Tata Steel in merger mode

The Telehraph: OUR SPECIAL CORRESPONDENT

Calcutta, July 26: Tata Steel has decided to merge associate companies Tinplate Co Ltd and Tata Sponge & Iron with itself. Hemant Nerurkar, managing director of Tata Steel, said the exercise would bring in greater operational and financial integration. “If you see globally, these businesses are only divisions of the main steel companies. Here we had separate corporate entities for historical reasons. But it makes more sense if they are part of Tata Steel,” Nerurkar said. Nerurkar, who was in Calcutta to participate in the 66th annual general meeting of the Indian Institute of Metals, said on the sidelines of the conference that no specific timeframe has been finalised. “It could happen in the next 1-2 years,” Nerurkar said. Tata Steel, the world’s sixth largest steel maker, has already initiated a process to ramp up its holding in these two companies. It has announced open offers to acquire shares from minority stakeholders, which would result in a higher promoters’ block. It will spend Rs 87.92 crore to pick up an additional 14 per cent stake in Calcutta-based Tata Tinplate if minority shareholders subscribe to the open offer. Similarly, Tata Steel will spend Rs 65.02 crore to buy an additional 11.26 per cent in Tata Sponge Ltd. At present, Tata Steel holds 59.44 per cent in Tinplate and 39.74 per cent in Tata Sponge. If the offers are fully subscribed, the promoters’ holding in Tinplate will climb to 73.44 per cent. In Tata Sponge, the stake will go up 51 per cent. Following the open offer, the Odisha-based company would be a subsidiary of Tata Steel. Tinplate became a subsidiary a couple of years ago. If merged, shareholders of both companies are likely to get shares of the parent, Tata Steel. In the steel value chain, Tinplate is a downstream and Tata Sponge an upstream company of Tata Steel. Both buy their raw material from the parent. While Tinplate buys hot rolled coil, a finished product of Tata Steel, Tata Sponge buys iron ore, mined by Tata Steel which it also uses as raw material. Globally, tinplate businesses are only a division of the integrated steel makers. “There is no point having different companies with different work cultures. For instance, the tube, pipe divisions which are similar to tinplate and sponge iron businesses are part of the parent,” said a steel industry executive. Tinplate is the largest indigenous producer of tin coated and tin free steel sheets, enjoying 35-40 per cent market share. It is an industry leader for more than 90 years. Tata Sponge makes direct reduced iron, which is used by small steel makers to make steel in electric arc furnaces.