Tata Steel may invest $2-2.4 bn annually in capacity expansion

Tata Steel plans to invest around $2-2.4 billion annually, from the financial year 2011-2012 for the next three years, in capacity expansion, portfolio revision and debt restructuring.

Group CFO Koushik Chatterjee today said the company was planning massive capacity expansion for its facility in Jamshedpur. The expansion is expected to increase the company’s production there by 3 mtpa (million tonne per annum). “This expansion will be funded more from debts than equity. This is likely to be completed by the second half of February, between October–February,” he said.

The expansion in Jamshedpur facility also includes a new blast furnace with 3.1 mtpa, a new pellet unit with 6 mtpa capacity and a steel melting plant.

“Through the FPO we will make up for the last couple of years when consumption of capital was required due to the financial crisis. The objectives of this public issue are to part finance the company’s share of capital expenditure for expansion of existing works at Jamshedpur, pay off redemption amounts on maturity of certain redeemable non-convertible debentures issued by the company on a private placement basis and general corporate purposes,” Chatterjee said.

By the next financial year, the company plans to source coking coal from Mozambique and iron ore from Canada by 2013-2014. Of the total investment of $2-2.4 billion, the company plans to invest £400-425 million per annum in its European operations in the next two years. “Our focus in Europe is on restructuring... We have been investing about £200 million so far annually in the last couple of years. We will raise that to about £400-425 million per annum,” he said.

The company, which had a net debt of $10.7 billion on September 30, aims to reduce its debt-equity to 1:1 (from the current 1.4:1) in the next 12 months by commissioning of the

3 mtpa project in Jamshedpur and hiving off the Teesside plant in Britain.