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tata steel: Consolidation of Tata Steel is likely to be a complex process, say experts

The Tata Group’s decision to consolidate its metals and raw materials businesses into Tata Steel is likely to be a highly complex and time-consuming effort for the group, with the amalgamation plan requiring stakeholder approvals along with regulatory approvals.

The group has started the process to consolidate its seven subsidiaries, including four listed companies Tata Metaliks, Tata Steel Long Products, TRF Ltd and Tinplate Company of India Ltd, into Tata Steel Ltd. The other three companies are Indian Steel & Wire Products Ltd, Tata Steel Mining Ltd and S&T Mining Company Ltd.

“Any merger plan requires approval from shareholders, creditors and exchanges. Other approvals may be required from regulatory authorities,” said Sudip Mahapatra, partner at S&R Associate. “Finally, the National Company Law Tribunal (NCLT) must approve the settlement. Normally, such mergers take six to 12 months to complete.”

Tata Steel said in its registration application that it has taken this step to improve operational efficiencies, including centralized procurement, which would result in procurement synergies and reduction of stores/spare parts through common inventory management.

According to Chandubhai Mehta, managing partner of law firm Dhruve Liladhar & Co, this announcement will likely keep Tata Steel’s compliance department busy for “a very long time.” “This is a very tedious and complex arrangement that requires coordination with, among others, various publicly traded companies, regulators, legal authorities and shareholders to merge all companies into one company,” said Mehta.

The steel behemoth is looking for better use of community facilities and greater efficiency in debt and cash management.

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“The proposed consolidation, as approved by the respective boards of directors, is likely to take time given the multiple regulatory interfaces and necessary approvals/no objections requirements, including those of the designated exchanges and the jurisdiction of the national company court,” said Harish Kumar , partner of law firm Luthra and Luthra Law Office.

This merger is also part of Tata Steel’s ongoing journey to simplify the group holding structure. Since 2019, Tata Steel has reduced 116 associates, eliminating 72 subsidiaries, eliminating 20 associates and joint ventures, and currently 24 companies are in liquidation.

According to Nishith Dhruva, managing partner of law firm MDP & Partners, some mergers have lasted longer in recent times due to the backlog of the NCLT. “Apart from cases like this, tribunals deal with cases related to the Insolvency & Bankruptcy Code (IBC) and also disputes about repression and mismanagement and most banks are overloaded with work,” Dhruva said.

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