Tata Steel said on Monday it will book a $1.6 billion (Rs. 8,787 crore with respect to $1=Rs. 54.92) non-cash impairment charge for the financial year that ended March 31 due to weak economic and market conditions in Europe, its main market.
"The above underlying condition is expected to continue over the near and medium term, and has led to the downward revision of cash flow expectations underlying the valuation of the European business," it said in a statement.
The impairment, it said, is primarily due to a weaker macroeconomic and market environment in Europe where apparent steel demand has fallen significantly in 2012-13 by almost 8 per cent "which in aggregate results in almost 30 per cent since the emergence of the global financial crisis in 2007".
"The above underlying condition is expected to continue over the near and medium term, and has led to the downward revision of cash flow expectations underlying the valuation of the European business," it said.
"The impairment also includes the effect of write down of assets in the ferro chrome business in South Africa and the mini blast furnace in Tata Steel Thailand which has been impacted by the high cost of raw material feedstock," it added.
The company, which is scheduled to announce its financial results for the year on May 23, however, said the non-cash write down is not expected to affect its financial covenants.
Financial covenants are part of the conditions of a loan agreement, these covenants are the promises by the management of the borrowing firm to adhere to certain limits in the firm's operations.
Tata Steel Group is among the top ten global steel companies with an annual crude steel capacity of over 26.5 million tonnes per annum (mtpa). It has operations in 26 countries.
The Tata Steel Group, with a turnover of $26.13 billion in FY12, has over 80,000 employees across five continents.
(With inputs from Reuters and PTI)