Tata Steel could merge some of its subsidiaries: MD, TV Narendran

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Source: The Economic Times
Monday, June 26, 2017

 MUMBAI: Tata Steel may merge some of its subsidiaries in a review of its assets portfolio even as India’s oldest maker of the alloy looks at brownfield expansion in Odisha, penciling in a demand revival. 

"Yes, if it makes the past subsidiaries have become divisions of Tata Steel. ...Like, the Tube company became the tube division. These are all possibilities," TV Narendran, managing director at Tata Steel India and South-East Asia, told ET in an exclusive interview. He was referring to the possibility of merging the units. 

Tata Steel has 22 subsidiary companies, including listed companies such as Tata Sponge and Tata Metaliks. About half of these were loss making, according to the fiscal 2016 results. The company, which once owned the biggest steel plant in the British Empire, currently is in the process of closing down Tayo Rolls, a loss-making business. 

It has earlier existed noncore operations, such as the Dhamra Port and its Sri Lankan subsidiary. However, its recent bid to merge Metaliks with itself was not successful due to delays in regulatory approvals. "If you have to allocate capital where would you do it — that's a call we will take. The first step is to make sure all the subsidiaries we have don't lose money. Some of them have strong cash flows and can find their own growth," Narendran added. 

The Indian steel industry is showing signs of revival after a particularly tough year of fighting off Chinese imports. The government's focus on infrastructure and affordable housing has helped stoke demand, while anti-dumping curbs and a favourable approach from the government have provided the enabling policy framework to boost the sector’s health. 

“From Tata Steel’s point of view, now that Kalinganagar plant is doing well, we have the opportunity to expand,” said Narendran. “The next phase will be to grow from 3 to 8 mt. In the next six months, we will go to the board with the proposal. We are now looking at a bigger blast furnace.” Tata Steel's current steel-making capacity stands at about 13 million tonne, combining its flagship Jamshedpur plant in Jharkhand at 10 MT and its new Kalinganagar plant in Odisha at 3 MT. Its earlier plan was to only double steelmaking capacity to 6 MT. 
"As we finished Phase One, the board allowed us to start working on Phase Two, and come to it with a report. We should be ready by September to go to the board. But it might not accept the first time we go to it. Normally, for big projects, there would be one or two iterations," he said. 

While business is looking good for Tata Steel and rival JSW Steel, there are stressed steelmakers — Bhushan Steel and Essar Steel, for instance — that may be up for sale. Lenders to these companies would take them to the National Company Law Tribunal for recovery under the Insolvency and Bankruptcy Code. 

"Obviously, if there are opportunities, we would evaluate them. We will take a call… Depends on what comes up, how much money is involved... If there are good assets, at good value and you aren't adding more capacity in the market... We are seeing how this whole thing plays out," Narendran said. 


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