Tata Steel, the Indian steel giant, will complete its merger with its eight downstream subsidiaries by the 2023-24 financial year. The company’s CEO and MD, Mr. T.V Narendran said while speaking with Press Trust of India (PTI) that this timeline is subject to securing requisite approvals for the process.
Angul Energy to be Merged with Tata Steel in addition to 7 other Subsidiaries
In a stock filing dated 6th February, Tata Steel stated that it will be merging with its subsidiary, Angul Energy Ltd. This is in addition to Tata Steel’s already approved amalgamation with 7 of its subsidiaries.
Angul Energy Ltd. is a thermal power producer with an aggregate capacity of 465 MW from its thermal power plant in Angul, Odisha. Tata Steel has stated that this amalgamation will enhance the reliability of power supply for its operations.
Earlier, in September 2022, Tata Steel’s board had approved the company’s amalgamation with 7 of its subsidiaries, namely Tata Steel Long Products (TSLP), Tinplate Company of India Ltd. (TCIL), Tata Metaliks Ltd. (TML), TRF Ltd., Indian Steel & Wire Products Ltd. (ISWP), Tata Steel Mining Ltd. (TSML), and S & T Mining Company Ltd., which has been non-operational since 2018-19.
NINL not to be Amalgamated with Tata Steel
Interestingly, Neelachal Ispat Nigam Limited (NINL), which was acquired by TSLP in July 2022, is not a part of this amalgamation process.
“As per the terms of purchase with the government, the company is committed to running the new asset as a separate legal entity for three years”, said Mr. Narendran, further saying that Tata Steel would decide the course of action with regard to NINL after the completion of the said period.
Share Swap Ratios for Tata Steel’s Listed Subsidiaries Post-Amalgamation
Out of these subsidiaries, TSLP, TCIL, Tata Metalliksand TRF Ltd. are listed on stock exchanges. Since these companies will cease to exist post the amalgamation process, their investors will be given shares of Tata Steel as per certain swap ratios.
In an investor presentation dated 6th February 2023, Tata Steel stated that the swap ratio for TSLP will be 6.7, meaning that for 10 shares of TSLP, an investor will be given 67 shares in Tata Steel. Similarly, the swap ratios for TCIL, Tata Metallics and TRF Ltd. will be 3.3, 7.9 and 1.7 respectively.
Amalgamation to Facilitate Focused Growth, Operational Efficiency
Tata Steel had stated in its regulatory filings that this amalgamation will result in several advantages and synergies.
Tata Steel sees this step as a means to catalyse focused growth in line with the company’s ‘5S Strategy’ which stands for simplification, synergy, scale, sustainability, and speed. Tata Steel has stated that this strategy targets a simpler group structure and enhanced collaboration amongst the group entities.
Reduction in operational costs, pooling of sales and distribution networks for better efficiency, better raw material management, and easy resolution of customers’ queries were some of the reasons highlighted by Tata Steel for taking this step.
Post this amalgamation, projects in the subsidiaries’ respective pipelines will be executed in a more time-efficient manner due to a larger knowledge and resource pool. Logistical costs will also be reduced, since cargo would be clubbed, thereby reducing shipping charges.
Tata Steel In Process of Aggregating Downstream Subsidiaries
Tata Steel has been in process of streamlining group holdings, meaning that it is reducing the number of its subsidiaries and other associated entities. Since 2019, Tata Steel has reduced this number by 116 which comprises 72 of its subsidiaries, 20 Joint Venture companies, and 24 other companies associated with Tata Steel undergoing liquidation.
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 the 2021-2022 fiscal.