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Tata Steel, India's largest steelmaker, has kicked off road shows in Europe and Southeast Asia to raise funds and reduce debt, say sources privy to the development. "The company (Tata Steel) has commenced road shows in Singapore, Hong Kong, London and, perhaps, even in Frankfurt," one of the issue arrangers told Business Standard.
As of March 31, Tata Steel's net debt stood at about Rs 66,000 crore.
"The amount being raised isn't known yet, but Tata Steel is in talks with several investors at the moment," said another issue arranger, based in Singapore. Though the company was yet to decide the currency it would opt for to raise funds, the amount to be raised could be much more than $3 billion, as perceived by the market, he added. Following news on the fund-raising, rating agency Standard & Poor's revised its outlook on Tata Steel UK Holdings from negative to stable. Fitch Ratings has assigned a rating of BB+ (which indicates stable) to Tata Steel's proposed dollar and EURO notes. According to a Fitch report, the notes will be issued by Singapore-based ABJA Investment Co Pte Ltd, a wholly-owned subsidiary of Tata Steel. For long, Tata Steel has been considering lowering its debt.
The company has already divested a few assets-selling its land at Borivali here, as well as its 50 per cent stake in Dhamra Port, the proceeds of which were used to cut debt. The company is also planning to boost revenue. It has been focusing on improving its basket of value-added product, which earns it a premium over regular products.
Simultaneously, it continues to remain engaged in commissioning the three-million-tonne first phase of Odisha's Kalinganagar plant, which is expected to add to its revenue and cut debt.
"Tata Steel is due to repay debt of Rs 13,000 crore this year (FY15) and so, this portion of debt may be refinanced through the funds being raised at present," said Giriraj Daga, senior analyst with Nirmal Bang Securities. "Since the market has now started to look up, it is easier for Tata Steel to raise funds at cheaper rates and this explains the move."
Analysts feel if the funds raised exceed $3 billion, the steelmaker's interest costs might fall 100-150 basis points.
