Tata Steel has kicked off a major organisational revamp in an attempt to unlock value. The company has transferred its overseas assets including Corus and Natsteel into an independent holding company called Tata Steel Global. The transfer will come into effect from Friday.
The new holding company will be the vehicle for all overseas expansions, said Kaushik Chatterjee, chief financial officer, Tata Steel.“The holding company will have an enterprise value of over $13 billion,” Chatterjee said. In addition to Corus and Natsteel, Tata Steel Global’s assets include iron ore mines in Ivory Coast, Mozambique and Oman.
Tata Steel might go for listing of Tata Steel Global on the London Stock Exchange (LSE) to raise funds for its global operations, said an investment banker, who requested anonymity. “The company may also go for a private equity placement,” he added. Tata Steel shares went up 3.92 per cent to close at Rs 680.65 at the BSE on Friday.
Earlier last year, Tata Steel acquired Anglo-Dutch steel maker Corus for $12.3 billion. According to analysts, Tata Steel did not have sufficient raw material linkages after the Corus acquisition.
“Post the Corus acquisition, Tata Steel’s raw material self-sufficiency has dropped to 20 per cent for iron ore (earlier 100 per cent) and 15 per cent for coking coal (earlier 70 per cent), exposing the consolidated entity to margin decline, in case it is unable to effect adequate price hikes,’ Edelweiss metal analysts Prasad Baji and Amit Dixit said in a recent report on Tata Steel.
“It is no secret we are looking for raw material assets. Because of the size and geographical spread of the holding company, it would be easy to raise funding,” Kaushik Chatterjee said.