Aug. 29: Tata Steel, the country’s largest private steel company, is scrambling to raise cash to fund its ambitious growth plans.
The Rs 15,132-crore steelmaker is reported to be finalising plans to raise $600 million (Rs 2,750 crore) through a global depository receipts (GDR) offering. The company’s board of directors had cleared a $1-billion cash-raising programme on May 18 through a combination of various long-term finance options that will target overseas markets.
The GDR plan forms part of this programme, which has already been approved by the shareholders. While unconfirmed reports emanating from the stock markets said the company had invited merchant bankers to make a pitch for the proposed GDR offering, officials from Tata Steel refused to confirm or deny the news. “We have no comments to make,” said a spokesperson from the company.
An intense battle is expected among merchant bankers to grab the mandate for the Tata Steel GDR offering. Deutsche Bank, JP Morgan, Merrill Lynch and Morgan Stanley have all worked on Tata group transactions in recent years.
The company has recently made a preferential issue of Rs 1,393.2 crore to Tata Sons by way of 2.70 crore ordinary shares of Rs 10 each at a price of Rs 516 per share.
Early last month, shareholders approved the proposal to raise long-term funds of up to Rs 6,500 crore in one or more tranches, in the form of such instruments as the board of directors would approve. The fund raising, Tata Steel had then said, was in line with its growth plan to build the greenfield projects and undertake strategic acquisitions.
The shareholders also approved the increase in the authorised equity capital to Rs 2,000 crore and the borrowing limit to Rs 20,000 crore. Tata Steel had added that it would continue to evaluate options to raise long-term funds based on its investment needs for its announced projects.
Tata Steel chairman Ratan Tata told shareholders: “You may ask why this injection of funds (Rs 6,500 crore) is not being made as a rights issue to shareholders. The main reason for that is through an overseas issue we can perhaps obtain prices that are close to market prices today, which, we would not be able to do in the case of shareholders who would justifiably want a substantial discount from market value.”
“We will consider this in time as we always have. But if we want to hold dilution to a minimum and protect existing shareholders, we expect to raise these funds in a manner that it will not exceed 15 per cent of the prevailing paid-up capital of the company,” Tata had added.
Shares of Tata Steel have risen 37 per cent since June 14 but today it went down by 1.95 per cent or Rs 10.30 to close at Rs 517.25.
Tata Steel has set an ambitious target of annually producing 30 million tonnes of steel within the next 10 years from 5 million tonnes it did in the year to March 2006.
Tata Steel has been on a fund-raising spree over the past 18 months. It first raised $100 million from IFC and another $300 million as part of an IFC-led syndication.
In March, it signed an external commercial borrowing agreement of $500 million in Singapore to fund its growth projects and acquisitions. The syndicated loan was for $400 million (or its equivalent in Japanese Yen) with a greenshoe option of another $100 million. Seventeen banks across various geographies participated in the syndicated term loan facility. The issue was oversubscribed. The loan has a maturity of seven years and the coupon of the loan was Libor plus 45 basis points.
Last week, it mandated a clutch of foreign banks to raise another $750 syndicated loans.