Tata Steel to consider Rs 12,000-cr NCD issue next week

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Updated: February 23, 2019 6:05:57 PM

The company’s shareholders had given a nod for the same in the annual general meeting (AGM) held on July 20, 2018 and was also approved by the board of directors on August 13, 2018.

Tata Steel board to consider Rs 12,000-cr NCD issue next weekTata Steel board to consider Rs 12,000-cr NCD issue next week

Tata Steel board panel will consider the issuance of unsecured non-convertible debentures (NCDs) on private placement basis of up to Rs 12,000 crore in a meeting to be held on February 26.

The company’s shareholders had given a nod for the same in the annual general meeting (AGM) held on July 20, 2018 and was also approved by the board of directors on August 13, 2018.

While the company has not stated the reasons for the said fund raise, it comes at a time when Tata Steel has picked up stressed asset of Bhushan Steel for about `35,000 crore. Besides, the acquisition of Usha Martin of around `4,500 crore is underway and the brownfield expansion of 5 million tonne per annum is taking place at Tata Steel’s Kalinganagar plant for enhancing the capacity from 3 MTPA at present to 8 MTPA.

In a late night filing to stock exchanges on Thursday, Tata Steel said: “The committee of directors of Tata Steel Limited will be held on Tuesday, February 26, 2019, to consider and approve the issuance of unsecured non- convertible debentures on private placement basis, within the limits approved”.

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In January 2018, Tata Steel through its wholly owned subsidiary ABJA Investment Co, had issued two tranches of $1.3 billion unsecured bonds in the overseas markets. Later in March 2018, the company had raised `12,800 crore through a rights issue, the proceeds of which were to be used to fund organic, inorganic expansions and also to deleverage.

Moody’s Investors Service on Wednesday had upgraded Tata Steel’s corporate family rating to Ba2 from Ba3, reflecting the sustained improvement in company’s credit profile. Tata Steel’s leverage, as measured by adjusted debt/EBITDA, is on an improving trajectory and will fall below 3.5x by March 2020 from 4.1x at March 2018 and 3.9x at March 2019. EBIT/interest coverage will remain above 3.0x, the ratings firm observed.

Tata Steel’s CFR is supported by its significant, diversified and growing operating base and its globally cost competitive steel operations in India, supported by its ownership of key raw materials— iron ore and coking coal.

These factors, alongside favourable industry dynamics in its key operating market in India have translated into the company’s sustained track record of improving credit metrics, it observed.

According to Moody’s, Tata Steel’s India business is on a strong footing and growth prospects in the country augur well for the company. During the first nine months of the fiscal year ending March 31, 2018, Tata Steel’s Indian operations generated EBITDA/tonne of `17,270 — more than three times the profitability of its European operations.

Meanwhile, successful integration of Bhushan Steel’s (Bhushan) assets in 2018 and the proposed acquisition of the steel business of Usha Martin have further cemented Tata Steel’s business profile.

The recent acquisitions have started reflecting in the strong earnings for the company.

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