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Need more support from UK govt to secure operations in long term, says Tata Steel CEO Narendran

TV Narendran's call for help is important as the UK unit is under focus with the company in talks with SSAB to sell the Dutch arm of Tata Steel Europe. Can the UK unit survive by its own?

November 17, 2020 / 01:30 PM IST
 
 
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Tata Steel has asked the UK government for more "substantive and permanent" options that will secure the company's operations in the country in the long term.

"The support we are looking for is a little more substantive and something more permanent, that will help us bring down cost of production and add value to the product mix. Or, help us over a period of time in making a transition to a greener facility," Tata Steel CEO and Managing Director TV Narendran said in response to a Moneycontrol query, during a media briefing on November 17.

Narendran added that while the company has already got financial assistance from the UK government, this was more immediate in nature to help the company's present cash flow. The support is something that the government is giving to all companies, to tide over the impact of COVID-19.

The top executive however declined to quantify the support. He added: "That is not enough to make the business going in the long term."

The UK unit of Tata Steel's European operations is under focus as the company has now engaged with Sweden's SSAB to sell the Dutch arm. On November 13, Tata Steel made official its talks with SSAB and said that it may take about six months to complete the process.

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Both the UK and Dutch operations till now came under Tata Steel Europe. But now the two will be separated and the bigger and more profitable Dutch unit will be taken over by SSAB.

The Netherlands operations contribute about 70 percent of Tata Steel Europe business, and there have been concerns about the UK unit - which has struggled most historically - managing by itself.

The European operations come from Tata Steel's acquisition of Corus in 2006, a $13 billion-deal that the company has struggled to manage since then.

At the same time, the potential deal with SSAB will help the company partly or completely clear the debt of Euros 1.7 billion that Tata Steel Europe has. While the company has till now been mum on the deal value, industry observers put it at multi-billion dollars.

But will a standalone UK operations put a drain on its Indian parent?

Narendran doesn't think so.

"Last six months, Tata Steel Europe has been cash positive and neutral and hasn't got support from India. The UK operations are within sight of meeting the target of being self-sustainable," he said.

"The mandate," Narendran added, "is to run without India's support."

It will give confidence that the European market has recovered well, with demand for steel picking up, especially from the auto industry. Though the company's consolidated net profit in the second quarter fell by over a half year-on-year, it swung to profitability after three quarters of losses.

While the company will bank on improved performance in the coming quarters- despite a re-surge in COVID-19 cases in Europe - it needs a more permanent solution to high production costs in the UK, where power rates are higher than in other countries.
Moneycontrol News
first published: Nov 17, 2020 01:27 pm

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