Tata Steel is looking to save up to Rs 1,500 crore with the merger of all its subsidiaries, which were already part of its consolidated entity. Among the cost savings will be Rs 700 crore to Rs 800 crore in annual fees, which will also be part of the synergies.
Tata Steel Executive Director and Chief Financial Officer Koushik Chatterjee said CNBCTV-18 that this decision brings supply, technological, financial and operational synergies to Tata Steel. He further added that it made sense to integrate the subsidiaries with strategic relevance after the company completed the integration of Bhushan Steel.
“All of these companies have a great future ahead,” he said, adding that the move will bring further simplification to Tata Steel’s operating structure.
The move will be accretive to Tata Steel’s standalone business, the amount of which, Chatterjee said, would be disclosed when the company’s September quarter results are reviewed.
Under the new regulatory framework for TCNs, all transactions will have to be approved by the audit committee as well as by the shareholders of a listed company.
The CFO of one of India’s largest steel producers said the company would have gone ahead with the deal regardless of the guidelines as it was the natural next step after acquiring Bhushan Steel. He also explained how the business structure of Tata Steel Long Products changed after its acquisition of Neelanchal Ispat. “With the acquisition of NINL, the shape of TSLP’s business is very significant, so it made sense for us to integrate all of this into Tata Steel,” he said.
On the trading side, Chatterjee said things were looking up after June to August were “very bad months”. The situation in Europe has also been stable over the past two months, according to Chatterjee. When asked if the company was planning separate listings of its India and Europe businesses, Tata Steel’s chief financial officer said no such plans were in the works.
Shares of Tata Steel are trading up 1.6% as of 11am at Rs 105.30.
First post: STI