Tata Steel today announced a $1.6 billion non-cash write down of goodwill and assets of Tata Steel Europe (formerly Corus) and other overseas assets due to poor macroeconomic condition in Europe, among others.
According to the 2011-12 annual report, Tata Steel's consolidated goodwill stood at Rs17, 354 crore ($3.2 billion) and a lion's share of that is on account of the $13 billion Corus acquisition in 2006.
''..the company expects non-cash write down of the goodwill and assets in the consolidated financial statements for the year ended March 31, 2013 of around $1.6 billion,'' it said in a statement.
The impairment in the market was apparent from the weak market environment in Europe where steel demand has fallen significantly in 2012-13 by almost 8 per cent, ''which in aggregate results in almost 30 per cent since the emergence of the global financial crisis in 2007''.
''The above underlying condition is expected to continue over the near and medium term, and has led to the downward revision of cash flow expectations underlying the valuation of the European business,'' it said.
''The impairment also includes the effect of write down of assets in the ferrochrome business in South Africa and the mini blast furnace in Tata Steel Thailand which has been impacted by the high cost of raw material feedstock,'' it added.
Tata Steel, which is scheduled to announce its financial results for the year on 23 May, however, said the non-cash write down is not expected to affect its financial covenants.
Financial covenants are part of the conditions of a loan agreement. These covenants are the promises by the management of the borrowing firm to adhere to certain limits in the firm's operations.
Tata Steel Group is among the top ten global steel companies with an annual crude steel capacity of over 26.5 million tonnes per annum (mtpa). It has operations in 26 countries.
The Tata Steel Group, with a turnover of $26.13 billion in FY'12, has over 80,000 employees across five continents.