CASH CHASE

Calcutta, Dec. 28: Tata Metaliks Ltd will raise Rs 100 crore through non-convertible debentures from financial institutions.

The company board met on Friday to finalise the borrowing plan.

Harsh K. Jha, managing director of Tata Metaliks, said the tenure and the interest rate would be frozen in the next 10 days.

“We will shortly sign an agreement with a lead arranger. The debentures would be subscribed by financial institutions. It will be a private placement,” he said.

Tata Metaliks’ choice of debentures instead of a term loan is significant during the current global financial crisis.

In term loans, the interest rates are generally set every year. The rates are fixed in debentures.

Companies tend to opt for debentures when they are uncertain about the future.

“One of the reasons to opt for debentures is that we wanted a clear visibility on the exact amount of cash outgo during the term,” Jha said.

The company’s ductile iron pipe manufacturing project with Kubota of Japan in Kharagpur is nearing completion. “We are hoping to start trial production from January. There is no further investment required from our side to the project,” Jha said.

The first phase of the venture involves an investment of Rs 150 crore and the production target is 110,000 tonnes a year.

The unit will use liquid pig iron from the company’s existing mini blast furnace.

The Indian company — a subsidiary of Tata Steel — holds a 51 per cent stake in Tata Metaliks Kubota Pipes Ltd. Kubota and Japanese trading outfit Metal One will own 44 per cent and 5 per cent, respectively.

Tata Metaliks’ steel project in Karnataka is yet to take off. It has sought a fresh location and 900 acres instead of 700.

Preparations are also on for a sinter plant project in Kharagpur.