Tata Steel Ltd is set to further dilute its equity to raise funds for the acquisition of Anglo-Dutch steel-maker Corus Group Plc and a public issue of Tata Steel equity is the preferred route right now. According to sources close to the developments, the company plans to raise around $2.5 billion (Rs 11,000 crore) by diluting its equity.
The total money to be raised for the Corus deal is $12.5 billion (Rs 55,000). Of this, a special purpose vehicle has been set up in London to raise another $8.5 billion directly as debt. This will be a non-recourse debt against the cash flow of Corus.
The remaining $4 billion (Rs 17,600 crore) will be raised by Tata Steel Ltd. ABN Amro and Standard Chartered are arranging a debt of around $1.5 billion (Rs 6,600 crore). This debt will be on the Tata Steel balance sheet and the interest to be paid out for this debt will affect the Tata Steel revenues to that extent. The remaining $2.5 billion (Rs 11,000 crore) will be raised as equity. Sources said Rs 11,000 crore was such a huge sum that the company would have to utilise all avenues of raising finances, including promoters equity, preferential allotment and public offering of its shares.
Tata Steel spokesperson, however, refused to comment. “The details of the financing for the Corus deal will be announced by the end of the month. We cannot say anything more right now,” he said.
While the financing is already in place, a lot of Indian banks are eager to jump on to the bandwagon. However, only some large banks such as the State Bank of India and ICICI Bank, who have the ability to lend in foreign currency, will be able to participate in the process. The Tata Steel scrip closed at Rs 438.55 on the national Stock Exchange on Wednesday, up 1.43 per cent from Monday’s close.