A day ahead of its follow-on public offer, Tata Steel today said it will double its investments on European operations to 400-425 million pounds (Rs 2,900-3,000 crore) annually in the next couple of years to increase productivity.

“Our focus in Europe is on restructuring… We have been investing about 200 million pounds so far annually in the last couple of years. We will raise that to about 400 to 425 million pounds per annum,” Tata Steel Group CFO Koushik Chatterjee told reporters here.He added that investments are mainly for improving productivity and for various other initiatives being targeted in Tata Steel Europe.

Talking about the capital expenditure and other investments, the Tata Steel CFO said the company overall will invest about $2-2.2 billion annually in the next 2-3 years for capacity expansion and other related things.

Tata Steel’s FPO to sell 5.7 crore shares opens tomorrow and is expected to fetch Rs 3,477 crore at the higher end of the price band of Rs 610 a share. It will raise Rs 3,385 crore at the lower end of price band of Rs 594 a share.

The issue opened today for anchor investors.

The company, which had a net debt of $10.7 billion on September 30, 2010, plans to reduce its debt-equity to 1:1 (from the current 1.4:1) in the next 12 months through various ways like commissioning of 3 MTPA project in Jamshedpur and hiving off Teeside plant in UK.

The enterprise value of Teeside is about $500 million and once that comes through, a part of that will certainly go towards enriching the balance sheet of the company, Chatterjee said.

“Some (Rs 1,000 crore) of the debt will be written off through this fund raising… These measures will enable us effectively to re-balance the debt:EBIDTA (Earnings before interest, taxes, depreciation, and amortisation) to about 2.5 times which is our target level also,” Chatterjee said.

He added that Rs 1,800 crore from the FPO proceeds will be used to part-finance of Jamshedpur expansion project.

Talking about the Kalinga Nagar project, which is being developed in two phases of 3 MTPA each, Chatterjee said construction work will be begin there by month end.

On the raw material requirements of the company, the Tata Steel CFO said that iron ore from Canada will come in 2012-13, where it had formed a joint venture with New Millennium Capital Corporation in October 2010.

He added that coal from Mozambique will be shipped in smaller quantities in FY11-12 onwards.

Tata Steel today closed at Rs 632.45 on the Bombay Stock Exchange, up 1.53 per cent from the previous close.

source: Business-Standard

Tags: tata steel, tata steel india, tisco

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