Tata Steel agrees to UK pension deal

Tata Steel has agreed to the key commercial terms of a deal to cut benefits and improve the funding position of its British pension scheme, it said on Tuesday.

The scheme was a major stumbling block during talks to merge Tata Steel’s British and European steel assets with those of Germany-based ThyssenKrupp. It was opposed to taking on Tata’s £15 billion for the UK’s pension liabilities. The deal, agreed with the scheme’s trustees, would see Tata plough £550 million into the final salary under the British Steel Pension Scheme (BSPS). However, it is subject to formal approval by The Pensions Regulator, but Tata said it expected to get the approval shortly. Tata has also agreed to sponsor a new pension scheme, which would have lower benefits than those of the original scheme. It would also give the BSPS a 33 per cent equity stake in its UK business. With benefit cuts in place, the new scheme would pose less of a risk to the company, Tata said.

The BSPS is one of Britain’s largest final salary schemes with 130,000 members. The members who do not agree to move to the new scheme will automatically transfer to the Pension Protection Fund (PPF). All the scheme’s members, including those in the new scheme, are guaranteed PPF compensation levels.

Tata Steel narrowed its losses in the quarter ended March to ~1,168 crore, down from ~3,042 crore in the corresponding quarter last year.

The revenues rose to ~35,305 crore for the quarter under consideration, up 30.4 per cent from ~27,071 crore for the corresponding quarter in the previous year.

The exceptional items that contributed to the loss, including the non-cash pension curtailment charges, aggregated to ~4,069 crore in the JanuaryMarch quarter, and ~4,324 crore for the year, the company said.

"As far as India is concerned, the Kalinganagar project has helped operations, and the ferro alloys division has done very well. Benefits from exports that accrued helped the fourth-quarter performance, and we expect to export over a million tonnes next year as well," T V Narendran, managing director, Tata Steel India, told reporters here.

For the full year, the net loss jumped almost nine times Consolidated data in ~ crore Net sales Other income Total income Depreciation Interest Tax Net profit to ~4,169 crore from ~497 crore in FY16 while sales grew to ~1.17 trillion from ~1.06 trillion.

Last year, the company also sold its speciality steel business to Liberty House Group for £100 million.

Regarding the impending pension scheme in the UK, the company said it will reach a final agreement shortly.

"Positive conversation with all the stakeholders, namely the Pensions Regulator, the British Steel Pension Scheme Trustee and the Pension Protection Fund and we are hopeful of reaching a final agreement shortly," Koushik Chatterjee, group executive director (finance and corporate), said.

The key commercial terms for the Regulated Appointment Arrangement (RRA) have been agreed in principle and the RAA will become effective once agreed conditions are satisfied, he added.

Regarding capital expenditure (capex), the steelmaker finished a significant part of its Odisha project, which was the single-largest part of the capacity-expansion profile at ~6,000 crore last year.

While this will taper off, the company expects a capex of ~7,000 crore next year.

"We have some raw material capacity expansion that we are undertaking through expansion of our mines. Besides, some environment and infrastructure expenses at our facilities in India, and a specific structural improvement programme in Netherlands, will call for a similar level of capex of about ~7,000 crore this year," Chatterjee said. The world's largest contract electronics maker, Foxconn, has sought 14 acres for building a manufacturing unit at the Jawaharlal Nehru Port Trust's special economic zone.

The company has approached the Maharashtra government, which in turn has asked the shipping ministry to facilitate the request.

"Maharashtra Chief Minister Devendra Fadnavis spoke to me and said Foxconn had sought 14 acres of land at JNPT SEZ," Shipping Minister Nitin Gadkari told reporters at a conference here.

According to previous reports, Foxconn planned to set up a factory in Navi Mumbai. The unit may be set up at an investment of $20-30 million.

In August 2015, Foxconn had signed an initial agreement