Tata Steel eyes South African firm

In talks with Anglo American to acquire 79% stake in Highveld Steel.

Tata Steel, the country's largest private sector steel company, is in talks with Anglo American of South Africa to acquire its 79 per cent stake in Highveld Steel.

Confirming the development, Tata Steel Managing Director B Muthuraman said, "We are evaluating the process." Muthuraman was talking to the reporters on the sidelines of a Press conference to formally announce the company's joint venture with BlueScope Steel. "This is not the only company we are currently looking at. In fact, there are several other companies on our radar," Muthuraman added. He, however, declined to divulge details on the Highveld deal, including valuation of the foreign company.

If the acquisition of Highveld Steel materialises Tata Steel's production capacity will go up to 6 million tonne from the current level of 5 million tonne. The Tata Steel scrip today lost 2.38 per cent to close at Rs 342.55 on the Bombay Stock Exchange.

Analysts said Tata Steel's move to look at a possible acquisition of Highveld was a part of the company's expansion plan. Tata Steel has been growing fast over the last few years. It acquired NatSteel Asia, a two-million tonne steel firm having facilities across seven countries last year.

Besides, it also signed a few joint ventures and announced organic expansion plan.

Highveld, the largest vanadium producer in the world, manufactures steel, vanadium products, ferro-alloys, carbonaceous products and metal containers and closures. It exports half of its products from the South Africa-based processing plants.

Muthuraman said the joint venture with Australian BlueScope Steel would manufacture and supply flat steel products and provide building solutions. Both the companies will have an equal share in the new company christened Tata BlueScope Steel Ltd.

Chetan Tolia, the former chief of strategy and planning in Tata Steel, was named the managing director of the new venture.

The project envisages an investment of Rs 1,200 crore to set up four manufacturing units in the country and build a sales network across the sub-continent.

A new metallic coating and painting facility will come up in Jamshedpur with a capacity of 1,50,000 tonne annually. The other three facilities "" in Pune, Bhiwadi and Sripedembadur "" will cater to the flat steel building solutions business.

"The joint venture will change the face of Indian construction industry," said Muthuraman. He expects the company's revenue to cross Rs 1,200 crore by 2010 and Rs 2,000 crore when the capacities are fully utilised.

BlueScope is an international flat steel solutions company with manufacturing facilities in Asia Oceania and North America. Along with Tata Steel, the Australian company is introducing a new building concept in India "" making buildings out of steel.

"In the US, steel solutions sector is worth almost $5 billion and the Chinese market has grown to about $1.75 billion within nine years," said BlueScope Managing Director and CEO Kirky Adams. The joint venture will tie up with architects and building erectors to provide complete building solutions. The Pune facility also includes a design centre.

India at present consumes two million tonnes of metal coated steel every year which is expected to grow by 15 per cent over five years. "Buildings made of steel would be cheaper than the concrete ones, more durable and also cooler," said Tolia.