Tata Steel raises $500 m via overseas term loan

Tata Steel has raised $500 million (about Rs 2,216 crore) through an overseas syndicated term loan facility to fund its growth plans, including acquisitions.

The loan with a 7 year maturity carries a coupon of Libor (London inter-bank offer rate) plus 45 basis points.

Reliance Petroleum, a subsidiary of Reliance Industries Ltd, last month had raised Rs $1.5 billion to part fund its $6 billion special economic zone refinery project adjacent to the existing refinery at Jamnagar in Gujarat.

Reliance Petroleum had raised the funds, partly non-recourse, at Libor plus 135 basis points as the loan was a non-recourse funding for a greenfield project.

Tata Steel had consciously de-leveraged its balance sheet over the last few years and is now prepared to re-leverage it to achieve its aim of enhancing steel capacity to 15 million tonne from the current over 4 million tonne by 2010. The company's debt/equity ratio had come down to 0.40 times as on March 31, 2005 from 0.78 time as on March 31, 2004.

Tata Steel plans to expand its capacity by maximising the potential of Jamshedpur works, setting up a greenfield capacity in Kalinganagar in Orissa, expansion of regional footprint through Singapore-based NatSteel Asia and further acquisitions in India and overseas.

The $500 million loan was subscribed to by 17 banks across geographies and the borrowing agreement was signed in Singapore.

The key elements of Tata Steel's strategy encompass securing raw material supplies in an environment of increasing scarcity, expanding the production of semi-finished steels domestically to support further finishing in selected geographies closer to the consuming markets.

Towards this end, Tata Steel has initiated international joint ventures for securing limestone supplies and proposes to have multiple production units in the growth markets of south-east Asia and China.