Tata Steel eyes aggressive India growth as UK fog clears

Bloomberg

Tata Steel Ltd. plans to grow “very aggressively” in India, riding on Prime Minister Narendra Modi’s promise of record infrastructure spending, after moving closer to a possible joint venture in Europe that will help stem losses there.
“We will be growing very significantly or growing very aggressively as far as India is concerned,” Group Executive Director for Finance Koushik Chatterjee said in an interview in Mumbai. Tata Steel plans to be a key part of the government’s vision of tripling steel capacity to 300 million metric tons by 2030, he said.
India’s oldest steelmaker will have more bandwidth to focus on its home market after resolving UK pension liabilities that have been seen as the chief roadblock to a European joint venture with Thyssenkrupp AG. The company will either expand its current plants or acquire debt-laden steel mills likely to be offloaded by Indian lenders eager to pare soured loans, Chatterjee said.
The company has sought environmental clearances to expand the capacity at its Jamshedpur plant to 11 million tons and its Kalinganagar to 6 million tons. However, the company would be cautious in growing faster than the market, Chatterjee said.
“We have to be balanced in the financial risk of such growth,” he said. “We don’t want to become this big when the market is still small.”
Shares of Tata Steel surged by the most in more than six months in Mumbai after the company and the British Steel Pension Scheme trustees agreed on key terms of a regulated apportionment arrangement. If the deal is approved, the company will pay a settlement of 550 million pounds ($713 million) to the pension scheme and will sponsor a new closed pension plan, it said.

MORE COMFORTABLE
The pension pact will make people “more comfortable when they see the risks on the other side are much lower,” Chatterjee said. “We are in deep discussions internally and we are also talking to counterparts like Thyssen to see what is the best option.”
The Indian steelmaker has been in talks with Thyssenkrupp and others for a joint venture in Europe since last year and Thyssenkrupp Chief Executive Officer Heinrich Hiesinger had identified the pension liabilities as a major stumbling block to a deal. The potential venture has also faced opposition from Germany’s largest labor union and politicians fearing job cuts.
A deal would involve combining Tata’s plants in the Netherlands and UK with Thyssenkrupp’s German plants to create the region’s no. 2 producer and a rival to industry leader ArcelorMitttal. The company’s Port Talbot operations in Wales will also be a part of the joint venture, Chatterjee said. He declined to comment on a timeline for a possible tie-up.
“The stakeholders who have a stake will always have an anxiety in the absence of a full and final situation,” Chatterjee said. “We need to do what is in the best interests of the company. We will also ensure that we take all stakeholders together as we have done in the past.”