Tata Metaliks, part of Tata Steel, has entered into an agreement with Fomento Resources group for divestment of Redi facilities, as part of a strategic review of its portfolio.
The Redi plant, with a capacity of 300,000 tonnes of pig iron, happened to be Tata Metaliks’ largest facility. In 2010-11, Tata Metaliks’ total production stood at 477,115 tonnes. The agreement, which was signed on Wednesday, entailed selling the facilities for a consideration of Rs 180 crore, apart from working capital.
“The proceeds from the divestment would be utilized for reshaping the balance sheet and future strategic investment,” the company said in a statement. On a consolidated basis, Tata Metaliks ended FY 2010-11 with a marginal profit of Rs 0.57 crore.
The agreement is subject to shareholders and regulatory approval. Tata Metaliks annual general meeting is slated for tomorrow.
The Redi plant, which was acquired in 2006 through an auction had been facing problems on the raw material front. The structural competitiveness of the facilities was severely affected with the increase in global raw material prices in the last five years.
“While the company made earnest attempt to secure raw material at Dongarpal mines in Mahasrashtra, it is estimated that it would take significant time to commercially mine the iron ore including its quality and suitability for use at Redi,” the company said.
Apart from Redi, the company has operations at Kharagpur in West Bengal. Also, Tata Metaliks is looking to set up a steel plant in Karnataka subject to iron ore allocation.
