Tata Steel AGM to discuss fund raising

Tata Steel will place a proposal before the shareholders to raise Rs 10,000 crore at its annual general meeting on July 18.

The company will place three resolutions pertaining to a rights issue worth Rs 3,655 crore, rights issue of convertible preference shares worth Rs 4,350 crore and a share sale of $500 million (Rs 2,042 crore) through overseas or domestic listing. These funds are aimed at funding the acquisition of Anglo-Dutch steel maker Corus group for $12.9 billion (Rs 52,000 crore).

Tata Steel, which was catapulted to the sixth position in the world steel market from 56, had announced these fund-raising measures in mid-April.

In addition to these resolutions, Tata Steel will also seek shareholders' nod to appoint James Leng, chairman of Corus Group, Phillippe Varin, chief executive officer of Corus Group; and J Schraven, deputy chairman of Corus Group, as directors of the company. Leng, Varin and Schraven joined the Tata Steel board as additional directors on May 17.

Priced at Rs 300 a piece, one rights equity share will be given to the shareholders for every five shares held. The Tata Steel stock closed marginally down at Rs 623.15 on the BSE. It will be the third rights issue of Tata Steel in the last 22 years. The company issued 1:3 rights offer in 1988 and 2:5 offer in 1993.

The preference shares will attach a coupon rate of 2 per cent. They can be converted into shares Rs 500 to 600 each, to be determined at the time of the issue, after anytime between 18 months and 36 months.

Tata Sons, the main promoters of Tata Steel, will subscribe to the undersubscribed portion of the rights issues. The promoters hold a shade over 30 per cent stake in Tata Steel.

Tata Steel will also go for share sale worth Rs 2,042 crore, post-rights issues. Further details of the overseas offer, including where it will be listed, will be determined later. It will be the company's first share sale after 15 years.