Tata Steel will offer 57 million new shares through a follow-on public offer (FPO), the company said in a notice to the stock markets, without giving any further details.
The company said: “Committee of Directors of the Company at its meeting held on January 11 approved a follow-on public offer of 57 million ordinary shares of Rs 10 each of the company for such price as may be determined through the book-building process under the Sebi regulations.” The offer will also include a reservation for eligible employees for 1.5 million shares. It did not announce any other details regarding the offer and said details like the price band and minimum bid issue would be declared at least one day before the opening date of the issue.
Sources, however, say that the company is looking to raise anything between Rs 3,500-Rs 5,000 crore from this FPO which is expected to hit the street on January 19. Earlier, the company was planning to raise the money through the DVR route and held road shows for the same in the month of October and November but couldn't generate much investor interest. It was then decided to raise money through the FPO route.
Taking its Tuesday's share closing price as an example, if Tata Steel issues 57 million shares at Rs 647.60 per share, the company will be raising close to Rs 3,700 crore.
In a board meeting on November 12, 2010, Tata Steel had approved money raising of up to Rs 7,000 crore through various routes, FPO being one of these.
The promoter shareholding in Tata Steel, on a basic equity of 902 million shares, as on September 30, 2010, stands at 32.48 percent and post issuance of the 57 million shares, the new basic equity holding of the promoter will come down to 30.55 per cent.
The company has ambitious expansion plans on the line-up beginning with its Jamshedpur 3 million tonne project, expected to be commissioned by September 2011. Apart from that, the company, in a joint venture with Nippon Steel, will also be setting up an autograde steel manufacturing unit at Jamshedpur for Rs 2,300 crore. Tata Steel will have 51 per cent stake in the JV. Also, Tata Steel is looking to set up a 6-million-onne steel plant in Kalinganagar, Orissa and a 5-million-tonne steel plant in Chhattisgarh. With a net debt of $10.7 billion as on September 30 and refinanced loans worth £3.53 billion.
Tata Steel also announced its production and sales figures for the third quarter ended December 31. It said steel deliveries for the third quarter increased by 3 per cent, at 1.637 million tonnes, when compared against the corresponding quarter last year, however, were lower by 1 per cent sequentially.
It said: “The pricing environment in India in the third quarter was mixed, with prices for flat products being marginally lower compared to the second quarter, while prices of some long products increased.”
The company's European subsidiary produced 3.7 million tonnes of steel in the third quarter and its deliveries stood at 3.5 million tonnes, lower by 8 percent year-on-year and 1 percent sequentially. It cautioned that the high raw material prices and reduced demand had adversely affected Tata Steel Europe's margins.
On a consolidated basis, volumes declined marginally when compared to the second quarter of 2010. "Due to the increased raw material prices experienced in the third quarter, Tata Steel further expects its operating results for the third quarter to decline somewhat in comparison to the second quarter," the company said.