Our focus on cash flows saved the day: Tata Steel’s Chatterjee

Our focus on cash flows saved the day: Tata Steel’s Chatterjee

We are not actively looking at any acquisition right now, though we are always open to growth opportunities that fit our strategy, financial framework and long-term goals.

We are not actively looking at any acquisition right now, though we are always open to growth opportunities that fit our strategy, financial framework and long-term goals.Despite the disruption from Covid-19, Tata Steel’s gross debt is down by Rs 7,649 crore and should fall further by Rs 12,000 crore in the March quarter. Koushik Chatterjee, ED & CFO, spoke to FE’s Shubhra Tandon on restructuring of the company’s business and the road ahead.

Tata Steel is restructuring the India business even as the rationalisation of its European businesses is underway…

Once it’s complete, we would have simplified the India business into four clusters (long products, downstream, mining and utilities & infrastructure) to drive scale, synergies and simplification. The long products cluster is almost done and the other clusters are being re-organised. The merger of Tata Steel BSL with Tata Steel is another strategic step in that direction. This programme would not only reduce the number of legal entities but also improve our functioning, accelerate the digitisation process and help in the financial management of the business.

The company has deleveraged significantly in the first three quarters of FY21…

Our enterprise strategy on debt management is on track. After reducing net debt by Rs 8,285 crore in the first half – which surpassed our annual de-leveraging target of $1 billion – we cut net debt by another Rs 10,325 crore and gross debt by Rs 5,640 crore in the third quarter, thus bringing down net debt by Rs 18,609 crore and gross debt by `7,649 crore over nine months. We intend to reduce gross debt by another Rs 12,000 crore in Q4 of the current fiscal.

Is the exercise of acquiring stressed entities through the NCLT process over, or are you still looking at assets?

We are not actively looking at any acquisition right now, though we are always open to growth opportunities that fit our strategy, financial framework and long-term goals.

What is the plan for the European business given that talks with Sweden’s SSAB have failed?

We are in the process of separating the two businesses in the Netherlands and the UK within Tata Steel. This will make the businesses more agile, drive performance outcomes and help us pursue our strategies better. We also remain focussed on the operating performance, cost take-out and cash flows.

What kind of measures did you put in place to minimise the pandemic’s impact?

We delegated duties of oversight and governance in order to make our response to the crisis nimble and effective. The operating model focused on the employees who had to be physically present at our manufacturing locations. Thanks to our enhanced digital investments over the last couple of years, the employees working from home managed to perform as well as before. As I said, our business decisions had to be pivoted on cash flows and every member of the organisation understood this and contributed to the effort. The cash war room served as an anchor for the cross-functional teams to ideate and prioritise their efforts. The cash war room took a call on issues like the best commercial options for sales, fixed cost reduction, working capital management, efforts on debtors and engagement with suppliers, helping us navigate the toughest phase of the pandemic.

What have been the key learnings from the event?

The pandemic made organisations like us more resilient to the unknown unknowns! At the peak of the pandemic, we had to apply pure instinct to deal with the changing situation, as there were no precedents to fall back on. Given our large balance sheet, we used scenario planning tools extensively to create playbook options for decision-making. This approach was very useful at both tactical and strategic levels.

What kind of change do you foresee in the post pandemic world?

The pandemic has accelerated the digital transition across industries and we are no exception to the trend. Relooking at the business and operating model through the digital lens is perhaps the most important task of all and we are on that journey. We are also very certain about our enterprise strategy of deleveraging the balance sheet. We have demonstrated clear outcomes in the current financial year and will continue to do so with calibrated capital allocation.

What is the macro outlook for 2021?

Globally, commodities have seen a sharp recovery from the lows of April 2020, on the back of a weak US dollar, liquidity triggered demand for commodities, supply constraint in the industry, the strong demand pull from China and the broad-based recovery in demand. We are quite optimistic about the demand for steel in India. The government’s focus on infrastructure-led economic revival and the policy reforms announced in the Union Budget should spur steel demand in the coming years.

Credit: Financial Express

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