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Valuation by Rajesh Kumar

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24

Tata’s acquisition of Corus—a valuation analysis

Abstract

The steel industry witnessed a wave of consolidation of capacity since the year 2004. The prices of iron ore were rising, and on the other hand, requirement of steel from the emerging nations started to rise. To maintain market concentration, most players started indulging in price wars stressing the margins further. Consolidation for economies of scale became inevitable. The steel industry had long fragmented capacity. Consolidation would increase the pricing power with both suppliers and buyers. At the time of Tata Corus deal, the top 10 auto companies, which were the major buyers of steel controlled about 95% of the market. Tatas had great interest in Corus. Tatas initially started ...

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