Tata Steel to get debt relief from Thyssenkrupp deal

MUMBAI:The signing of the long-due joint venture deal between Tata Steel Europe and Germany’s Thyssenkrupp will spell relief for Tata Steel in India, with debt close to Rs 20,000 crore offloaded to the JV from its books, however, the impending Bhushan Power deal still looms large on its financials.

According to definitive agreements signed by the two European steel companies on Saturday, Tata Steel Europe will transfer Euro 2.5 billion of its debt to the JV while thyssenkrupp will transfer ¤4 billion, which includes Euro 400 million of debt and the remaining unfunded pension liabilities.

“The Rs 20,000-crore debt of the JV has no recourse to Tata Steel,” said Koushik Chatterjee, chief financial officer, Tata Steel. This disintegration of debt comes at a time when Tata Steel is undergoing a growth phase and has multiple inorganic expansions lined up apart from its organic expansion at its 3MT plant in Kalinganagar, Odisha.


“A major overhang is past, though a bloated balance sheet remains a concern with the impending Bhushan Power and Steel deal,” said Ritesh Shah, lead analyst for materials at Investec Capital Services.

It has recently acquired Bhushan Steel for Rs 35,200 crore and is one of the final two bidders for Bhushan Power & Steel for which it has reportedly bid Rs 17,000 crore. It is also eyeing the speciality steel business of Usha Martin.

Tata Steel raised Rs 12,800 crore in March through a rights issue that was one of the largest in the country, for the expansion at Kalinganagar plant from 3 MT to 8 MT. More recently, it had announced in its annual report that it would seek shareholders’ approval to raise Rs 12,000 crore through non-convertible debentures. It’s net debt at the end of March, 2018 stood at Rs 69,215 crore. This has increased 1.6 times after it acquired Bhushan Steel for Rs 35,200 crore.