Tata Steel seeks approval to raise Rs 14,000 cr debt

Written by fe Bureau | Updated: Jun 18 2014, 08:03am hrs
Tata SteelRs 70,000 cr: New borrowing limit, up from Rs 50,000 cr
Tata Steel, Indias largest steelmaker by production, has sought shareholders approval to raise debt of up to Rs 14,000 crore through privately placed securities, which may even be convertible into equity shares, according to a company filing on the bourses.

The companys notification to the BSE said that this debt could be raised either internationally or domestically. Tata Steel will also be seeking shareholders nod to raise the borrowing limit to R70,000 crore from R50,000 crore at present, and for the creation of a charge on the moveable and immoveable properties of the company as collateral.

Indian companies have been looking to raise funds overseas also since improved inflow of foreign institutional investment into the country has helped the rupee has gain strength against the dollar, which makes it cheaper to repay such loans. Bloomberg reported on June 14 that the company was in talks with banks to raise a $3-billion loan to refinance the debt

it had taken on to acquire Anglo-Dutch steelmaker Corus in 2007 for a consideration of $12.9 billion.

As on March 31, Tata Steel had a consolidated net debt of R67,326 crore.

Tata Steels announcement is the latest in a series of fund-raising plans, either proposed or executed, by Indian corporations. With the constitution of a pro-reforms and stable government at the Centre, international investors are keenly eyeing debt and equity participation opportunities in India, and companies plan on making the most of this sentiment.

In May alone, at least a dozen firms most of which are directly or indirectly associated with the infrastructure sector announced plans to raise around R52,000 crore through a mix of instruments such as convertible and non-convertible debentures to be placed locally and abroad, bonds, and institutional and public placement of equity shares.

The debt-raising plan, at this juncture, may also be well-received since the companys operational performance has started improving, especially in Europe.

Tata Steel Europe, as Corus is now called, was hit badly due to a slump in demand for steel during the euro-zone crisis over the last couple of years. However, on the back of an economic recovery in the region and several measures to improve operational efficiency put in place by Tata Steels management, the companys European operations have started showing signs of a turnaround.

In FY14, Tata Steel Europe achieved an operating profit of 314 million, three times higher than in FY13. Tata Steels consolidated net profit for 2013-14 stood at Rs 3,595 crore, against a loss of Rs 7,058 crore in 2012-13. The loss in fiscal 2013 was mainly on account of a substantial impairment charge taken by Tata Steel mainly on account of diminution in the value of some of its international assets.

A Barclays Research report dated May 16 stated that Tata Steel could be attractive for investors going forward due to triggers such as balance sheet de-leveraging, cash flow generation from asset sales, growth visibility in India and efficiency improvements in Europe.

The Tata Steel share closed at Rs 532.10 on the BSE on Tuesday, up 1.38%, outpacing the bourses benchmark Sensexs 1.31% rise.