Tata Steel will raise $2.4 billion (Rs 10,300 crore) by issuing equity and convertible preference shares of the company as well as and a foreign equity issue to fund its $12.9-billion (Rs 55,000 crore) acquisition of Anglo-Dutch steel maker Corus.
The company will raise $862 million (Rs 3,655 crore) through a rights issue of equity shares to shareholders in the ratio of 1:5 at Rs 300 per share, which means every Tata Steel shareholder will get one additional share at Rs 300 for every five shares they are holding currently.
In addition to that Tata Steel will sell convertible shares carrying a coupon of 2 per cent with a conversion option into equity shares after two years at a price range of Rs 500-600. This will be issued in the ratio of 1:7. It will fetch $1 billion (Rs 4,350 crore) for the company. Tata Steel is also planning a foreign issue to rise $500 million immediately following the rights issue.
Announcing possibly the largest capital raising programme by an Indian company, Tata Steel Managing Director B Muthuraman told reporters here that the company would be utilising additional debt of only $500 million.
"This will be about 12 per cent of the total deal size of $12.9 billion. We have completed the transaction and have already started working on synergies," Muthuraman said. "We had earlier projected a savings of $350 million from synergies achieved by both companies and now we are confident that we will get much more than that," he said.
Tata Steel will pump in $4.1 billion into the Corus purchase and it has made arrangements with a consortium of banks, including Deutsche Bank, ABN Amro Holding and NM Rothschild & Sons Ltd, to raise $6.14 billion as loans. A further $2.66 billion is being raised overseas as bridge finance, or a short- term loan.
Stating the outlook for steel prices was healthy, Muthuraman said, "I believe steel prices are strong and will continue to be strong for the next couple of years."