Tata Steel's Acquisition of Corus (B)

Tata Steel's Acquisition of Corus (B)
Case Code: BSTR355
Case Length: 17 Pages
Period: 1997-2009
Pub Date: 2009
Teaching Note: Not Available
Price: Rs.300
Organization: Tata Steel Limited, Corus Plc.
Industry: Steel
Countries: UK, The Netherlands, India
Themes: Mergers and Acquisitions
Tata Steel's Acquisition of Corus (B)
Abstract Case Intro 1 Case Intro 2 Excerpts

"The company (Tata Steel Group) has not brought down costs to the extent they should have. There is more bad news in store, as the Corus Group disappointment is still round the corner."

-Niraj Shah, Senior Analyst, Centrum Broking, in October 2009.

"You don't buy looking at the short-term, but the long-term future of a company. Corus was a very good buy as its fundamentals are quite sound. However, it's poor show on the books has got nothing to do with its fundamentals. It's a victim of the current global downturn."

- B. Muthuraman, Managing Director, Tata Steel Limited, in March 2009.

Tata Steel Group Reports Loss

On August 27, 2009, India-based Tata Steel Group (TSG) announced disappointing results for the quarter ended June 2009. The company reported that its net sales were down by 47% at Rs 231.8 billion as compared to the corresponding quarter of the previous year. Industry experts were shocked as the company reported a net loss of Rs 22.09 billion for the quarter as compared to a profit of 39.01 billion in the quarter ended June 2008 (Refer to Exhibit I for Quarterly Performance of Tata Steel).

TSG's management said that while they had made efforts to bring down the company's costs, the prices at its European arm - Corus Group Plc. (Corus) - were impacting the profit margins. In light of the recession in developed countries, Corus reported lower sales volumes in the European Union (EU). The company's selling prices declined year-on-year by 1% in the EU. Lower capacity utilization and higher raw material cost impacted the operations in Europe.

Commenting on the efforts TSG's management was taking to turn around the operations of Corus, the company's Managing Director, B. Muthuraman (Muthuraman), said, "The results of TSG for the quarter ended June 2009 reflects the impact of the global economic downturn, particularly in the developed markets. The Group is currently undertaking several restructuring initiatives internally to not only weather the current storm but to emerge much stronger in the near future. The global recovery is expected to be slow and the company will continue to focus on operating performance and liquidity management." ....

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