CONSOLIDATION IN TATA STEEL: MAY BE COMPLICATED

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Tata Group's decision to consolidate its metals and raw materials businesses into Tata Steel NSE 0.68% is likely to be a very complex and time-consuming venture for the group, as the merger scheme will require stakeholder approvals in addition to regulatory approvals. The group has initiated the process of consolidating its seven subsidiaries, including four listed companies Tata Metaliks NSE -4.64%, Tata Steel Long Products NSE -12.07%, TRF Ltd and Tinplate Company of India Ltd in Tata Steel Ltd NSE 0.68%. The other three companies are Indian Steel & Wire.
Any merger plan requires shareholder, creditor, and stock exchange approvals. Further regulatory approvals may be required. Eventually, the National Company Law Tribunal  must approve the program. Typically, such mergers take 6 to 12 months to complete.Tata Steel said in its regulatory filing that it took this step to improve operational efficiencies, including centralized sourcing that would result in sourcing synergies and a reduction in stock/spare parts through shared inventory management.Tata Steel is likely to remain busy for a very long time due to this announcement.
This is a very lengthy and complex plan that requires coordination with multiple public companies, regulators, legal authorities and shareholders, among others, to consolidate all companies into one. The steel giant is aiming for better use of shared facilities and greater efficiency in debt and cash management. The proposed consolidation, as approved by their respective boards, is likely to take time given multiple regulatory interfaces and required approvals/no objections, including designated stock exchanges and competent national corporate law courts.
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