Tata Steel ups borrowing limit to Rs 50,000 crore

MUMBAI: Tata Steel will borrow up to Rs 50,000 crore in loans as the company, which recently refinanced the debt it had taken to acquire Corus, is now more comfortable to raise funds for capacity expansion and purchase of mines to consolidate its position as the world's seventh-largest steelmaker.

The board of the Jamshedpur-based steel company agreed to raise the borrowing limit from Rs 40,000 crore and has sought shareholders' permission in an extraordinary general meeting. The current borrowing level for Tata Steel is Rs 28,300 crore.

Tata Steel wants to borrow to expand capacity at Jamshedpur to 10 million tonnes, build a new steel plant at Kalinganagar in Odisha and also make global investments in raw material projects overseas. The company would also require funds to finance general corporate requirements and invest in subsidiaries.

Last year, Tata Steel had refinanced the entire debt in Corus through a Rs 25,000-crore term loan and revolving credit facility, replacing the existing term loans taken for acquiring Corus. Under the term finance, there are lighter obligations and reduced loan repayments.

According to institutional shareholder advisory, IIAS, "The improved terms of Tata Steel Europe's debt will translate into reduced financial burden on Tata Steel. The company therefore has the flexibility to borrow to meet its additional capex and working capital requirements."

As on December 31, 2011, Tata Steel's net debt totalled Rs 50,528 crore. Last year, the company had raised about Rs 4,977 crore through a follow-on public offer and bond issue. The company is currently expanding capacity and building a 6-mt steel plant at Kalinganagar in Odisha. Tata Steel will spend about $800 million in Kalinganagar, about $600 million in Europe and about $400-500 million at Jamshedpur.