“Tata Group will merge seven of its metal companies into Tata Steel to drive efficiencies and reduce costs. The amalgamation will be through a share swap,” Tata Steel said.
The board of Tata Steel approved the amalgamation of subsidiaries — Tata Steel Long Products, Tata Metaliks, The Tinplate Company of India, TRF Limited, Indian Steel & Wire Products, Tata Steel Mining and S&T Mining into itself.
Meanwhile, the company has withdrawn from the earlier merger scheme of Tata Metaliks and Tata Steel Long Products (TSPL).
Explaining the rationale behind the merger scheme, Tata Steel in a statement said the resources of the merged entities can be pooled to unlock the opportunity for creating shareholder value.
“Besides citing other synergies, it also said the mergers will result in utilisation of each other’s facilities in a more efficient manner. Marketing and distribution network of both entities can be collaborated,” it said.
The salt-to-software conglomerate under N. Chandrasekaran has been consolidating businesses that share common synergies. Earlier this year, the group had announced the merger of Tata Consumer and Tata Coffee.
Tata Group is said to be considering consolidation of airline companies — Air Asia India and Vistara – under the Air India brand by 2024.
Share swap ratios under the merger scheme would be 17:10 for TRF (17 shares of Tata Steel for every 10 shares of TRF), 67:10 for TSPL (67 shares of Tata Steel for every 10 shares of TSPL), 33:10 for Tinplate (33 shares of Tata Steel for every 10 shares of Tinplate), 79:10 for Tata Metaliks (79 shares of Tata Steel for every 10 shares of Tata Metaliks).
The subsidiaries are all majority owned by Tata Steel and include Tata Steel Long Products Ltd (74.91% equity holding), The Tinplate Company of India Limited (74.96% equity holding), Tata Metaliks Limited (60.03% equity holding), The Indian Steel & Wire Products Limited (95.01% equity holding), Tata Steel Mining Limited and S&T Mining Company Limited (both wholly-owned subsidiaries).
The Board also approved the amalgamation of TRF Limited (34.11% equity holding) into Tata Steel.
“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. 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 statement said.
The amalgamations will also drive synergies through raw material security, centralised procurement, optimisation of inventories, reduced logistics costs and better facility utilisation.
“On completion, there will be further opportunities towards reduction of overhead and corporate costs. Each of the proposed amalgamations will be value-accretive for shareholders,” it said.
“The boards of all the amalgamating companies have also considered the proposals following due process and have unanimously approved the amalgamations,” according to the statement.
The merger 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).
“Each scheme of amalgamation will now move into a defined regulatory approval process, which includes approval by stock exchanges and the NCLT,” the statement added.