The board of directors of Tata Steel on Friday approved amalgamation of seven metal subsidiaries of Tata Group into Tata Steel.

The seven companies that will be merged with their parent Tata Steel include Tata Steel Long Products Limited, The Tinplate Company of India Limited, Tata Metaliks Limited, TRF Limited, The Indian Steel & Wire Products Limited, Tata Steel Mining Limited and S & T Mining Company Limited.

The decision of amalgamation of all metal companies was taken at a board meeting of the company held on September 22, an exchange filing said.

On the rationale of the amalgamation scheme, Tata Steel said the resources of the merged entities can be pooled to unlock the opportunity for creating shareholder value and provide greater market penetration.

Marketing and distribution networks of both Tata Steel and Tata Steel Long Products can be collaborated, the steelmaker says in the exchange filing. Tata Steel Long Products is primarily engaged in the business of production and marketing of sponge iron.

The amalgamation will provide an opportunity for reduction of operational costs through better order loads through pooling of orders, improved sales, and production planning. Also, the amalgamation will foster maintaining uniform KPIs benchmarks including, consumption of coke, fuel, and power, Fe-bearing material, etc. which will reduce overall cost of production and promote efficiencies, the steelmaker says.

Proposed amalgamation would integrate all long products businesses under a single umbrella fostering an integrated approach to market. Sales and distribution network will be pooled, facilitating an increase in market penetration, it adds.

Explaining the rationale for merging its tin subsidiary, The Tinplate Company of India (TCIL), Tata Steel said the proposed amalgamation will provide an opportunity for reduction of operational costs through transfer of intermediary products between companies, better order loads, synergies from sales and production planning across the business.

"In line with Group level 5S strategy – simplification, synergy, scale, sustainability, and speed – proposed amalgamation will simplify group holding structure, improve agility to enable quicker decision making, eliminate administrative duplications, consequently reducing administrative costs of maintaining separate entities," the steelmaker says.

The mega-merger will need the approval of shareholders of all the seven companies as well as those of Tata Steel, regulators and stock exchanges.

On the merger of TRF, Tata Steel said existing facilities and expertise of TRF will cater to demand for design and engineering services for industrial structure required in upcoming expansion projects of the company.

TRF is engaged in undertaking turnkey projects of material handling for the infrastructure sector and also in production of such material handling equipment. The TRF stock, which has risen over 100% in the past month, fell 5% to ₹356 apiece in the intraday trade on the National Stock Exchange after the merger announcement.

Meanwhile, shares of Tinplate tanked as much as 6% to ₹318 on the NSE after the amalgamation plan was announced.

Tata Steel amalgamation

Seven Tata Group metal companies merged into Tata Steel