Cement: Tisco No To Brandname Buyout Offers

Private sector steel major Tata Steel, which announced earlier this week that it may be putting its cement units on the block, has so far kept most offers in this regard at bay as parties have shown more interest in acquiring the 'Tata Steel Cement' brand name rather than the cement business itself.

The steel major is, however, firm that it has no plans to part with the brand name.

"Slag-based cement, like Tata Steel Cement, is going to be the demand of the future and we expect that there will be some party that will be interested in our cement units to enhance their existing capacities ,"a company spokesperson said.

"There is also the possibility that if in the near future the cement division becomes very profitable, the company may take the decision not to get out of the business and make the business function as a profit centre," he added.

The company's two cement manufacturing units are located at Jojobera, Bihar, and Sonadih, Madhya Pradesh.

The unit was built by Holders Bank of Switzerland and has completed three years since commissioning and faced initial technical problems and the company has invested Rs 406 crore till last year to correct errors.

Till recently, Tisco used to sell cement in the domestic market through a marketing arrangement with Associated Cement Companies (ACC).

It may be noted that the cement division of Tata Steel is yet to post a net profit since commissioning.

Production figures last year however indicate that the company is confident of posting a profit this time.

The Jojobera unit posted a 34 per cent growth in production last year.

Earlier this week, Tata Steel managing director, Jamshed J Irani, had indicated that the company was open to a good offer for its cement units. He had explained that the move was in line with the steel major's present strategy to get out of non-core areas and concentrate on core competencies which include steel and ferro alloys.

During the last financial year, the company offloaded its power unit at Jojobera in favour of Tata Electric Company and sold its industrial gases unit to BOC India.

Tata Steel now meets its power and oxygen requirement by purchasing them from Tata Electric and BOC. respectively.

"Integration of services is good in a sellers market. However, since that situation no longer exists, it makes sense to streamline operations as far as possible," Irani had said.

Cement, therefore could feature as part of that plan. Significantly, last year, Tata Steel also decided to freeze all capacity expansion plans in its cement division for the next one and a half years and concentrate instead on realising the returns from the investments made so far.