Tats Steel Ltd. made a big announcement on Friday. It is going to merge seven of its subsidiaries including four listed and three unlisted companies with itself. The merger will consolidate its operations and save costs in the long run.
10 Highlights Of Tata Steel’s Merger
- Tata Steel Long Products Ltd (TSL), Tinplate Co. of India Ltd, Tata Metaliks Ltd, TRF Ltd, The Indian Steel & Wire Products Ltd, Tata Steel Mining Ltd, and S&T Mining Co. Ltd. are going to merge with Tata Steel Ltd.
- The announcement made Tata Steel jump up to 4.1% on the stock exchanges but was left only with gains of 0.55% as the benchmark Sensex index plunged over 1.73%.
- Tata Steel will swap 79 shares with every 10 shares of Tata Metaliks and 33 shares with every 10 shares of Tinplate. The share swap rate of 2% premium and 1% premium, respectively, is considered beneficial for the shareholders of the subsidiary companies.
- It will swap 67 shares for every 10 shares of Tata Steel Long Products at a 7.8% discount and 17 shares for every 10 shares of TRF at a 53% discount). Here the swap rate is in favor of Tata Steel.
- Shareholders of Indian Steel & Wire Products Ltd. will get ₹426 per share. Tata Steel Mining Ltd and S&T Mining Co. Ltd are wholly owned units of Tata Steel.
- Tata Steel said that the amalgamation will drive synergy benefits for the company with operational integration and better facility utilization. Resources of the merged entities will be pooled and the marketing and distribution network will collaborate.
- The amalgamation will improve raw material security and rationalize the logistics cost. It will also reduce the royalty on iron ore paid by the subsidiaries.
- Jatin Damania, vice-president, fundamental research, Kotak Securities Ltd, anticipated annual savings of ₹750 crore-800 crore. The equity dilution will increase to 2.2% and per-share earnings will be 1.5-2%.
- Analysts at another domestic broking called the merger the right step in driving synergy across the whole steel value chain of Tata Steel.
- Analysts further said Tata Steel would have the advantage of net cash balances and strong cash flow generation of subsidiaries.