Tata Steel to raise $750 mn via foreign bonds

Although the coupon rate is unknown, there is speculation that it might be a 10 year bond issue

In its first foreign fund-raising activity in about three years, Tata Steel has started conducting roadshows to raise $750 million in Singapore, said  a company official, on condition of anonymity. The coupon rate and the maturity periods of the bonds are unknown. The official said it was expected 10-year bonds would be issued. The company declined to comment for the story.

The fund-raising would be conducted through Abja Investments, Tata Steel’s Singapore-based wholly-owned arm. Tata Steel is expected to use this money to fund the construction of its six-million-tonne (mt), Rs 35,000-crore Odisha steel plant and to partly repay debt.

For the nine months ended December 2012, the company spent Rs 11,385 crore in capital expenditure.

Its 2.9-mt blast furnace at the flagship Jamshedpur steel plant is now on stream. In 2012-13, the company increased its steel production in India 14 per cent. In the same period, it produced 8.8 mt of crude steel, while saleable steel production stood at 7.9 mt, against 6.9 mt in 2011-12.

As on December 31, 2012, Tata Steel’s total debt stood at Rs 58,000 crore. Of this, foreign bonds worth $5.5 billion (Rs 30,000 crore) are set to mature by the second half of 2016, according to Bloomberg data.

The subdued steel demand and profitability in India and Europe has led to ratings agencies Moody’s and Fitch turning negative on Tata Steel---Moody’s has a ‘Ba3’ rating for the company, while Fitch has a ‘BB+’ rating. Moody’s says the company’s results for the quarter ended March would be good, owing to the increase in production in India.

In the quarter ended March, Tata Steel’s sales rose 29 per cent, while saleable steel production stood at 2.2 mt, against 1.7 mt in the corresponding quarter of FY12, a rise of 27 per cent. For the quarter ended December, the company had reported a consolidated net loss of Rs 763 crore, owing to declining sales in Europe.

For the nine months ended December 2012, the company reported a consolidated net loss of Rs 530 crore.