100th Annual Report 2006-2007 - Tata Steel

convertible preference shares and about USD 500 million from a
foreign issue of equity-related instrument.
Tata Steel UK Limited, a wholly-owned indirect investment
subsidiary of the Company, has contracted a USD 6.14 billion
long-term debt from a consortium of banks, with a non-recourse
provision as far as Tata Steel is concerned. The balance amount
of USD 2.66 billion is proposed to be raised through a long tenor
quasi-equity or debt capital market instrument.
Considering the large amount of funds required, adequate care
has been taken to ensure that the additional borrowings are
efficiently priced and serviced without overly stretching the
Company’s balance sheet. The financing structure also allows deleveraging
of Corus without any pre-payment costs and provide
flexibility to take advantage of better terms in the future.
A secured loan of USD 400 million was availed from IFC
(Washington) to part finance the domestic expansion projects.
During the year, total loans increased to Rs. 9,645 crores from
Rs. 2,516 crores in the previous year, due to increase in the foreign
currency loans of Rs. 7,225 crores (USD 1.65 billion) for funding the
acquisition of Corus. The proportion of foreign currency loans to
the total loans was 76% in the year under review as compared to
11% in the previous year.
Raising of Finance Through Preferential Issue of
Shares and Warrants to Tata Sons Ltd.
At the Annual General Meeting of the Company held on
5th July, 2006, the shareholders had approved the proposal to
raise additional long term funds, including through preferential
issue of securities to the main promoter, Tata Sons Limited (TSL).
In terms of SEBI (DIP) Guidelines 2000, the Board, at its meeting
held on the same day, approved the preferential issue of
2,70,00,000 Ordinary Shares of Rs. 10 each, at a premium of
Rs. 506 and 2,85,00,000 warrants to TSL, where each warrant
entitled TSL to subscribe to one Ordinary Share of the Company
against payment in cash. The option to convert the Warrants into
Ordinary Shares was exercisable on or after 1st April, 2007.
Pursuant to the above, 2,70,00,000 Ordinary Shares of Rs. 10
each were allotted to TSL on 19th July, 2006, at a premium of
Rs. 506 per share aggregating to Rs. 1393.20 crores. On 16th
April, 2007, TSL exercised its option to convert 2,85,00,000
warrants into Ordinary Shares at a price of Rs. 484.27 per
share. Accordingly, 2,85,00,000 Ordinary Shares of Rs. 10 each
The combination of Tata Steel and Corus
will give the Company access to highly
developed and competitive markets of
Europe, a strong product portfolio and stateof-the-art
technology in manufacturing.
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