Tata Steel to recast SE Asian operations, focus on Indian operations
21 July 2018
Tata Steel is refocusing on its India operations and is aiming to increase revenue share from domestic operations to 91 per cent of the total from 53 per cent in the financial year ended 31 March 2018.
In the process, the country's oldest steel producer is also looking at simplification of subscale and non-core assets such as South East Asia operations.
Tata Steel, which earlier restructured its loss-making European operations by forming an equal joint venture with Thyssenkrupp, is now looking to restructure its Southeast Asian operations.
“One of the things that the company is looking at is all assets that are sub-scale or non-core... what we can simplify... we are looking at that,” Natarajan Chandrasekaran, chairman Tata Sons, replied to a shareholder query at the company’s annual general meeting,
In Southeast Asia, Tata Steel operates through NatSteel Holdings Pte Ltd (Singapore) and Tata Steel Thailand, both of which have reported contraction in operational profit, despite improved selling prices.
Both are also suffering due to lack of demand caused by a slump in construction activity and elevated scrap prices in Singapore and Thailand, the company said in its annual report for 2017-2018.
The two units together contributed Rs9,542 crore, or 16 per cent, to Tata Steel’s total revenue of Rs60,519 crore in FY18 but only Rs437 crore, or 2 per cent, to the total Ebitda of Rs22,045 crore.
Chandrasekaran also said funds will be required for the acquisition of Bhushan Steel.
“Our existing debt of Rs69,215 crore will go up to Rs85,000 crore after the acquisition of Bhushan Steel. The debt will reduce by Rs20,000 crore once the JV with Thyssenkrupp is done.”
The company is looking to borrow fresh funds to tune of $3.5 billion to refinance high-cost debts. Of this, €2.5 billion loans on the books of Tata Steel Europe will be refinanced before the JV with Thyssenkrupp. Tata Steel’s debt may rise even further if it bags Bhushan Power and Steel Limited in the insolvency proceedings against the latter.
“We have to strategise the acquisition. Of course, it will have a debt component,” The Hindu quoted Koushik Chatterjee, Group CFO, as saying.