Tata Steel assures investors on European business sale plans

Tata Steel says on track for sale or joint venture for its European business and sale of its UK assets, a day after Cyrus Mistry made public the extent of writedowns

Other than the India business, Tata Steel has a debt of about Rs50,000 crore. Photo: AFP
Other than the India business, Tata Steel has a debt of about Rs50,000 crore. Photo: AFP

Mumbai: A day after Tata Sons Ltd’s ousted chairman Cyrus Mistry made public the extent of write-downs faced by the group, Tata Steel Ltd addressed investors in an attempt to allay concerns.

The company assured investors at a meeting in Mumbai that contrary to reports it was still firm on the sale or joint venture plan for its European business and the sale of its UK specialty steel business was on track, said three analysts who attended the meet. They declined to be identified.

ALSO READ | Tata replies to Cyrus Mistry, revealing reasons for rift

An email sent to Tata Steel on Wednesday remained unanswered.

“This was to address concerns amid speculation that the UK business will not be sold,” said the first of the three people mentioned above. The idea behind the meeting, said the second person, was to assure investors that “nothing has changed at the company and it’s business as usual.”

There has been no decision yet on a potential European joint venture between Germany’s Thyssenkrupp AG and the Tata group-controlled Tata Steel, Thyssenkrupp India’s chief executive Ravi Kirpalani said in an interview on Tuesday.

The company has taken an impairment of Rs35,000 crore till date from acquiring the Corus steel assets in 2007. Other than the India business, Tata Steel has a debt of about Rs50,000 crore.

In his letter to Tata Sons board members, Mistry warned of a Rs1.18 trillion write-down, over time, from five unprofitable businesses. Tata Steel’s Europe business, he said, faced potential impairments in excess of $10 billion, only some of which has been taken as of now.

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Tata Steel’s consolidated loss widened to Rs3,183 crore in the June quarter, from Rs317 crore a year earlier as India’s largest steel maker had to account for the divestment of its Long Product Europe unit.

The company’s consolidated revenue fell 5.7% to Rs26,406.10 crore in the quarter, from Rs28,025.43 crore a year earlier.

An analyst at a domestic brokerage who declined to be named said, “The revelation by Mistry further reiterates that the future of European operations is not bright.”

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The company’s European operations have been consistently losing money and have never been profitable at the PAT (profit after tax) level. This in turn has eroded the net worth of the company, the analyst said.

Tata Steel in March decided to put its entire UK business on the block in the face of a slump in steel demand and prices but the plan hit a roadblock due to uncertainty stemming from Britain’s decision to exit the European Union (EU).

The group eventually halted the sale process in July in favour of discussions for a joint venture with “strategic players in the steel industry, including Thyssenkrupp AG”.

On Thursday, Tata Steel shares closed at Rs397.10 on the BSE, down 0.44% from the previous close, while India’s benchmark Sensex rose 0.29% to 27,915.90 points.

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