Information on the Target
Tata Refractories Limited (TRL), established in 1958, is India's largest refractory manufacturer, recognized for pioneering refractory production within the country. As an ISO 9001 certified company, TRL has a diverse product range, including Basic, Dolomite, High Alumina, Monolithic, and Silica Refractories, with a consolidated installed capacity of 304,760 TPA as of FY 2010. Major clientele includes various sectors such as Steel, Cement, Glass, Copper, and Aluminium.
Located in Belpahar, Jharsuguda, Odisha, TRL also operates through subsidiaries like TRL Asia Pvt. Ltd., based in Singapore, and TRL China Ltd. In the fiscal year 2010, TRL achieved a consolidated turnover of Rs 905 crores and an EBITDA of Rs 101 crores. The strategic partnership with Krosaki Harima Corporation is expected to enhance its product offerings and market reach.
Industry Overview in India
The refractory industry in India is poised for growth, driven by the increasing demand from the steel and cement sectors. With a robust industrial base and the ongoing government initiatives aimed at infrastructure development, the demand for refractories is projected to rise significantly. The domestic market is supported by the presence of several large steel manufacturers shifting their focus towards high-quality refractory materials.
India's refractory market is growing in tandem with the global market, wherein technological advancements are increasingly prioritized to meet the diverse demands of various industries. Market players are actively investing in research and development to innovate and produce high-engineered products. This is essential for maintaining competitiveness and addressing the rising cost pressures.
The regulatory landscape in India has also improved, creating favorable conditions for foreign investment and partnerships. This is highlighted by Tata Steel's collaboration with Krosaki Harima Corporation, which is an advantageous move as it integrates global standards of technology and management practices that will be beneficial for TRL.
Furthermore, the domestic sourcing of raw materials coupled with the need for effective waste management plays a critical role in the sustainability of the refractory industry. A growing emphasis on environmental regulations encourages manufacturers to invest in eco-friendly refractories that contribute to a circular economy.
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The Rationale Behind the Deal
The alliance between Tata Steel and Krosaki Harima Corporation is primarily driven by the latter's cutting-edge refractory technology and global expertise. By acquiring a 51% equity stake in TRL, KHC aims to foster innovation and enhance product diversity, which aligns with Tata Steel's commitment to maintaining industry leadership.
This strategic partnership is expected to facilitate TRL's entry into new international markets, expanding its reach and establishing a technological edge in the competitive refractory landscape. Tata Steel's ongoing 26.46% stake ensures that it remains a significant player in the operational decisions of TRL. This collaboration seeks to leverage both companies' strengths to optimize performance and long-term growth.
Information About the Investor
Krosaki Harima Corporation (KHC) is a prominent player in the refractory materials industry, established in 1918 and headquartered in Kitakyushu, Japan. As a subsidiary of Nippon Steel Corporation, which holds a 42.9% equity stake, KHC is known for its advanced refractory technology and global outreach.
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The partnership between Tata Refractories Limited and Krosaki Harima Corporation presents a compelling investment opportunity, highlighting the strategic significance of integrating global expertise into a domestic leader. The infusion of KHC's technological advancements is expected to elevate TRL's operational efficiencies and broaden its product offerings, thus catering to evolving market demands.
Moreover, the deal is likely to position TRL favorably amid the increasing competition and innovation requirements in the refractory industry. Not only does the association aid in securing a technological edge, but it also facilitates greater access to global markets, which is crucial for sustainable growth.
However, success will depend on the seamless integration of KHC’s advanced methodologies into TRL's existing framework. The commitment from both entities to cooperate and leverage each other's strengths will fundamentally determine the outcome of this partnership.
Overall, the investment appears promising, provided that both companies maintain a clear focus on innovation and customer-centric strategies. This collaboration could very well set a benchmark for other partnerships within the industry, potentially leading to a future of sustained growth and operational excellence.
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Krosaki Harima Corporation
invested in
Tata Refractories Limited
in 2023
in a Strategic Partnership deal
Disclosed details
Revenue: $12M
EBITDA: $2M
Enterprise Value: $113M
Equity Value: $134M
Multiples
EV/EBITDA: 50.2x
EV/Revenue: 9.3x
P/Revenue: 11.0x