Tata Steel on Friday announced the amalgamation of six of its subsidiaries with it. Koushik Chatterjee, ED &CFO, Tata Steel, told FE, the transaction would be value accretive and result in synergies worth around Rs 1,500 crore. Excerpts.
What is the rationale for the amalgamation?
The objective is to consolidate the subsidiary businesses within Tata Steel to drive simplification of management and also have a sharper focus on the business. After the successful merger and integration of Tata Steel BSL, which was a much larger and more complex transaction, this was the next logical move. We propose to drive synergies across multiple areas, be it in procurement or in financing, and the value leakages will be plugged.
Also Read: Weakening rupee raises fresh fiscal concerns
Will the transaction be value accretive ?
Yes, it will be value accretive to Tata Steel standalone and all the businesses are part of Tata Steel core strategy, whether it is long products or packaging. Further, these businesses are part of Tata Steel’s enterprise strategy and we have much more flexibility to grow some of these businesses faster. Since they are all subsidiaries, the consolidated debt will not change.
How much will the synergies yield?
The net present value of all synergies will be over Rs 1,000 crore, which is a material value unlocking potential. This covers benefits on cost takeouts, leveraging the synergies on procurement, commercial and financing synergies. Tata Steel will also be able to bring its capability in the technology and digital area to these businesses.
Should we expect any more corporate restructuring?
This will take some time going through the regulatory process and we are focused on putting this as a priority. We do not have anything else on the table currently.
What is the outlook for steel?
It has been a challenging year. The global industry, including India, has had a challenging last few months, but things are getting in a better shape now and hopefully will be less volatile in the near future.