Tata Steel plans Rs 21,500 cr capex in 5-6 years

Tata Steel has planned a capital outlay of Rs 21,500 crore over five to six years, said chairman Ratan Tata on Thursday.

Of this, Rs 16,000 crore would be spent on greenfield expansion at Orissa, he said.

Tata was responding to shareholders' queries during the extraordinary general meeting called for increasing the company's borrowing limit to Rs 10,500 crore from Rs 5,500 crore currently, issuing of appropriate securities, and approval of creation of securities for the increased borrowing limits.

All the three resolutions were passed unanimously.

Excerpts of Tata's replies to shareholders' and reporters' queries.

Orissa and Jamshedpur plans: "We plan to invest Rs 16,000 crore in greenfield expansion in Orissa. The plant won't be at Gopalpur. The Gopalpur project didn't come up due to infrastructure constraints like water, rail, and port.

"Since the Gopalpur project didn't take off, we had to take up the expansion at Jamshedpur. We are investing Rs 10,000 crore in Jamshedpur to increase capacity from 5 million tonne (annually) to 7 million tonne. There would be new mining leases for our Orissa project.

"Cost of production in Jamshedpur and Orissa are similar. We are a 7-million-tonne (per annum) company now. We would be 12-15 million tonne company by 2008-09."

Price hike: "We haven't decided yet. If the price increases, we will increase, if it falls, we will reduce. We will see how the market moves. We will take a view in April."

Bangladesh plans: "If India, Pakistan, and Bangladesh can come together, it would be good for the region. If anybody can make a start, it would be a wonderful thing. In our own little way, we would like to make a beginning.

"We have undertaken a study to invest in Bangladesh. It's on three sectors, steel, fertiliser, and power. We will take it (the study report) to the Bangladesh government, because they will have to supply gas for the project.

"Contrary to perceptions, the Bangladesh government has an excellent record in honoring power purchase agreements with foreign companies.

"If Bangladesh doesn't absorb the steel (produced there), we will export from there. If it does, it would be good for the region because they import now."

International acquisitions: "We will choose an acquisition we believe would add value or give us a geographical advantage. Our model is not to take over sick steel plants and turn around. We would like to grow through secured supply of raw material.

"We are hoping to be self sufficient in raw material. Those who are in control of raw material will be kings of the business. There are steel plants all over the world, but the raw material are not everywhere. We are looking at acquiring properties for not just iron ore, but also for coal. We are looking for southeast Asia and Latin America for these."

Cost of debt: "As of now the company has raised money at 90 basis points over Libor (London Interbank Offered Rate). This is not very expensive. Funds are (now) available at close to Libor rate at about 4.4 per cent (annual)."