Tata Steel To Cut Capex In FY20 By A Third Amid Slowdown
Silos stand at the steel works operated by Tata Steel Ltd. in Port Talbot, U.K. (Photographer: Chris Ratcliffe/Bloomberg)

Tata Steel To Cut Capex In FY20 By A Third Amid Slowdown

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Facing headwinds amid a slowdown in the economy, Tata Steel Ltd. said it is likely to revise the planned capital expenditure for the current financial year to Rs 8,000 crore from Rs 12,000 crore planed initially.

The steel sector is expected to see a pick-up in the second half of the current financial year, a top company official said.

Also read: Slowdown In Auto Industry Has Impacted Steel Sector: Tata Steel CEO

“We have given a guidance that the capex will be 20-25 percent lower than the original plan between Europe and India (operations)... our original estimate was Rs 12,000 crore for the Tata Steel Group. It will now be around Rs 8,000 crore.
TV Narendran Tata Steel Managing Director And Chief Executive Officer

Of the Rs 12,000 crore, the steel major had initially planned to spend around Rs 8,000 crore on India operations.

“Both India and Europe will take a cut,” Narendran told reporters after the launch of the company’s steel retail store—steeljunction.

He said the capex for India will largely be deployed on its Kalinganagar plant in Odisha.

Also read: Q1 Results: Tata Steel Tumbles To Three-Month Low After Earnings Miss As Brokerages Slash Targets

“We have a lot of subsidiaries in Europe and many of them were created over a period of time. At one point of time, we had 200-300 legal entities and subsidiaries of Tata Steel Europe. We have reduced them significantly and are paring another 100-120 this year... In India, it is all about bringing operating subsidiaries together,” Narendran said.

“We do believe that things should improve in the second half of the year,” Narendran said.

The top Tata Steel official said in order to insulate the steel industry from its cyclical nature, the company is focusing on strengthening the branded consumer business and downstream product portfolio.

“Today the business-to-customer business is about 15 percent of our revenue. We have set a target that the B2C, services and solutions business should contribute 30 percent in the next five years,” he said.

On the South-East Asia business, he said the company has signed a memorandum of understanding with the Synergy Group, which is ‘interested in our Thailand assets’. “We should come to a conclusion in the next two-three months.”

Following the termination of the definitive agreement with the HBIS Group to divest 70 percent stake in its South-East Asia business, Tata Steel had executed an MoU to sell the stake in Tata Steel Thailand to Synergy Metals and Mining Fund.

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