Hot metal: Davids fight over Goliath in battle for steel

Folklore has it that David beat Goliath. We have an interesting scenario now where two Davids are fighting over one Goliath. CSN’s (Companhia Siderúrgica Nacional) bid for Corus comes just 17 days before the EGM of Corus where the fate of Tatas’ bid was to be finalised.

CSN has upped the ante with a 4.4% increase in the offer for Corus, in comparison to what Tatas were offering.

It is an interesting sight to see two smaller companies fighting for a larger company. But that is the way it is in the steel industry. Companies with captive raw material sources are the kings and call the shots.

Earlier this year, we saw Mittal Steel make a successful bid for Arcelor where the former had better raw material sources than the latter. Now, we are seeing a similar scenario, where two smaller companies are making a bid for a much larger company.

Tata Steel, the smallest of the three has a production of just 4.5 million tonnes (mt). Its turnover last year was Rs 20,244 crore. CSN is only marginally bigger with a production of 5.2mt of steel in ’05.

Its turnover was slightly lower than Tata Steel at Rs 18,266 crore. Corus is a much larger entity with a production of close to 18.2mt of steel. It had a turnover of over Rs 87,204 crore in ’05.

However, in the end it is the bottomline that counts. The smaller companies steal the march from Corus in this respect. In comparison to Corus’ income of Rs 3,879 crore, Tata steel made Rs 6,307 crore in FY06. CSN managed an income of Rs 3,649 crore in ’05.

ET Intelligence Group