Tata Steel merges subsidiaries for better efficiency; here’s the swap ratio

The board of Tata Steel has approved the amalgamation of strategic businesses into the company as part of its efforts to drive synergies, simplify group holding and management structure, consolidate and strategically grow downstream operations and engineering capabilities. 

As per a statement issued by the steel major, the subsidiaries are all majority owned by Tata Steel and include Tata Steel Long Products (74.91 per cent equity holding), The Tinplate Company of India (74.96 per cent), Tata Metaliks (60.03 per cent), The Indian Steel & Wire Products (95.01 per cent), Tata Steel Mining Limited and S & T Mining Company Limited (both wholly owned subsidiaries). 

The board of Tata Steel also approved the amalgamation of TRF (34.11 per cent) into Tata Steel. 

Further, based on the reports of the independent valuers, the board approved swap ratios for the proposed amalgamations as below: 

• For every 10 shares of Tata Steel Long Products, 67 shares of Tata Steel
• For every 10 shares of The Tinplate Company of India, 33 shares of Tata Steel 
• For every 10 shares of Tata Metaliks, 79 shares of Tata Steel 
• For every 10 shares of TRF, 17 shares of Tata Steel 

Interestingly, shares of the listed subsidiaries registered a strong surge in the last one month even as the benchmark Sensex rose a marginal 0.7 per cent. In the last one month, shares of Tata Steel Long Products rose from Rs 605 to Rs 749 while those of The Tinplate Company of India moved up from Rs 295 to Rs 338. Shares of Tata Metaliks rose from Rs 715 to Rs 801. 

“The proposed amalgamations will enhance management efficiency, drive sharper strategic focus and improve agility across businesses based on the strong parental support from Tata Steel leadership,” stated a statement from Tata Steel. 

“In line with Tata Steel’s long-term strategy, the consolidation of the downstream operations will enable growth in value added segments by leveraging Tata Steel’s nationwide marketing and sales network. The amalgamations will also drive synergies through raw material security, centralised procurement, optimisation of inventories, reduced logistics costs, and better facility utilisation,” it added. 

On completion, there will be further opportunities towards reduction of overhead and corporate costs and each of the proposed amalgamations will be value-accretive for shareholders, it said. 

Incidentally, the proposed amalgamation is also part of Tata Steel’s continuing journey to simplify the group holding structure. Since 2019 Tata Steel has reduced 116 associated entities (72 subsidiaries have ceased to exist, 20 Associates and JVs have been eliminated and 24 companies are currently under liquidation). 

Tata Steel, together with its subsidiaries, associates, and joint ventures, is spread across five continents with an employee base of over 65,000.  

The Indian listed major also is among the top global steel companies with an annual crude steel capacity of 34 million tonnes per annum. The group recorded a consolidated turnover of $32.83 billion in the financial year ending March 31, 2022.

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