Tata Steel seeks shareholders' nod to double its borrowing capacity

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Tata Steel is planning to double its borrowing capacity from Rs 20,000 crore to Rs 40,000 crore to meet its project costs, according to the company's annual report. These include three of its planned greenfield projects, global raw material projects and other capital expenditure programmes.

The company will seek its shareholders' consent at the annual general meeting to be held in Mumbai on August 28 to enable its directors to borrow money up to Rs 40,000 crore. It is also planning to expand the capacity of its Jamshedpur plant from 5 mtpa to 10 mtpa.

According to the company report, shareholders had given their consent to the board to borrow up to Rs 20,000 crore at the AGM held on July 5, 2006.

The board of a company cannot, except with the consent of its shareholders, borrow money, apart from obtaining temporary loans from its bankers in the ordinary course of business.

Such temporary loans, too, have to be within the aggregate of the company's paid-up capital and free reserves available, i.e, reserves not set apart for any specific purpose like 'debenture redemption reserve', etc.

The borrowings of the steel major stood at Rs 18,000 crore on March 31, 2008.

Tata Steel intends to invest Rs 15,400 crore to set up a 6-mtpa steel project at Kalinganagar in Orissa, Rs 10,000 crore for a 5-mtpa integrated steel plant in Chhattisgarh's Bastar region and Rs 40,000 crore for a 12-mtpa steel project at Tontaposhi, Jharkhand. It has already made some progress with its Kalinganagar and Chhattisgarh projects.

To become self-sufficient in raw materials, especially to meet the needs of Corus that it acquired in early 2007, the steel major has signed some joint venture (JV) agreements. The company has signed a JV with Ivory Coast's SODEMI for the development of Mount Nimba's iron ore deposits and another with the Al Bahja group for the development of the Uyun limestone deposits at Salalah in the Sultanate of Oman.

Besides, along with a Brazilian company Vale, Tata Steel has announced to undertake a large-scale expansion of the Carborough Downs mine near Moranbah in central Queensland in Australia.