Spurred by a revival in fortunes of its European operations and banking on the success of its follow-on public offer (FPO) that opens on Wednesday, steel major Tata Steel on Tuesday said it would more than double its investments in Europe from R1,451 crore to around R3,084 crore per annum in the next fiscal.
The firm’s overall investments will go up from R6,850 crore to over R10,000 crore per annum from the next fiscal signalling the end of the austerity drive the company had embarked upon in the aftermath of the global economic meltdown of 2008.
The increase in investments in Europe, however, would not be to expand capacity but to de-bottleneck its operations. All of this would be through internal fund generation.
“The way our European operations are reviving while our Indian operations keep generating a good cash flow, we have been encouraged to start investing again in a systematic manner,” said Koushik Chatterjee, group chief financial officer, Tata Steel. “Till now, we were focussed on conserving cash. But now we are more confident of the upturn in the demand situation.”
The company’s FPO, which will be open till Friday, will see issue of 5.7 crore equity shares through which the firm hopes to raise around R3,744 crore. Part of this will be used to bring down the debt, which currently stands at around $10 billion (R45,330 crore) while some part will be used to fund capacity expansions.
“Of the funds that will be raised through the FPO, around R1,800 crore will flow to our ongoing expansion project in Jamshedpur,” Chaterjee added. The company is investing R16,000 crore in expanding the capacity at Jamshedpur, India’s oldest steel plant, by 3 million tonnes per annum.
Simultaneously, the firm will keep selling smaller portfolio investments in order to further de-leverage its balance sheets and bring down its debt.
It is currently involved in selling off its Teesside unit for which an enterprise value of $ 500 million (R2,266 crore) has been set.