Tata Steel is moving ahead with a plan to sign a deal for the sale of its units in Thailand and is hoping to close the transaction in a month or two. It has also received interest from multiple players for the sale of its Singapore units.
South East Asia Business Insight
Earlier this year, TS Global Holdings Pte, a wholly-owned subsidiary of Tata Steel had formed a joint venture with the Chinese government-owned HBIS group (presently known as the Hesteel). It was formed in 2008 by the merger of Tangshan Iron and Steel Group and Handan Iron and Steel Group of Hebei province, HBIS group is one of the world’s largest steelmakers and a leading player in China’s home appliance, automotive and construction sector with a production capacity of 46 million tons generating an annual revenue close to $40 billion. The revenues for Singapore and Thai companies of Rs.5181 crore and Rs.4361 respectively accounted for about 4 percent and 3 percent of the group’s total revenue. The decrease in profit margin is due to the slowing demand for steel owing to weak construction activity and elevated scrap prices in both Singapore and Thailand in the last few years. The deal was meant to partially divest its equity stake in Tata Steel (Thailand) Public Company and NatSteel Holdings Pte for $327 million, in which HBIS Group will hold the controlling stake of 70 percent and Tata Steel will own the balance 30 percent.
But unfortunately in August Tata Steel had an aborted the agreement with HBIS Group of China for not been able to procure requisite approvals from the Hebei government, one of the key conditions required for the transaction. Both the deals were important for Tata Steel to cut down its debt of over Rs 1 lakh crore, and refocus its energies and capital into the Indian market.
