Did Mistry exit Tata Steel's long products Europe business in a hurry?

Roland Junck, executive chairman of British Steel, said that the business was back in profit at an underlying level before financing costs 100 days after the sale

It sounded like an echo when Ratan Tata told his CEOs on Tuesday that the companies must focus on their market position vis-à-vis competition, and not compare themselves to their own past. Last month, Roland Junck, executive chairman of British Steel, had suggested that the Scunthorpe steelworks — that Tata Steel sold in May for one pound — had become “inward-looking” and “stopped comparing themselves with the best” under its previous management.

According to UK media reports, Junck said the business was back in profit at an underlying level before financing costs 100 days after the sale.

In May, Tata Steel completed sale of its long products Europe business — which included Scunthorpe steelworks, two mills in Teeside, an engineering workshop in Workington, a design consultancy in York, and associated distribution facilities as well as a rail mill in northern France — to Grebull Capital LLP.

The new owners of Scunthorpe were targeting a 10 per cent profit margin on its annual revenues of £1.2 billion, meaning it could make a profit of £120 million a year.

In August, Cyrus Mistry, the then Tata group chairman, had said at the Tata Global Beverages annual general meeting that part of the DNA of the Tata group was to continuously push barriers and see where it could actually grow. “And, with it, will come some successes and some failures. But, I think, it is also important to move forward at some failures and look at whether there are other alternate ways to make it succeed. Then at some point, we have to call it a day.”

Mistry had, of course, explained his philosophy in a completely different context. The context was Tata Global’s efforts to restructure its Chinese operations and one of the options was sale. The question uppermost on everyone’s mind is did Mistry call it a day too early for the UK business that it sold.

Junck has squarely blamed the Tata Steel management and suggested that it lost interest in Scunthorpe steelworks. But officials close to the development, however, pointed out that the recovery in international steel prices and currency depreciation had helped Scunthorpe register better results.

“If coke prices appreciate the way they are now, then it will be back to square one for Scunthorpe,” a person familiar with the plant said.

Divestment of under-performing Corus assets happened even when Ratan Tata was the chairman of Tata group. In 2011, Tata Steel sold Teeside Cast Products to Sahaviriya Steel of Thailand for $467 million.

Yet, an official who had handled the Tata-Corus integration at the time of acquisition, pointed out, sale of the entire UK business might not have been Tata’s choice.

In March, Tata Steel decided to explore all options for the UK business which included sale. Seven bidders were shortlisted. The process, however, was put on hold in July, on Brexit concerns.

“Tata had always batted for Indo-UK trade, the move to sell the entire UK business was in conflict with that stand,” he said.

Timing has never gone quite right for the $12-billion Corus buy. If Scunthorpe was sold at the bottom of the steel cycle, the Corus acquisition happened at the peak at 608 pence a share, a premium of 34 per cent to the original price, to ward off a counter bid from Brazilian steel maker, CSN.