From global acquisitions to global listing, India’s Tata group is turning adept at the game. India’s largest private steel maker, Tata Steel, plans to list Tata Steel Global Resources, its holding company for steel and raw material assets outside India, on the London Stock Exchange (LSE), Mint has . The funds raised will be used for further acquisitions of iron ore and coal mines, besides repaying part of the debt which was taken to buy Corus in 2007. Corus, which was delisted in April 2007, will be a part of the holding company, according to the report.
This would be similar in lines to metals firm Vedanta Resources (owned by Anil Agarwal which raised £825 million after it sold a 46 per cent stake to overseas investors) which was listed in 2003, followed by Aditya Birla Minerals in Australia.
The idea is that the European market will value Tata Steel more than Indian bourses, as certain commodity sectors command much higher valuation there compared to India. A similar thinking prompted a restructuring of paper firm Bilt some time back. Analysts feel if Tatas divests about 25 per cent of the holding company (Tata Steel Global), it will be able to raise $5-6 billion.
Tata Steel, along with its associates, has operations in 24 countries and commercial presence in more than 50 countries. The steel maker owns Corus, Tata Steel Thailand (formerly Millennium Steel) and NatSteel Asia. The company is also working jointly with Vietnam Steel to develop a steel complex in Ha Tinh in Vietnam, with an estimated capacity of 4.5 million tonnes per annum (mtpa). In Australia, Tata Steel has a JV in Carborough Downs Coal Project located in Queensland, which has a mining capacity of 58mt of raw coal for 14 years.
While Tata Steel has enough raw material in India to feed its plant in Jamshedpur, Corus is largely dependent on its long term contracts and spot purchases to produce about 20 mtpa of steel. This puts a strain on Tata Steel’s consolidated results as raw material prices have been shooting up.
Iron ore prices have risen by about 65 per cent in recent months and coking coal by 100 per cent which is leading to a scramble among steel firms to acquire mines across the world.
Corus accounts for about 88 per cent of the overseas subsidiaries’ total profits. Corus accounts for 72.5 per cent of the firm’s consolidated revenues.