Tata Steel, through its subsidiary Tata Steel Long Products Ltd. (TSLP), completed the acquisition of Neelachal Ispat Nigam Limited (NINL) for Rs. 12,100 crore on 4th July 2022. Apart from this, the company has plans to invest about Rs. 12,000 crore in 2022-23 fiscal for organic growth.
Specifics of Neelachal Ispat Acquisition by Tata Steel
TSLP has acquired 93.71% equity share in Neelachal Ispat Nigam Ltd. for Rs. 12,100 crore, which was held by four Central Public Sector Units (PSUs) and two Odisha government PSUs.
Metals and Minerals Trading Corporation (MMTC), National Mineral Development Corporation (NMDC), Bharat Heavy Electricals Ltd. (BHEL) and Metallurgical & Engineering Consultants Limited (MECON) are the central PSUs which held equity stake in NINL, while Odisha Mining Corporation and Industrial Promotion and Investment Corporation of Odisha (IPICOL) are the state PSUs which had equity share in NINL. The remaining equity share in NINL is held by banks and insurance companies.
NINL’s plant had been out of operation since 30th March 2020 owing to huge losses. Neelachal Ispat’s debt and liabilities exceeded Rs. 6,600 crore as of March 2021.
After bids were invited for NINL, TSLP was declared as the successful bidder on 31st January 2022. On 4th July 2022, TSLP completed the acquisition of NINL as per the process stated by Department of Investment and Public Asset Management (DIPAM), GoI.
Strategic Importance of Tata Steel’s Acquisition of NINL
NINL, which produced long steel products like billets and pig iron, has a production capacity of 1.1 Million Metric Tonnes Per Annum (MMTPA). NINL also has 2,500 acre of land, which has iron ore reserves of about 100 Million Metric Tonnes. TSLP’s deal not only gives it ownership of the plant, but also the mining and leaseholding rights of this land, which were earlier with the Ministry of Steel, Govt of India.
Another strategic benefit of this deal for Tata Steel is that NINL’s plant in Jajpur, Odisha, is in close proximity to Tata Steel’s Kalinganagar facility. This would facilitate shared use of resources, technology and infrastructure, as stated by Tata Steel. The company is actively looking forward to not only bringing the acquired NINL plant back into operation and expanding its capacity, but also increasing the production capacity of its establishment at Kalinganagar.
The NINL acquisition has provided Tata Steel with a dedicated plant for the production of long steel products. India’s production capacity of long steel products sits at about 48 MMTPA. Therefore the acquisition of NINL and the subsequent expansion in production capacity would strengthen Tata Steel’s position in the Indian long steel products industry.
Tata Steel’s Growth Targets and Rs. 12,000 Cr Capex Plans
Tata Steel has set a target to increase its total steel production to 40 MMTPA by 2030.
Acquisition of the NINL plant is an inorganic means of growth for Tata Steel’s production capacity since they have taken over an already existing facility. For this plant, Tata Steel has set the target to increase production capacity to 4.5 MMTPA from the current 1.1 MMTPA in the next few years, and further to 10 MMTPA by 2030.
Further, Mr. T. V. Narendran, Managing Director, Tata Steel, stated in an interview with PTI, that the company has planned a Rs. 12,000 crore CAPEX for FY-23. This investment will be an organic means of growth for attaining Tata Steel’s production goals.
Out of this, Rs. 8,500 crore will be used towards expanding the production capacity at the company’s already existing Kalinganagar facility, and on mining operations in India. Currently, Tata Steel is in the process of expanding the production capacity of its Kalinganagar plant to 8 MMTPA from 3 MMTPA.
The remaining Rs. 3,500 crore out of the FY-23 CAPEX amount will be invested in the company’s business in the Netherlands and Britain. This investment in Europe will be towards environment-related operations and exploring variety in its product offerings.
About Tata Steel: Tata Steel was established in 1907 as Asia’s first integrated private steel company, which led to the development of Jamshedpur as India’s first industrial city. The Mumbai-headquartered company has over 32,000 employees, and clocked a turnover of Rs. 243,959 crore in 2021-2022 fiscal.