Tata Steel getting rid of its Europe assets : A deeper look on what transpires

Tata Steel is buzzing lately with its strategic decision to offload its assets in UK markets. In what can be termed as a decisive move the current fast track partial sale of its UK business to Greybull Capital augurs well for the company as it was struggling to be profitable and no free cash flows were being generated from its European operations.

Tata Steel, the second largest steel producer in Europe and one of the most geographically diversified steel producers operating in over 26 countries had acquired Corus Plc for a sum of $ 12.9 billion in the year 2007. In 2007 Global economic cycle was in upturn and the commodity prices were rallying up and the acquisition looked a genius one assuming rising steel prices for a decent amount of years going forward.

Greybull capital LLP, a family office that makes long term investments in private companies spanning energy, technology, retail, industrial and manifacturing sectors in Eurpore and Americas, is now to raise 400 million pounds from various shareholders and banks to fund working capital and furture investments.

Whether Tata Steel will gain and how much the company will gain will depend upon the amount of loan that can be reduced by the current sale of asset in UK. The consolidated debt for Tata Steel is around Rs. 71,000 crore (rounded off). The debt related to the long products division which is now being sold to Graybull capital is approximately to the tune of Rs. 12000 crore. Most important signal that Tata Steel management has given to markets is that of its willingness and urgency in getting rid of its assets in Europe. This will help Tata Steel bleed less when it comes to Europe operations and when the company exits completely, the impact could be sizable.
 
Tata steel is trading down on Tuesday with some profit booking in the stock. The stock has risen almost 27 percent on YTD basis outperform BSE Sensex and BSE Metal Index