Exclusive: Tata Steel clarifies on UK exit reports

Tata Steel on October 14 clarified on the news report regarding talks of exit from the UK Business. In an exclusive interaction with Moneycontrol, Tata Steel's chief financial officer (CFO) Koushik Chatterjee said that the company is still actively engaging with the UK Government regarding the subsidy issue, and any talk of exit is speculative. He added that the isn’t in talks with any potential buyers for the UK business.

“Media reports stating the company’s plan to exit the UK business is completely speculative in nature,” Tata Steel ED and chief financial officer Koushik Chatterjee told Moneycontrol in a telephonic conversation. “The company would first inform the exchanges if there is any material development.”

It is to be noted that Tata Steel UK has asked for £1.5 billion for the transition to green energy. It plans to replace carbon-intensive blast furnaces with electric arc furnaces over the next few years.

India’s Tata Group and Chinese Jingye-owned British Steel own Port Talbot and Scunthorpe steelworks, respectively, both of which produce over 85 percent of the total annual steel produced in the UK. Both the sites need to transition to green energy to meet the UK's commitment to net zero. Port Talbot is the UK’s largest steel plant and employs 4,000 people, while Scunthorpe provides 3,000 jobs.

The UK makes about 70 percent of the 10 million tonnes of steel it consumes.
Tata Steel’s management on the UK business:
In an interview to Moneycontrol on July 26, 2022, Tata Steel managing director TV Narendran said that its UK business was self-sustainable but faced a changing cost structure due to higher gas prices.

The MD acknowledged that the company has sent a proposal to the British government two years ago seeking financial aid, which was less than 2.5 billion pounds.

He added that the UK business was EBITDA-positive and cash-neutral and was able to stand on its own. At the same time, he said the existing business can run only as long as cashflows can support it, which is presently true.European Business Saga:
Tata Steel’s UK business is by far its weakest segment, having reported losses for all years except FY22. In the past, Tata Steel was willing to bite the bullet and shut down its UK operations over pension funding. However, the matter was settled with the government stepping in.

In August 2017, the company struck a deal to restructure its British pension fund, in a move that followed months of negotiations and brought the troubled industry a bit more financial stability.

The Indian conglomerate had reached an agreement with regulators and pension bodies that would allow it to offload the £15bn British Steel Pension scheme.