Tata Steel puts Rs 66,000 cr worth of projects on hold
Tata Steel has put on hold its two large greenfield expansion plans in Jharkhand and Chhatisgarh, which will have a collective investment of close to Rs 66,000 crore.business Updated: Dec 03, 2008 21:12 IST
The global credit crisis has come home to India's largest steel-maker. Tata Steel has put on hold its two large greenfield expansion plans in Jharkhand and Chhatisgarh, which will have a collective investment of close to Rs 66,000 crore.
The company, which bought out the Anglo-Dutch steel maker Corus for a record $12.3 billion (Rs 53,680 crore), is reworking on its capital expenditure plans citing bad market conditions.
Tata Steel intends to create a 12 million integrated plant with an investment of Rs 45-50,000 crore in Jharkhand and a 5 million tonne plant in Chhattisgarh, where it plans to invest Rs 16,000 crore. The two projects were already delayed by 2-3 years due to land acquisition problems.
“For Jharkhand and Chhattisgarh, we have not yet acquired land. These projects will be further delayed because of the current market scenario,” said B. Muthuraman, managing director, Tata Steel. "However, we will go ahead with Jamshedpur and
Orissa expansions as they are high-return projects."
However, the company is not thinking of a production cut in India, Muthuraman said. "Unlike in the West, I think there is enough demand for steel in India. So there is no need to cut production."
It also plans to cut costs by Rs 300 crore during the fiscal through improving the operational efficiency.
Meanwhile, analysts say there were no catalysts for the stock in the near future. "While the valuations are at historic trough, there is no catalyst for the stock in the near term. Negative sentiment will weigh down on the stock with the expected downtrend in steel prices along with the possibility of a loss in Corus in the fourth quarter of the current fiscal," said BNP Paribas analysts Preeti Dubey and Karan Gupta said in a research note earlier this month.