Tata Metaliks rejigs business to achieve synergy

Tata Metaliks is in the process of restructuring its pipe business in order to derive cost benefit from backward integration in a time-bound manner.

As part of this initiative, the company acquired its Japanese partners Kubota Corp and Metal One in water pipes making venture Tata MetaliksKubota Pipes (TMKPL).

Following this, TMKPL would be a wholly owned subsidiary of TML and could eventually be merged into it. TML board may discuss other options too, like making TMKPL a conversion agent of TML and realise tax benefits.

The move is expected to result in better cost management and optimisation of resources. It makes sense for Tata Steel to drive closer integration of subsidiaries in the same industry segment. It can help Tata Steel plan and strategise products in different markets in a better way.

Some analysts feel that while these companies are profitable on a standalone basis, it can also help optimise resources for better cost management and manpower utilisation.

For example, sponge iron from TSIL can be made available to Tata Metaliks. Also, they can now decide on a lower transfer price for such transactions,” the analyst said.

Tata Steel supplies hot rolled coils to TCIL to produce tin mill plates for cans used in food packaging and beverage cans.