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Tuesday, February 18th, 2020

No regrets on buying Corus: Tata Steel Group CFO

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by March 30, 2016 General

MUMBAI: Tata Steel holds no regrets of buying British steelmaker Corus at high price after a bidding war with Brazilian steelmaker CSN a decade back. Today, the company put its entire UK business on block hurt by poor demand and high cost of operations.

Group CFO Koushik Chatterjee defended the decision by saying the acquisition was a logical de-risking strategy of spreading presence across geographies, before unexpected recession struck globally. Excerpts:

What are your expectations from the UK government?
Had transparent conversation and engagement with UK government over past several months. It was always the case as one of the largest many companies and we kept the UK government informed about the realities of situation. In the last couple of months we engaged on an intense basis and in the last 8-10 weeks we went to London every week to engage with them. It was essentially to look at working together and finding out what is the most achievable objective under the current circumstances. It is an ongoing process and we will look to work with government, unions and any other stake holders as we move forward in our journey.

When do you expect a buyer?

When we started the long product divestment process there were similar issues in everyone’s minds. We found 3 potential buyers and we are progressing with one. Our hope is that we will sort out the issues that are outstanding but we will have to go through that process. We come with an open mind and if divestment is a process then we will do that.

What about job cuts?

There are certain redundancies that we had announced but nothing new.

Do you see operational change?

Our endeavour will be to ensure that we operate the way we have been except for the fact that there has been in recent months and quarters significant cash drain that is required and which is why a time bound manner is an important element in the process. But preserving asset and doing it in an orderly manner is our endeavour

The Netherlands is in a relatively better position. Why are you leaving it out?

The call taken is not a valuation exercise. Assets are impaired in UK and it is a question of reducing exposure. The Netherlands business is one of the most competitive operations in Western Europe though it has faced headwinds in recent times. We believe that it will go through appropriate restructuring in terms of focusing on of costs and productivity and come back to its profitable levels.

Any regrets of an expensive buy?

It is an unfair question. One has to go back to that time when we were in an environment and the demand conditions. The robustness of demand in the developed were much more stable than emerging markets. The challenges of putting put up capacity in India were significant, which continues. If I look at last 2-3 years in particular after china started slowing down and their overcapacity levels started to look more prominent China started significant amount of exports. The worst affected were Singapore, UK and many others countries with open borders.

It is getting affected by externalities of the business rather than internal factors. Every employee and worker of the company has put their heart and soul trying to offset the adversities. But the avalanche of adversities that hit the business it is facing the perfect storm.

Why was the acquisition made?

As many companies would have looked at logical de-risking by spreading across geographies. Nobody had predicted the global financial crisis. Structural demand in Europe went down by 30%. Then you have a complete repositioning to the sector. There have been investments made by Tata which have worked out in a different manner (referring to JLR). Factors that affect companies and countries are different in different sectors.

What lessons have you learnt?

It is too early say that there are lessons learnt. We are still materially invested in Europe. Every investment provides an opportunity to make it better than the previous one. If you live in a volatile world every lesson does not have a repeatable impact because they are intrinsic to that situation.

How do you quantify the ‘time-bound’ factor?

Given the funding needs it is important to make it time bound. We have to on-board the advisors, we need to work with the government to develop the timeline.

What if the sale does not happen in time bound manner?

We will see when we come to it.

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