As per the filing of exchange on 23rd Sept 2022, Tata Steel will merge seven of its subsidiaries in itself. This decision was long awaited. There were plans of amalgamation of Tata Metaliks into Tata Steel Long Products. Now that plan is shelved completely. As per new plan four listed companies Tata Steel Long Products (TSPL), Tinplate Company of India Ltd (TCIL), Tata Metaliks Ltd (TML), TRF Ltd and three unlisted companies Indian Steel and Wire Products Ltd (ISWL), Tata Steel Mining Ltd (TSML), S & T Mining Company will be merged into Tata Steel Ltd. This amalgamation is subject to approval of majority share holders, exchanges, SEBI and other related authorities. The Board has approved SWAP ratio of these as follows:
- For every 10 shares of Tata Metaliks 79 shares of Tata Steel
- For every 10 shares of Tata Steel Long Products 67 shares of Tata Steel
- For every 10 shares of The Tinplate Company of India 33 shares of Tata Steel
- For every 10 shares of TRF 17 shares of Tata Steel
Enlisting the benefits that will be achieved by this Mega Merger of Tata Steel
- All the Metals and Mining companies will come under One-roof simplifying the group structure.
- Synergies in Procurement, Operations, technologies and finances will help in long term future.
- The cost of Royalty to be paid to Govt will reduce significantly.
- Raw material costs, overhead costs, administration costs, logistic costs will be reduced.
- Focused leadership and strategy team can define better future for Tata Steel
- Optimal use of facilities, resources, funds and human resources can be planned
- More value creation for shareholder’s possible by merged entity
Which shares to get benefited by this Mega Merger?
In the long term parent company Tata Steel will get benefited. For the same reason shares of Tata Steel traded 4.1% high in the morning before profit booking took place as Market starts falling rapidly. Even though all the listed subsidiaries were down on Friday session after the News came out Analysts came to conclusion that this Merger will help Tata Steel Long Products and Tata Metaliks more than Tata Steel. On TRF and Tinplate the views are neutral. Corporate Action news always brings spikes in the stocks involved. But then they generally see profit booking and stocks corrects more than its actual price from where it started. This happens because many big people who have inside news already take positions in such stocks and sell those stocks once news goes public. Business channels call it ‘Buy on rumors and Sell on News’. Therefore it is my humble request to all that if you are planning to trade these stocks on Monday be careful about your quantities and stop losses. These corporate developments take 8-12 months to actual realize on ground levels. So it is always better to wait. You can buy these stocks before Record date and get benefited rather than getting stuck on wrong side in the euphoria.
Disclaimer: Stocksbaazigar Mr. Deepak Doddamani is not a SEBI registered investment analyst. He is NSE’s Certified Investment Analysis Professional (NCIAP), NSE’s Certified Marketing Professional Level – 4, AMFI registered Mutual Funds Distributor, Authorized Person at IIFL Securities and MBA, B.Tech. This post is for the educational purpose. Please consult your financial advisor before taking any investment/trading decision. Thank You.