Mumbai: India’s Tata Steel, the world’s No. 6 steelmaker, said on Tuesday it raised $500 million in an issue of global depositary receipts (GDRs). Its shares rebounded after initially falling on equity dilution concern.
The company said it would issue 65.41 million GDRs at $7.644 each, with each representing one equity share. The GDRs will be listed on the London Stock Exchange.
The offering was roughly priced at 5.4% discount to Tata Steel’s closing price on the Mumbai exchange on Monday.
Shares in Tata Steel, which has a market value of $5.9 billion, fell as much as 3.5% early but rebounded and were trading up 1.7% at Rs397.70 by 11:12 am in a Mumbai market down 0.2%.
Ambareesh Baliga, vice president at Mumbai-based Karvy Stock Broking, said the initial fall was a normal reaction to an equity dilution.
“But in a different sense, the pricing is favourable to the company as it has picked up funds when valuations are much stronger,” he said.
Shares in Tata Steel have soared about 150% from their March low of Rs148.65, helped by a rebound in global equity markets.
Tata Steel, which bought Anglo-Dutch steel maker Corus in 2007, increased the offering from an earlier target of $400 million, sources familiar with the matter told Reuters.
The size was, however, lower than the $600 million sources had said the company was considering raising earlier this month.
The deal was managed by JPMorgan, Goldman Sachs, UBS and Citigroup.
The company is expected to use the funds to meet expansion in India and also to inject cash into its UK unit, sources said.
Tata Steel, which operates a quarter of its 30 million tonnes annual capacity in India, is raising domestic capacity to 9.8 million tonnes from 6.8 million. The company expects Indian demand to grow 25% in 2009/10.
As part of a revised debt covenants package with lenders, Tata Steel has said it would inject 425 million pounds ($700 million) into Tata Steel UK in a phased manner.