Tata Steel appoints i-banks for $2 billion rights issue to be launched in January
Mumbai: Tata Steel Ltd has appointed a bunch of domestic investment banks to manage its proposed rights issue of about $2 billion (Rs12,800 crore), three people aware of the development said.
On 19 December, the steel maker’s board had approved the plan to raise up to Rs12,800 crore.
“Tata Steel has appointed domestic investment banks Axis Capital, ICICI Securities, Kotak Mahindra Capital and SBI Capital Markets Ltd to manage the $2 billion rights issue,” said the first of three people cited above, requesting anonymity, as he is not authorized to speak to reporters.
According to the second person cited above, the company is looking to launch the deal in the coming quarter, as early as January.
He, too, requested anonymity.
“They are moving fast on the transaction and are targeting to raise the funds in the next quarter. The deal could be launched as early as before end of January. Usually all Tata deals are underwritten by the bankers and that could be one of the reasons for the company wanting to work with these merchant bankers as they are all backed by respective group banks,” he said.
Emails sent to Axis Capital, ICICI Securities and Kotak Mahindra Capital were not answered. SBI Capital declined to comment.
“The Tata Steel Board reviews the company’s financing strategy from time to time as part of its overall growth strategy. In keeping with the strategic decisions being implemented with respect to its future growth strategy, the company also implements various long term financing plans. The company also engages with its lenders and investors to evaluate financing and refinancing transactions in line with business requirements,” Tata Steel said in an email response.
The approval to the rights issue by the board is part of the financing strategy to de-leverage and for general corporate purposes, the email added.
“For the purpose of the issue, the Board authorized the Executive Committee of the Board to decide the structure, terms and conditions of the issue including the instrument options, rights entitlement ratio, issue price, record date, timing of issue and other related matters. The company will make appropriate disclosures regarding this at an appropriate time,” it added.
As of 30 September, Tata Steel’s gross debt stood at Rs90,259 crore.
In its 19 December board meeting, the company also approved an expansion of 5 million tonnes per annum (Mtpa) for its Kalinganagar plant, which currently has a capacity of 13Mtpa.
The proposed expansion will cost the company Rs23,500 crore, which will be funded through a mix of debt and equity.
The expansion is expected to meet the requirements of automotive, general engineering and other value added segments, the company said in its stock exchange filings.
The steel maker is also planning to raise funds from the overseas debt market.
On Tuesday, Bloomberg reported that Tata Steel Ltd has sounded out banks about raising the equivalent of $5.1 billion through loan facilities and a bond issue to help refinance debt.
The Indian steel maker plans a $2.15 billion six-year syndicated facility to refinance loans in the books of units, TS Global Holdings Pte. and NatSteel Asia Pte., Bloomberg reported.
A separate €2.5 billion borrowing is planned to refinance debt remaining after the transfer of Tata Steel Europe Ltd’s existing obligations into its proposed joint venture with Germany’s Thyssenkrupp AG. The new fundraising will be backed by a letter of comfort from Tata Steel, the report said.
The last Tata group company to raise equity capital through a rights issue was Tata Motors Ltd. In 2015, the auto maker raised around Rs9,000 crore through a rights issue which was subscribed 1.21 times.
- Govt serious in bringing fugitive economic offenders to task: Rajnath Singh
- Sushma Swaraj arrives in China for talks with Wang Yi, SCO meet
- Make the best of technology to deal with administrative delays: Modi tells bureaucrats
- Amit Shah says ordinance shows Modi govt’s commitment to women’s safety
- Sanskrit most suitable for machine learning, AI: Ram Nath Kovind