Tata Steel to raise up to $1 billion via GDR

KOLKATA: Tata Steel, India's largest steelmaker by capacity, has started the process for an overseas sale of shares to raise up to $1 billion, in order to reduce debt incurred in 2007 to acquire Corus.

The Jamshedpur-based steel company has already taken shareholders' approval to raise up to $1.5 billion. While the global depository receipt ( GDR) issue would raise $1 billion, Tata Steel hasn't yet decided on the mode of raising the remaining $500 million.

The GDR issue could likely be priced at a discount of just under 4%, to the current market price, according to people familiar with the development, who added that the price would be close to 670 a share. An external spokeswoman for Tata Steel could not be reached on her mobile.

Shares of Tata Steel, which have been trading firm in the past week on expectations of improved profitability, on Tuesday rose to an intra day high of 713.80 on the Bombay Stock Exchange, before closing at 694.50.

Investors have been buying shares of Tata Steel because of expectations that measures to reduce debt coupled with strong demand for steel in Asia and Europe, could lead to better earnings for the company.

Tata Steel's debt stood at $10 billion as on September 30, 2010. Tata Steel has been working on an equity fund raising plan and chose the GDR method to raise up to $1 billion. JPMorgan, Citi, Standard Chartered, RBS, Kotak and HSBC are among the banks advising Tata Steel on the GDR issue.