Tata Steel o buy Brahmani River Pellets

Tata Steel on Friday said it has agreed to acquire Brahmani River Pellets for an enterprise value of Rs 900 crore in a transaction aimed at improving supply of raw material and reducing costs at its new steel unit Kalinganagar in Odisha.

Tata Steel on Friday said it has agreed to acquire Brahmani River Pellets for an enterprise value of Rs 900 crore in a transaction aimed at improving supply of raw material and reducing costs at its new steel unit Kalinganagar in Odisha.

A Tata Steel sign is seen outside their plant in northern England. (Reuters)

Brahmani River Pellets, which is also located in Odisha, was earlier owned by UK trading major Stemcor Corp, before it was demerged last year under a global restructuring exercise initiated by the UK company.

Enterprise value in a transaction implies the market capitalization of a company and also includes debt and minority interest in the company.

“To build a similar facility would have taken significant time and costs and therefore this acquisition is very timely as we are looking to ramp up the capacity of Phase I at Kalinganagar,” said group executive director Koushik Chatterjee.

Brahmani River Pellets, makes iron ore pellets, an intermediate raw material ingredient, vital in steel making. Since Tata Steel has captive iron ore mines near the pellet making, minerals from the mines can be carried to Brahmani via a slurry pipeline, converted into pellets and then fed into Tata Steel Kalinganagar, reducing costs.

Tata Steel is building a 6 million tonne steel plant at Kalinganagar, split in two phases of 3 million tonnes each. The company started commercial production this May.

The announcement has pushed up the share price of Tata Steel by 0.2% at Rs 393.15 on the BSE.