Slabs of red hot steel pass through a heat source on the production line at a metallurgical plant in Chelyabinsk, Russia. (Photographer: Andrey Rudakov/Bloomberg)  

Tata Steel To Cut Debt By Rs 3,800 Crore By Selling More Assets

Tata Steel Ltd. is looking at lowering debt by nearly Rs 3,800 crore by selling majority stake in its southeast Asia business.

TS Global Holdings Pte Ltd. inked a pact with HBIS Group Co. Ltd. to divest its entire stake in NatSteel Holdings Pte Ltd. and 68 percent in Tata Steel (Thailand) Public Company Ltd., according to the steelmaker’s exchange filing. The divestment, according to the agreement, will be made to a company in which 70 percent will be held by the Chinese entity—formed by the merger of Tangshan Iron & Steel Group and Handan Iron & Steel Group of Hebei Province—and the remaining by Tata Steel.

Tata Steel will receive $327 million (Rs 2,325 crore) for the 70 percent stake divested, according to the filing. The deal is expected to be completed within three to four months of signing the regulatory approval, the company said.

Also read: Tata Steel Inks Pact To Divest Majority Stake In South East Asia Business

The business was divested to shift the focus back on domestic markets, said TV Narendran, chief executive officer and managing director at Tata Steel. The 30 percent stake, he said, is retained to capture any upside in southeast Asian markets. Narendran also didn’t rule out an initial public offering of the venture in the next three years.

The divested business contributed 7.2 percent to Tata Steel’s consolidated revenues and 2 percent of the consolidated earnings before interest, tax, depreciation and amortisation, the company’s investor presentation showed.

Also read: BQEdge | Will Tata Steel Lose More Ground?

The total enterprise value of the southeast Asian business stands at $685 million (Rs 4,871 crore), of which $120-150 million (Rs 853-1,067 crore) would be debt and $535 million (Rs 3,798.5 crore) will be the equity value. Of the $535 million, Tata Steel would get $327 million, excluding the adjustments on closing level, Narendran said.

The deal is done at 1.5 times its FY18 book value and with this Tata Steel’s debt would stand reduced by Rs 3,800 crore, he replied to BloombergQuint’s query. As of September, Tata Steel’s consolidated gross debt stood at Rs 1,18,680 crore. This would come down to Rs 1,14,880 crore.

Also read: Tata Steel Looks At Acquisitions To Ramp Up India Business