Does Tata Steel gain from the acquisition of Neelachal Ispat?

Moody's Investor Service has opined that the acquisition of Neelachal Ispat by an arm of Tata Steel should be credit positive for Tata Steel as it would enhance Tata Steel’s long-steel production capacity as well as iron ore reserves. It may be recollected that Tata Steel had won the bid for 93.7% stake in Neelachal Ispat for a consideration of Rs.12,100 crore.

Neelachal Ispat Nigam (NINL) has long steel manufacturing capacity of 1.1 MTPA and has rich iron ore reserves of 100 million tonnes, which is an added advantage for Tata Steel. However, NINL is currently loss-making and it is hoped that roping in Tata Steel will give them traction on account of a bigger balance sheet.