Tata Steel gains 4%, shares of subsidiaries drop 9% after amalgamation announcement

23 Sept 2022 , 12:08 PM

Following the company's board's approval of the merger of seven group firms with itself on Friday, shares of Tata Steel rose 4% to Rs107.90 on the BSE. These businesses include Indian Steel and Wire Products, Tata Metaliks, Tinplate Company of India, Tata Steel Long Products, Tata Steel Mining, and S&T Mining. The appropriate authorities must approve each merging.

Tata Steel would receive 67 shares for every 10 shares of Tata Steel Long Products under the revised merger plan that has been suggested. For every 10 shares of Tata Metaliks, Tata Steel will grant 79 shares. Additionally, the share swap ratios for Tinplate and TRF are 33:10 and 17:10, respectively.

Then, Tata Steel Long Products was down 9% to Rs680, followed by Tinplate Company of India down 6% to Rs317, TRF down 5% to Rs335.65, and Tata Metaliks down 3% to Rs 680. (down 2 % at Rs777). The S&P BSE Sensex, in contrast, was down 0.44 % at 58,861 at 9:28 am.

Through the consolidation of the group firms' businesses, the company will experience targeted growth, operational efficiency, and commercial synergies. Additionally, the ensuing corporate holding structure will increase the amalgamated entity's business ecosystem's adaptability, according to Tata Steel's exchange filing. These businesses think that by combining their resources, the newly formed firm will be able to maximize the potential for shareholder value creation.

The suggested merger plan was developed to increase the business synergies between the organizations taking part in the plan. The suggested plan will improve operational integration, improved facility use, logistics cost rationalization, operationalized efficiency, structure simplification, management efficiency, etc.

Through the merger, facilities will be used more effectively by both parties. Collaboration between entities' marketing and distribution networks is possible. Tata Steel Long Products and Tata Metaliks' previous merger plan has also been abandoned.

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