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Tata Steel Says It's in Talks to Sell Its Ferrochrome Unit in South Africa
Tata Steel Ltd. is looking for a buyer for its South African unit after agreeing to sell its Teesside operations in the U.K., as India’s largest steelmaker seeks to reduce debt.
“There have been some talks,” Tata Steel Managing Director H. M. Nerurkar said today in New Delhi, without giving details. “Some people are interested.”
Tata Steel, weighed down by loans raised to mainly fund its $12.9 billion purchase of U.K.-based Corus in 2007, aims to cut and refinance debt that totaled 457.1 billion rupees ($9.8 billion) as of June 30. The company is in talks with banks for 3.5 billion pounds ($5.4 billion) in loans for its U.K. unit, four people with direct knowledge of the matter said Sept. 3.
“In the short term selling the South African unit may be beneficial because it will raise cash for Tata Steel,” said Giriraj Daga, an analyst with a “buy” rating on the stock at Khandwala Securities Ltd. in Mumbai. “It can be negative in the long term as the unit may have given the company access to other opportunities in the country.”
Shares of Tata Steel rose 0.1 percent to 576.40 rupees at the 3:30 p.m. close of trading today in Mumbai. The key Sensitive Index gained 0.5 percent.
Teesside Sale
Sahaviriya Steel Industries Pcl, Thailand’s biggest maker of hot-rolled steel, plans to buy Corus’ Teesside Cast Products unit for about $500 million, Tata Steel said Aug. 27. Corus said in February it lost about 150 million pounds running the Teesside plant in northeast England after four buyers, accounting for about 80 percent of Teesside’s business, reneged last year on a 10-year contract.
Indian steel companies are trying to integrate operations and sell non-core businesses, which is a “positive move,” said Rahul Jain, an analyst with a “hold” rating on Tata Steel at RBS Equities (India) Ltd. in Mumbai.
Tata Steel KZN Pte, set up in Richards Bay, South Africa in 2006, turned to a profit of 430 million rupees in the year ended March 31 from a 1.8 billion rupee loss the previous year, according to the company website. Sales gained to 5.22 billion rupees, or about 0.5 percent of Tata Steel’s global revenue, from 2.31 billion rupees.
The unit produces high carbon ferrochrome and charge chrome. The plant, located on the KwaZulu-Natal coast, was commissioned in 2008 with an annual production capacity of 151,000 metric tons.
To contact the reporters on this story: Abhishek Shanker in Mumbai at ashanker1@bloomberg.net; George Smith Alexander in Mumbai galexander11@bloomberg.net
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