Transaction:

  • Tata Steel announced amalgamation of six subsidiaries majorly owned by Tata Steel Limited into the parent company.
  • The subsidiaries are all majority owned by Tata Steel and include Tata Steel Long Products Limited (74.91% equity holding), The Tinplate Company of India Limited (74.96% equity holding), Tata Metaliks Limited (60.03% equity holding), The Indian Steel & Wire Products Limited (95.01% equity holding), Tata Steel Mining Limited and S & T Mining Company Limited (both wholly owned subsidiaries). The Board also approved the amalgamation of TRF Limited (34.11% equity holding) into Tata Steel Limited.

About Tata Steel Limited:

  • Tata Steel group is among the top global steel companies with an annual crude steel capacity of 34 million tons per annum.
  • It is one of the world’s most geographically diversified steel producers, with operations and commercial presence across the world.
  • The group recorded a consolidated turnover of Rs. 69,324 Crores in the financial year ending March 31, 2022.

 Rationale:

  • The amalgamations will help Tata group to simplify the complex group holding structure. Since 2019, Tata has been on a journey to reduce its associated entities and subsidiaries. Till date Tata has reduced 116 associate entities (72 subsidiaries have ceased to exist, 20 Associates and JVs have been eliminated and 24 companies are currently under liquidation).
  • Company expects enhancement in management efficiency, drive sharper strategic focus and improve agility across businesses based on the strong parental support from Tata Steel leadership.
  • Keeping in line with the long-term strategy, the consolidation of the downstream operations will enable growth in value added segments by leveraging Tata Steel’s nationwide marketing and sales network.
  • The amalgamation will drive synergies through raw material security, centralized procurement, and optimization of inventories, reduced logistics costs, and better facility utilization. There will be further opportunities towards reduction of overhead and corporate costs and leveraging of Tata Steel’s nationwide marketing and sales network.
  • Tata Steel’s CFO said to media that the net present value of all the synergies will be over Rs. 1000 Crore.
  • While Market reacted initially positive to the announcement, post-merger gains were quickly erased and the stock nosedived on account of weakness in steel prices in increasing rate of interest environment.

 

RBI Bulletin (www.bulletin.rbi.org.in), SEBI (www.sebi.gov.in), NSE (www.nseindia.com), BSE (www.bseindia.com)

Disclaimer:

This material has been prepared by the personnel in Vora Corporate Finance which is Investment Banking arm of Vora Management Consultancy Private Limited and looks after Mergers & Acquisitions (M&A), Private Equity (PE), Fund Raising, Debt syndication and Valuations and is based out of Ahmedabad, Gujarat, India. Any views or opinions expressed herein are solely that of individual authors and may differ from view of Vora Management Consultancy Private Limited. This material is proprietary to Vora Management Consultancy Private Limited and is for your personal use only. Any distribution, copy, reprints or forward to others is strictly prohibited.

This material captures the information based on information available in the public domain, public announcements and sources believed to be reliable. Analysis contained herein is based on publicly available information and appropriate assumptions. This material is intended merely to highlight market developments and is not intended to be comprehensive and does not constitute strategic, investment, legal or tax advice. In no event Vora Management Consultancy Private Limited be liable for any use by any party or for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained herein and such information may not be relied upon by you for evaluating any transaction. 

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