Tata Steel Plans to Double Borrowing Capacity to $10 Billion Meet Project Costs

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Researched by Industrial Info Resources (Sugar Land, Texas)--In its recently released report for the fiscal year 2007-08, India's Tata Steel (BOM:500470) (Mumbai) announced plans to increase its borrowing capacity from $5 billion to $10 billion to meet project costs involved in its greenfield and brownfield expansion plans. The firm will require approval from its shareholders and plans to seek their consent at its 101st annual general meeting scheduled to be held in Mumbai on August 28. The firm had obtained shareholder consent to borrow up to $5 billion at the 2006 meeting. The firm's borrowings stood at $4.5 billion as of March 31, 2008, the end of the 2007-08 fiscal year.

Tata Steel, which is on a major expansion drive, plans to invest an aggregate $16.35 billion to develop three greenfield projects in the country. The firm plans to invest $10 billion in a 12 million-ton-per-year steel plant in Tontaposhi, Jharkhand, $3.85 billion in a 6 million-ton-per-year plant in Kalinganagar, Orissa, and $2.5 billion in a 5 million-ton-per-year integrated steel plant in Bastar, Chhattisgarh. The company has already procured equipment worth $1.5 billion for the upcoming plant in Orissa. It also plans to expand the production capacity of its Jamshedpur, Jharkhand, facility by 7 million tons per year.

The company secures raw material domestically for its 5 million-ton-per-year steel production capacity in India. However, Corus (London), which Tata Steel acquired last year, is dependent on raw material imports for its production level of 18 million tons per year. Tata Steel has entered into several joint ventures to secure raw material supplies, such as limestone and iron ore, and aims to attain 100% raw material self-sufficiency in India and 50% self-sufficiency in Europe. These include joint ventures with Societe d'Etat pour le Developpment Minier de la Ivory Coast (Abidjan, Cote d'Ivoire) to develop iron ore mines in Mount Nimba and with the Al Baheja Group (Sultanate of Oman) to develop the Uyun limestone deposits in Salalah. The firm also plans to undertake significant expansion activities in the Carborough Downs mine in Queensland, Australia, in partnership with Vale (NYSE:RIO) (Rio de Janeiro, Brazil). Last year, the company invested $88 million to acquire a 35% stake in a coal mine in Mozambique. Tata Steel is also developing a ferrochrome plant in South Africa. It has entered into an agreement with Vietnam's government to set up a 4.5 million-ton-per-year steel manufacturing plant in the country.

In May of this year, the company raised $500 million through a private placement of redeemable nonconvertible debentures. In November 2007, it came out with a $2.5 billion rights issue to repay the bridge loans it had raised to fund its $13 billion acquisition of Corus. The firm has also set up Tata Steel Global in Singapore as a holding company for all of its overseas assets. The company has firmed up plans to raise $2.5 billion in debt to fund its $3 billion expansion plan in India.

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