China’s second largest steelmaker, Hebei Iron and Steel Group (HBIS), is reportedly to buy controlling stakes in NatSteel Holdings and Tata Steel (Thailand) from Indian Tata Steel for $327 million, as it plans to expand capacity in Southeast Asia, including Vietnam, Nikkei reported.
Under the Indian deal, HBIS will hold a 70 percent stake in a newly created entity and a Tata Steel subsidiary will own the rest. In the process, Tata Steel will divest its entire 100 percent equity stake in NatSteel and 67.9 percent of Tata Steel Thailand.
Tata Steel Chief Financial Officer Koushik Chatterjee told Nikkei the enterprise value of the new entity will be around $685 million.
The deal will give HBIS access to Singapore, Thailand and Vietnam. NatSteel has a production capacity of 2 million tonnes per year and claims to be the largest single downstream rebar fabrication operation in the world. Tata Steel Thailand has an annual capacity of 1.7 million tonnes.
HBIS has significant ambition for Southeast Asia and wanted to leverage Tata Steel’s footprint in the region, said Tata Steel CEO and Managing director T.V Narendran in an interview with Nikkei.
The deal marks the reversal of decades of expansion by the Indian company as it now focuses on the growing domestic market. “In Europe and Southeast Asia, the entities can focus on its own and parent can focus capital on growing India business,” Narendran was quoted as saying.
In the quarter ended in September, the revenues of Tata Steel’s Southeast Asia operations rose by 22 percent year-on-year to $416.24 million, primarily due to improved deliveries at NatSteel and better realisations at both NatSteel and Tata Steel Thailand. Operating income for the Southeast Asia business was steady at $15.72 million in the quarter.
