Tata Steel to Cut Capex for FY20, Simplify Corporate Structure

Tata Steel will be recalibrating its capital expenditure for the current financial year from INR 12,000 crore to INR 8,000 crore, the company's CEO & Managing Director, T.V. Narendran, told mediapersons on the sidelines of the launch of its steel retail store 'steeljunction' in a new avatar, in Kolkata on Saturday.

He further said Tata Steel was in the process of simplifying its corporate structure and that the company was looking at creating a downstream company for many of its downstream assets.

Keeping in mind the slowdown and reduced cash flows, Narendran said, "We said at the analysts call a few days call that we will certainly recalibrate some of the capex. And that it will be lower than what it had originally been planned between Europe and India.

Tata Steel's original plan was around INR 12,000 crore for the Tata Steel Group but it will now be reduced to INR 8,000 crore for the current fiscal.

Narendran said that in the INR 12,000 crore capex originally planned, roughly INR 8,000 crore was for India and INR 4,000 crore in Europe. "Both sides will take a cut, I do not want to be very specific. It would be fair to say the cut would be straight, at least equal on both sides," he said.

The India capex is mostly focused on Kalinganagar, he said, adding that, the company we continue with the Kalinganagar project but said, "We have a way to prioritise. So we will be focusing on the cold rolling mill which adds value without adding volume. Basically, value adding to the steel that you already have. We will give priority to the pellet plant because that gives us some cost benefit. So, basically, the multiple capital items we spend capital on are prioritised," he added.

Corporate restructure

Coming to the simplification of the corporate structure, he said there were a lot of subsidiaries in Europe and many of them created over a period of time. At one point in time, there were almost 200-300 legal entities and subsidiaries of Tata Steel Europe, which have been reduced significantly. "We are reducing another 100-120 this year. That will still leave us with a lot but still that is one level of simplifying," he said.

In India, he said, it is more about bringing the operating subsidiaries together, referring to the acquisition of Usha Martin steel business by Tata Sponge and the name change of the latter to Tata Steel Long Products. "That becomes a vehicle for long products growth and any further consolidation that we do in long products," he said.

"Similarly, we are looking at creating a downstream company for many of our downstream assets. May be an infrastructure and utilities company for our infrastructure and utility assets. May be, a mining company for our mining assets as well as to explore opportunities in commercial mining. So, instead of having the 30-odd subsidiaries that we had, we will have fewer subsidiaries, we will be more consolidated, derive the synergy benefits," he stressed.

Debt reduction

Talking about the debt reduction plan, post the failed ThyssenKrupp deal, he said, "Even though the Thyssenkrup deal did not happen due to regulatory issues, we were focused on two things. One, was running Europe as a cash positive business. So even if EBIDTA got compressed, those were the levers we were working on. And second, from Tata Steel's point of view, we had given a guidance that we will reduce debt by a billion dollar. The number is becoming more and more difficult by the day but we have not given up on it yet," Narendran said.