Kolkata: Tata Steel Ltd subsidiary Tinplate Co. of India Ltd, which was to be merged with its parent five years ago, has said in a communication to its shareholders that it will stop working as a downstream processing unit for the steel maker.
Till now, Tinplate used to convert hot-rolled (HR) coils into electrolytic tinplate for Tata Steel, but the company now says it will buy HR coils from the steel maker worth up to Rs1,800 crore a year, and pursue expansion on its own, ending an arrangement of almost two decades.
Besides processing HR coils for its parent, industry leader Tinplate also helped Tata Steel sell electrolytic tinplate—a high-grade packaging material for food products.
“The company is now in a position to independently undertake tinplate business on its own,” Tinplate said in its notice to shareholders.
Because Tata Steel currently owns 75% in Tinplate, the company is obtaining approval from its shareholders for the proposed related party transaction of buying HR coils from its parent under a long-term contract.
Tinplate, which clocked Rs850 crore in revenue in fiscal 2017, has said that it will get into a long-term agreement with Tata Steel for procurement of HR coils at competitive prices.
It may buy the raw material from other producers as well. The move will not only help Tinplate expand its business, it will also lead to the company building its “independent profile and identity”.
“The proposed introduction of the Goods and Services Tax regime is expected to provide a smooth transition by way of a simpler tax structure,” Tinplate said in its notice.
Tinplate and Tata Steel declined to comment on this story.
Back in 2012, then managing director of Tata Steel, Hemant Nerurkar, had said that the steel maker was looking to merge Tinplate with itself.
Tinplate was a separate company because of “historical reasons”, and, technically speaking, was only a division of Tata Steel, Nerurkar had said.
Though he did not immediately commit to a time frame for the merger, Tata Steel, as a precursor to the consolidation, made a public offer to buy an additional 14% stake in Tinplate, paying Rs88 crore. The open offer resulted in Tata Steel’s stake going up from 61% to 75%.
In 2013, Tata Steel and Tinplate’s management said the two companies were not going to be merged.
It is not immediately clear how Tinplate, which reported a net profit of Rs27.86 crore for fiscal 2017, is going to manage its working capital needs as its seeks to turn itself into an independent producer of packaging material from a captive processing unit for Tata Steel.