Tata Steel FPO on Jan 19-21; to use money for Jamshedpur plant

In an investor's presentation, the company said that it plans to use Rs 1,875 crore from the FPO proceeds to "part finance the capital expenditure for expansion of its existing works at Jamshedpur".

The expansion work at Jamshedpur plant, scheduled to be completed by March this year, will have a production capacity of 10 million tonnes of steel per annum post expansion.
Besides this, Tata Steel which has a net debt of USD 10.7 billion, will also use Rs 1,090 crore from the FPO proceeds to pay the redemption amount of some maturing redeemable non-convertible debentures, the presentation said.

However, quantum of the debentures could not be identified immediately.
When asked, a Tata Steel spokesperson said that "debentures are not related to acquisition of Corus (now Tata Steel Europe) and their redemption is due in May 2011".
The FPO is expected to garner Rs 3,691.32 crore from the capital markets, as per the closing price of Tuesday (when FPO was announced) at Rs 647.60 per share on the Bombay Stock Exchange.

However, scrips of the company continued its declining trend for fourth consecutive day and by now, have slid over 4 per cent from the date of announcement of the FPO.
The shares were traded today at Rs 621.7 apiece on the Bombay Stock Exchange, down 2.47 per cent from the previous close.

Meanwhile, beginning with Mumbai on January 17, the company will also launch roadshows nationally and internationally to lure the investors towards its share sale.
However, the company spokesperson declined to comment on the dates of roadshows of the company.

As on September 30, 2010, the company had a net debt of about USD 10.7 billion (Rs 48,790.6 crore), majority of which (standing at USD 5.32 billion) consists of loans taken by the company for expansion of its Indian operations.

The debts of the company also include remaining portion of the loans (USD 4.58 billion) taken by the company to acquire Corus in 2007.In November, Tata Steel Board has approved raising up to Rs 7,000 crore (USD 1.5 billion) and subsequently, on December 24, the company secured shareholders nod to raise a maximum of Rs 5,000 crore.
For the share sale, the Tata Steel has appointed a consortium of seven banks to manage the issue.

This includes Kotak Mahindra Bank, Citi Bank, Deutsche Bank AG, Royal Bank of Scotland Plc, Capital Co Ltd, Standard Chartered Bank Plc, SBI Capitals and HSBC Bank.