Values and aspirations come together for a bright future

Fifty seven years after independence, India achieved what could well be viewed as a visible sign of independent India’s economic freedom. On August 16, a day after Indian Independence Day, The Tata Iron and Steel Company Limited announced that it had signed Definite Agreements with NatSteel Limited, Singapore to invest in all of NatSteel’s steel business.

NatSteel will spin off its entire steel business into a wholly owned subsidiary, NatSteel Asia Pte Ltd, subsequent to which Tata Steel will invest the equivalent of 100% of the equity of NatSteel Asia. The enterprise value of the investment is Singapore $486.4 million, approximately Rs 13,130 million.

Explaning this action an exuberant Managing Director, Mr B Muthuraman said, “the investment in the steel business of NatSteel is an important step in Tata Steel’s plans to build a global business. NatSteel’s business provides Tata Steel access to key Asian steel markets including China. I believe that the investment will prove to be a good strategic fit and create value for Tata Steel’s shareholders. I welcome members of NatSteel’s management team and all employees to the Tata Steel family.”

Incorporated in the early 1960s as The National Iron and Steel Mills, the focus of its operations was to support Singapore’s nation-building efforts in infrastructural and residential development. In the 1980s the group chose to diversify into related areas to broaden its earnings base. It began then by expanding into steel fabrication and construction-related products and services, which now form the Industrial Division.

NatSteel is the leading industrial group in Asia Pacific with operations and joint ventures in 12 countries. The Group recorded a turnover of S$ 1718 million and profit before tax of S$80 million for its businesses for the year ended December 2003. At close of trading on August 13, 2004, NatSteel’s market capitalisation was S$ 874 million. The Group has two main divisions: steel and industrial, comprising construction products, chemicals and engineering.

The Steel Division has a regional presence in Singapore, China, Malaysia, Thailand, the Philippines, Vietnam and Australia through joint ventures and investments in mills in the region. Singapore serves as the hub providing R&D, engineering, logistics, sourcing and other support services. This allows each mill to enjoy economies of scale and synergies in these functions and pass on the benefits to its customers.

The acquisition is a significant step in Tata Steel’s globalisation initiative and will act as a beachhead investment for Tata Steel in the high growth geographies of China and South East Asia. Tata Steel will, through this investment, increase its manufacturing footprint to seven new countries in Asia.