Tata Steel has decided to raise long-term funds of up to $1 billion by a way of share sale through the Differential Voting Rights (DVR) route.
A source close to the development said, “The company has mandated Standard Chartered Bank, HSBC Holdings, Deutsche Bank, RBS and Kotak Mahindra Capital to manage the share sale.” Another official who wished not to be named, said, “The company will raise up to $1 billion via DVR route.” DVRs are equity instruments with dividends but have limited voting rights and are traded at the stock exchanges.
The proceeds of the share sale will go towards funding the company’s massive expansion plans currently underway at Jamshedpur. Tata Steel, at its Jamshedpur facility, will become a 10- million tonne steelmaker from the current seven million tonnes by September next year. The company is also planning to set up a six million tonnes steel plant at Kalinganagar, Orissa. The plant will be set up in two phases of 3 million tonne each.
Some part of the funds may be used in paying off debt and deleveraging its balance sheet. As on September 30, Tata Steel had a net debt of $10.7 billion and had refinanced debt taken for Tata Steel Europe, the erstwhile Corus. The company had signed an agreement with a syndicate of 13 banks for £3.53 billion of loan and a revolving credit facility.
The company did not respond to emailed queries.
In a statement to the stock exchanges on Friday, it said shareholders have given their approval to raise funds. However, the company did not identify the route which would be used or the quantum of the money to be raised.
In a notice dated November 12, it had quoted various equity routes to raise money, like, issue of securities, including ordinary shares, equity shares with differential rights as to voting and dividend, GDRs, debentures, foreign currency bonds, etc. The company has taken the shareholder approval to raise up to Rs 7,000 crore.Earlier, another Tata Group company, Tata Motors, had come out with a DVR issue of $750 million.
