SAIL raises Rs 300 cr by selling short-term paper

State-owned Steel Authority of India Ltd (SAIL) has raised Rs 300 crore by selling a short- term commercial paper to State Bank of India to meet temporary cash needs.

"We sold 74-day paper to State Band of India, Mumbai to meet temporary mismatch in cash flow," a SAIL spokesperson told PTI.

However, the spokesperson refused to provide further details on the papers as well as the use of raised funds.

But market sources said the paper carried 6.4 per cent coupon rate.

Sources said the company may be in need of cash due to its expansion plans, which could later be funded through the funds to be raised by follow-on public offer as well as other resources.

The navratna company is undertaking Rs 70,000 capacity augmentation programme take its production capacity from present about 14 million tonnes per annum (MTPA) to 23 MTPA by 2012-13.

The steel major is slated to launch its 20 per cent share sale plan in two tranches, which could generate up to Rs 16,000 crore. The first phase of the share sale is likely in January.

The company has invited merchant bankers to manage the first phase of its share sale programme, under which the government plans to divest 5 per cent of its stake in the company, while the steel giant will issue additional shares equivalent to a 5 per cent stake, SAIL said last week.

Another 10 per cent stake will be sold under the second phase of the FPO, the timing of which will be decided later.

The two-phase FPO may help raise a total of Rs 16,000 crore, Steel Minister Virbhadra Singh had earlier said.

At present, the government holds a stake of a little over 85 per cent in SAIL and post-FPO, its equity in the company is expected to go down to about 69 per cent.

SAIL wants to part-fund its Rs 70,000 crore expansion programme with the proceeds from the share sale, while for the government, the stake dilution will help attain its disinvestment target of Rs 40,000 crore for this fiscal.