Tata Steel to raise $600 million for capex, refinancing of debt

By: |
Published: July 20, 2019 12:57:28 AM

TV Narendran, MD and CEO of Tata Steel said, “We started the quarter on a positive note since the prices went up in April, but they fell in May and June.

In industry parlance, a spread is the difference between the cost of raw material and sales price of the finished product.

Tata Steel is in process of raising $600 million of debt to part finance its high-cost debt and majorly to meet the expenditure for second phase expansion of Kalinganagar steel plant in Odisha, company officials said to the media after the AGM in Mumbai. The second phase expansion at the Kalinganagar plant will set up cold rolling mill facility there. The plant is scheduled to be commissioned in 2020-21. Following this, its expansion capacity will go up to 8 mtpa from 3 mtpa at present.

Koushik Chatterjee, executive director and chief financial officer of Tata Steel, said, “We are in the process of raising the debt as we speak. The fund will be used for part refinancing, but majority of it will go towards the second phase of expansion at Kalinganagar.” The company has seen its net debt increase to `1 lakh crore as on March 31, 2019, and has set a debt reduction target of $1 billion for FY20.

One of the officials said the company was on track to meet the target for FY20. The company also sees pressure on spreads in the Q1FY20 as steel prices have dropped during the quarter for the industry across geographies. This coincided with a sharp increase in iron ore prices due to supply disruption and elevated coking coal costs, which impacted the spreads for steel producers. In industry parlance, a spread is the difference between the cost of raw material and sales price of the finished product.

TV Narendran, MD and CEO of Tata Steel said, “We started the quarter on a positive note since the prices went up in April, but they fell in May and June. The prices fell in Europe as well, which has created the spread squeeze.” Steel prices dropped by around `2,000 per tonne in the domestic market during the quarter, Narendran said.

Tata Steel, in a release dated July 14 on production volumes in June quarter, said, “In India, the liquidity issues in the NBFC and banking sectors along with rural stress have negatively impacted sentiments and overall economic activities, including domestic consumption.

Despite this, Tata Steel India’s Q1FY20 production increased 20% on year with consolidation of Tata Steel (Bhushan Steel) for the full quarter and higher capacity utilisation at both Tata Steel standalone and Tata Steel BSL. Q1FY20 sales volume improved 16% on year primarily with consolidation of Tata Steel BSL for full quarter.”

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.