Tata Steel on Tuesday said it plans to issue 57 million shares through follow-on public offer (FPO). As per Tuesday closing price of Rs 647.60 on the Bombay Stock Exchange (BSE), the company can raise around Rs 3,700 crore. The company, which had received board approval in November to raise upto Rs 7,000 crore in long-term funds, is expected to utilise the proceeds for capacity expansion.
Tata Steel said its board has approved ?a further public issue of 57 million ordinary shares of Rs 10 each for a price to be determined through the book-building process under the Sebi guidelines.? This includes a reservation for eligible employees for 1.5 million ordinary shares of Rs 10 each, the company said.
The Street has welcomed the move. Macquarie Securities head of research Rakesh Arora said, ?It is good that the company has decided not to issue shares with differential voting rights. That is not the best way to raise money. Moreover,the dilution in earnings as a consequence of the expanding equity will be very small.? Tata Steel?s outstanding shares as of September 30, 2010, stood at 9,017.4 million on a consolidated basis. FE was the first to report about Tata Steel?s FPO plan in the edition dated January 10.
Tata Steel’s move to raise funds comes at a time when Indian steel companies are adding capacities in a bid to cash in on the strong demand for steel in the country, which has been growing at 8-9%.
Sales dip in Q3
Tata Steel, on a group-wide basis, has seen a marginal decline in the volume of steel products sold by it compared to the second quarter of FY?11. With an adverse pricing environment in the third quarter, Tata Steel expects net sales for the third quarter to be flat compared to the second quarter.
The steel major also expects its operating results for Q3 to decline in comparison to Q2, due to increased raw material prices. Tata Steel?s Indian operations saw a 3% jump in sales in Q3.
The figure was lower by 1% compared to deliveries in the September-ending second quarter.