Tata Steel Declares 25% Capital Expenditure Cut and Major Restructuring of Subsidiaries

SEATTLE (Scrap Monster):  As part of its efforts to reduce costs, Tata Steel has decided to cut its annual capital expenditure by as much as 25%. In addition, it will restructure and reorganize its subsidiaries in Europe and India.

According to top company official, several headwinds including ongoing slowdown in automotive industry has forced the company to cut its annual capacity expenditure for the current fiscal from INR 12,000 crore proposed earlier to INR 8,000 crore. This translates to a reduction of nearly one-fourth. Out of the total capex, nearly 75% will be for Indian operations. The allocated capex for Indian operations will be mainly spent at Tata Steel’s Kalinganagar steel plant in the state of Odisha.

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In an attempt to safeguard the company from the dynamics of a business slowdown, Tata Steel has also announced plans to double the share of the business to consumer segment from existing 15% in total revenues to 30% over the next five-year period.

As part of reorganization efforts, the company will reduce the number of subsidiaries in Europe by at least 100 to 120 in 2019. The operating companies in India will be grouped into four key areas-long products, downstream, infrastructure and utilities and mining assets. For instance, Tata Sponge will now head the company’s long products business and hence is being renamed as Tata Steel Long Products. The restructuring of company’s India operations could unlock much value, noted T.V. Narendran, CEO, Tata Steel.