Natarajan Chandrasekaran, chairman of Tata Steel, has refuted earlier allegations raised by former chairman Cyrus Mistry over the acquisition of British steel maker Corus and the conduct of the board over the decision. Addressing the annual general meeting of Tata Steel, and his first as chairman, Chandrasekaran said the acquisition of Corus was conducted as a part of a global growth strategy and the board was deeply involved in the deliberations.
Mistry, who was ousted as chairman of Tata Sons last year, had accused Ratan Tata and the company of buying Corus in 2007 at a highly inflated price and has alleged the decision to buy Corus for over $12 billion was based on “one man's ego and against the reservations of some board members.”
“One of the long-term strategy of your company was to grow through international acquisitions. Following the successful acquisition of NatSteel in Singapore and Millennium Steel in Thailand, Corus Group provided a natural fit for the international portfolio including the identified synergies,” Chandrasekaran told shareholders on Tuesday.
He further said that the acquisition price of Corus was five pence higher than the next bidder and the value of the company had increased since the initial bid, in line with the commodity price boom and its underlying performance.
“The acquisition was through a transparent auction process managed by the takeover regulator in the UK. In the first financial year after the acquisition, the EBITDA of Tata Steel UK, was GBP 1.03 billion, compared to GBP 687 million in the previous year. This performance justified the reasonableness of the acquisition,” Chandrasekaran said.
The board was deeply involved in all the deliberations on Corus over multiple board meetings and had “approved” the deal on the "basis of a consensus", he added.
Chandrasekaran again blamed the “unprecedented scale” of the global financial crisis in 2008 for the impact on the industry and on the performance of Corus.
Tata Steel undertook restructuring of the European steel business after it incurred huge losses. Earlier this month, it completed the sale of its 42 inch and 84 inch pipe mills in Hartelpool to the Liberty House Group. Earlier, it sold the Specialty Steel business to Liberty. The company is also looking to merge the European operations with Germany's Thyssenkrupp.
Mistry had raised transparency and corporate governance issues at Tata Group companies and the involvement of promoters. Chandrasekaran clarified on the issues raised over the company's communications with the promoters, and said the company upheld highest standards of corporate governance and had robust processes in place.
“As the issue was raised, our audit committee undertook a detailed review and has come to the conclusion that all of company's communications with Tata Sons were fully compliant with all applicable laws,” he said.
Tata Steel swung to a net profit of Rs 921 crore in the first quarter ended June 30, versus a loss of Rs 3,183 crore a year ago, aided by rising steel prices, the European business restructuring and strong growth in the domestic business.
However, Chandrasekaran admitted that challenges remained, particularly the consolidated debt of Rs 83,014 crore and there was a need to "work towards reducing this to a long-term sustainable level". The company also needed to focus on building sustainable European operations, he added.
