Tata Steel to raise $300m, RIL raises $350m

Tata Steel today signed a $ 300 million loan agreement with the International Finance Corporation (IFC). In a parallel development, Reliance Industries successfully closed its $ 350 million multi-currency term loan facility.

The financial assistance would help support Tata Steel's ongoing $ 2.66 billion investment programme, including a 3.4 million tonne capacity expansion in Jamshedpur, a company release said. Washington-based IFC is the private sector financing arm of the World Bank Group.

Under the agreement, IFC will provide Tata Steel with a corporate loan of $ 300 million, which will have two parts. A facility of $ 100 million will come directly from IFC. There will be a syndicated loan of $ 200 million.

The facility has a tenure of 11 years. The syndicated facility is expected to be underwritten by Bank of America, N.A., CaylonCalyon, HSBC and Standard Chartered Bank.

The mandated lead arrangers for Reliance Industries include ABN AMRO Bank N.V., Bank of America N.A., The Bank of Tokyo-Mitsubishi Ltd., Calyon, DBS Bank Ltd, HSBC, HVB Corporates and Markets and Mizuho Corporate Asia (HK) Ltd.

B Muthuraman, Tata Steel's managing director, said, "The IFC funding is an important part of Tata Steel's financing strategy. The IFC loan will help us finance our future projects by way of long-term funding".

Tata Steel had lined up major expansion projects. The company currently produces five million tonne of steel per annum at its Jamshedpur plant and planned to add another 2.4 million tonne at a cost of Rs 7,800 crore.

Further, Tata Steel had signed MoUs with the Orissa government for setting up a six million tonne greenfield plant at Kalinganagar in Jajpur district of Orissa and with the Chhattisgarh government for a five million tonne plant.

Tata Steel's expansion plans were not just restricted to the domestic space. The company intends to set up a 2.4 million tonne steel plant, based on the economic and financial viability of the project and was in discussion with the government of Bangladesh.

The company had also invested in NatSteel Asia, which has a capacity of about two million tonne.

Tata Steel was exploring various options for funding its expansion projects. The company recently sought shareholders' approval for raising long term resources to the tune of Rs 5,000 crore.Tata Steel's reserves excluding revaluation reserves was Rs 7,326.67 crore as on March 31, 2005.

Tata Steel was in the process of improving its product mix on a continuous basis and moving up the value chain. The company was focused on the sophisticated automobile and the construction sector.

Tata Steel was also weighing possibilities in downstream projects and planning to float a joint venture with leading steel producer in Australia and New Zealand, BlueScope Steel.