Tata Steel may prepay loans of up to Rs 4,700 crore taken for acquisitions

Tata Steel is likely to prepay up to ₹4,700-crore loans taken for acquisitions of Bhushan Steel and Usha Martin as the metal maker aims at making these two companies’ debt free in the next two quarters.

While Tata Steel BSL has around ₹4,000 crore outstanding net external debt, Usha Martin has about ₹700 crore outstanding net debt. Tata Steel BSL is in the NCLT for the merger with the parent.

“We are not raising any capital, but we are looking at deleveraging,” Koushik Chatterjee, executive director and CFO at Tata Steel, told ET in an interaction.


“Interest costs will keep going down due to lower leverage levels,” he said. “We aim to make Bhushan and Usha Martin external debt free in a quarter or two.”

In April-June quarter, all Tata Steel companies including Bhushan and Usha Martin have had a 20% plus reduction in their leverage levels compared with the starting of the last financial year.

Tata Steel had taken a rupee-denominated bank loan for about ₹15,000 crore nearly three years ago through a process of syndication for Bhushan acquisition. For Usha Martin, the sum was about ₹3,500 crore.

In Europe, Tata Steel foreclosed half a billion euro worth of bank debt well before its scheduled maturity in coming years.

Tata Steel is considering prepaying up to $1 billion (₹7,315 crore) of foreign loans, taking advantage of a commodity price super cycle that has boosted the company’s cash position, ET reported on June 7.

Interest rates are globally going south as the economic cost of the pandemic is rising.

The three-month LIBOR (London Interbank Offered Rate), a global gauge until now, plunged about 250 basis points to 0.25% now since November, 2018.

Tata Steel has begun evaluating the long term ESG financing options and identifying the deployment strategy as it plans for capital allocation on its sustainability strategy.

“Once we finalise this, we will likely tap offshore ESG funds although it may take some time as our first priority is to deleverage further this financial year,” said Chatterjee.