Turnaround of a large steel company of Tata Steel's size is a tough job to do in a year's time. But still, N Chandrasekaran's one year at the helm of Tata group - on February 21, he completes one year of his chairmanship - has changed the fate of the steel maker quite dramatically. The company gets rid of the European pangs and quite bullishly postured itself in the bids for Bhushan companies, which is up for sale as part of the insolvency proceedings.
In the third quarter, Tata Steel posted an almost five-fold jump in consolidated net profit to Rs 1,136 crore, thanks to higher production and sales volume in India and the surging steel prices. Revenues shot up 15 per cent to Rs 33,446 crore. The consolidated quarterly Ebidta at Rs 5,801 crore registered a 59 per cent increase year on year (y-o-y) with an Ebidta margin of 17 per cent.
The major worry for the company, the gross debt went down by Rs 1,658 crore to Rs 88,601 crore because of the repayments and a positive impact on the forex front. The debt accumulated largely because of the losses in the European, which acquired for $12 billion in 2007.
Debt is reducing, sales rising and margins increasing. It's a good sign for the steelmaker, say industry experts. In Europe, Thyssenkrupp of Germany is on the verge of finalising the joint venture agreements with Tata Steel Europe. The improving domestic outlook, healthy cash flows and the impending transfer of its European steel business to the JV will help Tata Steel to build a stronger balance sheet and India-focused portfolio.
The latest information is that Tatas is the lead bidder for Bhushan Steel and Bhushan Power and Steel - both the companies came up for court-led insolvency proceedings after they defaulted loans. Tata Steel's surprise bid of Rs 35,000 crore for 5.6 million tonne (MT) Bhushan Steel is Rs 5,300 crore higher to rival JSW Steel's offer. It became the lead bidder for Bhushan Power with the bid of Rs 24,500 crore.
With both the bids, Tata Steel made a financial commitment of around Rs 60,000 crore. It will definitely be a financial burden for the company. However, Chandrasekaran sees it as an opportunity. When the steel market is growing, Tata Steel is the third largest player in the country after JSW Steel and Steel Authority of India (SAIL). With the addition of the capacities of both Bhushan companies, Tata Steel will be able to produce around 20 MT steel annually.
Besides, the steelmaker is adding 5 MT capacity at its Kalinganagar plant in Odisha by investing Rs 23,500 crore. The new capacity will be commissioned by 2021.
Chandrasekaran doesn't want to miss any opportunity and looks to regain the lost glory of Tata Steel, which is one of pioneers in the country's steel business.