MUMBAI:
Tata Steel has put its proposal to sell the Southeast Asian business on the back burner as the company enters the next phase of its plan to consolidate operations, boost margins and reduce debt. The move follows an improvement in the Southeast Asian business performance since it was put on the block in early 2019. Operating profit of the business more than doubled after growing 105% to Rs 295 crore in the fourth quarter of fiscal 2021.
Tata Steel reviewed the progress of its Southeast Asia business (which is in Singapore and Thailand) and decided to do away with its classification as assets ‘held for sale’, it said in a regulatory filing. Consequent to the reclassification, the Southeast Asia operations are presented as ‘continuing operations’ in
Tata Steel’s Q4FY21 statement, it added.
The management explained that the company, over the last fiscal year, “did some work on the fundamentals of the Southeast Asia business†and felt that it should focus on running it, given the upcycle in the steel industry.
Besides Southeast Asia, Tata Steel’s international play includes Europe, where it is splitting its UK and Netherlands units. After separation, the focus will be on transformation, especially of the UK unit, the management said. “The company is not looking at embarking on any strategic action on the Netherlands or Europe at this time.â€
While the company decided to continue with its international operations, it also continues to evaluate opportunities in India, its largest market.
Tata Steel, said its management, will “take a call†on Rashtriya Ispat Nigam, in which the government plans to sell its stake. It has already evinced an interest in Neelachal Ispat Nigam, a PSU based in Odisha. The management described that the company is looking at M&A to boost its long products portfolio that includes wires, bars and rods. Both Neelachal and Rashtriya Ispat are into long products.
These opportunities are being considered on the back of robust earnings and cash flows. Tata Steel generated a free cash flow of Rs 23,748 crore in fiscal 2021, led by strong operating performance of its India business. It also lowered its net debt by Rs 29,390 crore to Rs 75,389 crore, and has plans to reduce it further by “more than a billion dollars†in the current fiscal.
Tata Steel MD T V Narendran said the first half of fiscal 2021 was challenging following the uncertainties and complexities brought on by the pandemic. But he added that the domestic steel demand has been improving since then with accommodative policies, government spending and relaxation in mobility restrictions. He further said the second wave of Covid in India is a risk and the company is working to minimise the impact on its employees and communities while meeting the requirements of its customers.
On Wednesday, Tata Steel reported a profit of Rs 8,190 crore for fiscal 2021, compared to a profit of Rs 1,172 crore in the year-ago period.