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Tata Metaliks has signed an agreement with Fomento Resources Group who has presence in iron ore mining in Goa, Karnataka and Maharashtra, for divestment of the Redi facilities as a going concern for a consideration of Rs 180 crore (book value around Rs 114 crore) plus working capital at closing. The above agreement is subject to the shareholders and regulatory approval.
This agreement is a part of the strategic review of the company due to which the board has decided to divest its 300,000 tonne pig iron making facility at Redi in Maharashtra with three mini-blast furnaces serving mainly the Western and Southern India markets.
The Redi facilities were acquired in 2006 by Tata Metaliks through an auction. Following the acquisition the company undertook several initiatives including refurbishing the Blast Furnaces, create better infrastructure and extensive training of people. However, the structural competitiveness of the facilities was severely affected with the increase in global raw material prices in the last 5 years. While the company made earnest attempt to secure raw material at the Dongarpal mines in Maharashtra, it is estimated that it would take significant time to commercially mine the iron ore including its quality and suitability for use at Redi.
Further, the proceeds from the divestment would be utilized for reshaping the balance sheet and future strategic investments. The company would continue to focus its efforts on consolidating its Kharagpur operations and invest in the facilities to make the operations more competitive. The company will also continue to look at other long term value creating options.
Tata Metaliks was set up as a joint venture between Tata Steel (TSL) and WBIDC (West Bengal Industrial Development Corporation) to manufacture pig iron at its plant at Kharagpur, West Bengal. It has two plants at present, one located at Kharagpur (West Bengal) and the other at Redi (Maharashtra), which was acquired in January 2006. TML belongs to the Tata group of companies with Tata Steel indirectly owning 50.04% of equity capital of company at present.
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