Tata Steel sets up global holding company

Mumbai: All international assets of Tata Steel including Corus have been brought under a global holding company, Tata Steel Global, Mr Koushik Chatterjee, Group Chief Financial Officer, said.

Any future overseas acquisitions in steel, coal or iron ore by the group will be through this new entity. Tata Global with an enterprise value of $12-13 billion will be a subsidiary of Tata Steel, Mr Chatterjee said.

The new holding company, based in Singapore, is operative from today. Having a large and diversified asset base, the global holding company will be in a better position to raise funds—either equity, quasi-equity or debt for the group’s overseas growth.

We have a basket of global assets. For the governance point of view, it will be easier to manage the assets under a single entity, Mr Chatterjee said.

In addition to Corus, Nat Steel, and Tata Steel Thailand, the group’s other interests in Europe, Asia and Africa will be under this company.

He said the company is in talks with Vietnam Government for setting up a 4.5-million-tonne greenfield steel project. The group is also looking at opportunities for acquisition of steel and raw material facilities in South-East Asian countries, he said.

Tata Steel has been able to reduce its liabilities by around Rs 1,000 crore by swapping its foreign currency loans. The company has swapped external commercial borrowings of $1.65 billion – $1.25 billion in Yen and $400 million in dollar, Mr Chatterjee said.

Commenting on the first quarter results, he said the high interest cost was due to the full year effect of the funds raised for financing the Corus acquisition.

On the Rs 254-crore forex losses on account of Convertible Alternative Reference Securities, he said it is a notional loss as these bonds are neither convertible nor repayable in the next three years.

The bonds, listed on the Singapore exchange, are trading currently at a healthy premium, indicating good demand and higher chances of conversion into equity, he said.

Mr Chatterjee said the working capital cost for the company has come down and the current cash flow levels from operations generates Rs 2,000 crore in a quarter providing enough leeway for the company to finance new projects.

On the question of raising steel prices, he said around 65 per cent of the company’s sales are on negotiated terms. The company will take a view on price increase based on international prices and local conditions.