Tata Steel to restructure business, cut capex to Rs 8,000 crore in FY20

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Tata Steel MD and CEO TV Narendran.

Tata Steel will embark on restructuring of its business globally while recalibrating its annual capex plan originally kept at Rs 12,000 crore for the financial year. Tata Steel MD and CEO TV Narendran said Tata Steel would lower the number of Eurpoean subsidiaries and also consolidate the Indian entities in a bid to simplify the structure of its business.

“In Europe we have 300 subsidiaries, which we plan to bring down by at least 100. At one point of time Tata Steel Europe had more than 300 legal entities. We had brought down some and some more needs to be reduced. In India, instead of 30 subsidiaries we can have a subsidiary for long products, a subsidiary for infrastructure, a subsidiary for mining and some downstream subsidiaries. This will simplify the over all business structure,” Narendran said.

Considering the low demand that the steel giant is currently facing, it is going to make a downward revision of its capex for the year, which would be brought down to Rs 8,000 crore from Rs 12,000 crore originally.

“Our capex plan was originally Rs 8,000 crore for India and Rs 4,000 crore for Europe,” Narendran said. Although he didn’t want to give any specific figure on how much of capex will be reduced for Europe and how much for India, he said the reduction would be equally distributed.The focus of capital expenditure in India is Kalinganagar. The company can de-prioritise some projects in Kalinganagar and push its expenditure plan two three months behind.

This won’t affect its business, but can commensurate with the market conditions, Narendran said after inaugurating a steel-junction store. In Kalinganagar, the company’s priority was putting up a pellet plant and a chunk of the capital expenditure would be utilised there.

However, it is continuing its attempt to off load its southeast Asian steel business, although China’s state-run HBSIS Group couldn’t get requisite clearance to acquire majority stake in NatSteel Holding and Tata Steel Thailand, for which it signed definitive agreements. “Synergy Group has shown interest in Thailand assets and a deal may take place in three-four months,” Narendran said. According to Tata Steel officials, the firm wants to sell off its low-margin assets abroad and reduce its debt burden. An MoU has been signed and Synergy Group is like to do a confirmatory due diligence shortly.Tata Steel would now lay more emphasis on providing services and solutions, for which it is partnering with its group companies Voltas and Chrome. “For 15 years we have build successful brands. Why can’t we move from products to more services and solutions?” the MD asked.

The company’s B to C segment contributes 15% of its total revenue . It is looking for 30% of its revenue to come from solutions and services in the next five years.

Steeljunction will offer a whole range of products and Tata Steel will continue to invest in building stronger customer relationship, distribution networks and brands that focus on value-added segments such as retail that help strengthen revenue profile.

Narendran said the market was expected to look up in the second half of the financial year and the demand for the automobile industry was likely to pick up during the second half. Low demand for cars had impacted steel businesses, Tata Steel earlier said.

[“source=financialexpress”]