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Trophy Buy, Distress Sale

1. One Pound Sterling. Or just about US $1.41. Which is less than Rs 100.
That's the price at which Tata Steel sold off its Scunthorpe steel plant, its mills in Teesside and Northern France, an engineering workshop in Workington, a design consultancy in York, and a bulk terminal and associated distribution facilities to Greybull Capital. These assets represented its loss-making long products division, employing 4,400 people. It represented roughly one-fourth of the Tata Steel UK business - the erstwhile Corus Plc - which the group had picked up after a bruising bidding war in 2007 for $12 billion (Rs 53,000 crore then).
Apart from the token amount, Greybull Capital - a private investment firm - will also take over 'relevant liabilities', mostly working capital-related. Analysts say there is no transfer of debt, implying that parent Tata Steel's debt continues to be high. Tata Steel will also have to bear pension liabilities of the divsion worth »90 million ($127 million) for 2016-18. Greybull plans a package of »400 million ($564 million) from banks and its shareholders for working capital and future investments.
Meanwhile, over the past eight years, the Tatas have already written off around »2 billion ($2.8 billion at today's exchange rate) goodwill impairment from the books, apart from investing a fresh »1.7 billion ($2.4 billion) to modernise the plants of its British buy. The Tatas tried everything to make their trophy acquisition work - idling blast furnaces, cutting jobs and selling assets (see A Rollercoaster Ride).
In the end, nothing worked, and Chairman Cyrus Mistry finally decided to pull the plug. He didn't have much choice - Tata Steel UK was reportedly losing $1 million (Rs 6.65 crore) a day in 2016, and losses were accumulating faster than the profitable Indian operations could clear them.
The distress sale is a dream turned sour for the group that made India's biggest overseas acquisition - and Britain's biggest inbound FDI - at the peak of the commodities supercycle. The price of hot-rolled coil was $550 per tonne as against $340 today. In 2008, it had even touched $1,000. The Corus acquisition had propelled Tata Steel from the world's 56th largest steel maker to sixth. (At the time of going to press, Tata Group did not provide answers to an emailed questionnaire or access to Tata Steel's CEO and group CFO for this story.)
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