Tata to seek funding options as UK bailout for steel, auto biz fails2 min read . Updated: 17 Aug 2020, 06:51 AM IST
The UK treasury concluded that Tata Group had deep-enough pockets and did not qualify for taxpayer support
The Tata Group will have to look for new ways to support its struggling steel and automobile businesses in the UK after the failure of talks with the UK government for a potential rescue package.
The Financial Times reported over the weekend that emergency funding talks with Jaguar Land Rover Automotive Plc (JLR), a subsidiary of Tata Motors Ltd and UK’s biggest carmaker, and Tata Steel broke off recently. The report, citing anonymous officials briefed on the discussions, said the British treasury concluded that Tata Group had deep-enough pockets and did not qualify for taxpayer support under Project Birch, the UK government bailout package for companies hit by the covid pandemic.
Reports in the British media said earlier that JLR had asked for up to £1 billion in government aid while Tata Steel sought up to £500 million.
FT in its report said both businesses of the Tata Group are continuing talks with the UK government over “other areas of potential support, such as tax breaks, which in the case of Tata Steel could extend to state loans."
Tata Motors and Tata Steel in India have so far not shed much light on the nature of the bailout they are seeking from the UK government. In response to this latest development, a spokesperson for Tata Steel said on Sunday: “Tata Steel remains in ongoing and constructive talks with the UK Government on areas of potential support. As these discussions have not reached a conclusion, it would be premature to comment on any options that may or may not be under consideration."
Tata Steel set up manufacturing operations in the UK and the Netherlands when it acquired Corus Group Plc in 2007 for $13 billion; the business was renamed Tata Steel Europe in 2010. Over the years, Tata Steel has taken $3 billion in impairment losses on its European steel business. An attempt to divest the European operations, and about $2.5 billion of debt, from the parent company’s balance sheet into a joint venture with Germany’s Thyssenkrupp fell through last year after the proposal failed to win European Commission approval.
The European operations continue to weigh heavily on Tata Steel’s profitability. In the June 2020 quarter, it reported a consolidated net loss of ₹4,648 crore as its financials took a blow from lower output and sales in both its domestic and European markets.
JLR too has seen challenges in China, US, and Europe in the last three years as sales fell due to increased competition, slowdown in global economies and falling demand for diesel vehicles.