of international consultants, has initiated a major cost-reduction drive that could pitch it among the lowest-cost producers steel in the world.

Earlier in the decade, Tata Steel had proposed setting up a 10-million-tonne integrated steel project in Gopalpur, Orissa at an investment of Rs 7,000 crore in the first phase, but the project has since been put on the backburner.

Tata Steel had then thought of going ahead with the project in partnership with some global steel major, but later abandoned the idea. It could not be ascertained what will be the fate of the Gopalpur project, which the Tatas wish to revive, in case Tisco forges ahead with the proposed HRC joint venture.

Tata Steel is one the two main steel exporters from India, with access to all the major markets including the US and Europe. With steel prices firming up in both the two largest international markets, having a manufacturing base in either of the regions will be a major attraction for any steel company, a steel sector analyst said.

"It is one of the reasons for the consolidation among international steel majors. And with steel prices moving northwards, international banks may show some interest in funding such a project," he said.

The long gestation period of greenfield steel projects and low return on equity are among the major stumbling blocks for financing steel projects, the analyst said.

Tata Steel recently sold its non-core cement business to French transnational Lafarge, as part of a move to exit from non-core operations and consolidate its steel business.

Insight
Overseas base makes senseProspects of setting up a joint venture with a global major for a HRC unit abroad depend to a large extent on the market in which the project is being set up. With a series of charges being imposed on Indian companies as far as dumping is concerned, it makes sense to have a manufacturing base abroad to exploit the international market. Though it is too early to comment on the impact on Tisco, it is clear that the company is not sitting idle after it scrapped its greenfield project and is looking at other avenues for growth.

Shishir Asthana