...the steel Industry is likely to undergo a more extensive process of consolidation

IIPM PUBLICATION

However, while doing so the companies have been overbullish, resulting into shelling out of more moolah. Tata almost paid nine times the Corus’ EBIDTA, almost double of what Mittal paid for Arcelor (a much better company in size & scope). Hindalco too paid twice its current EV/EBIDTA for Novelis’, an entity with a loss of $275 million for the year ended on December 31, 2006. It can also be sighted as a trend where the Western peers prefer to get out of this old-world business and Indians are only too eager to move in.

With these new found chattels, most of the companies intend to move ahead with a very straightforward strategy. The companies will provide low-cost steel produced in India to these companies, which then would be finished in these markets for supplying them to the highend steel consuming sectors like auto, construction & aerospace.

Now the question is whether there’s more bloodbath left? Uwe Perilitz, D.B. Research, Frankfurt explained to B&E, “In the medium term the global steel industry is likely to undergo a more extensive process of consolidation since industry players are engaged in an unfettered rush for scale.”

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Source : IIPM Editorial, 2007

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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