Tata Sons to raise holding in Tata Steel

As soon as NRI steel tycoon, Mittal announced that he would now focus on India and China for expansion, Tata Sons, the parent company of Tata Steel decided to raise its stake in the company to 33%. This was planned in order to prevent takeovers.

Mittal, who last month succeeded in merging his company Mittal Steel with nearest rival Arcelor to create the world’s largest steel entity, is arriving here today.

Tata group chief, Ratan Tata told shareholders at the company’s 99th annual general meeting on Wednesday that there will be a raise in the holdings of the promoters in order to act as a shield to takeovers.

Tata steel, which recorded its highest ever PAT at Rs 3,700 crore in Financial Year 2006, will be raising Rs 6,500 crore within the next few months to meet its expansion. Tata also said fund is required for expansion in Jamshedpur, acquisitions at right time and also to meet requirements of three Greenfield project in Orissa, Chhattisgarh and Jharkhand would be expanded to a capacity of 1.8 million tonne per year.

Through a preferential issue at the SEBI-determined prices in two tranches, Tata Sons will be injecting 10%. Tata Steel plans to tap foreign markets for the remaining as the price it would be able to obtain will be close to the market value.

In the first tranche, Tata Sons will be putting in Rs 1300 crore and after the 10% preferential issue, Tata Sons holding Tata Steel will increase to 33% from the present level of 26 %.

Tata Steel has also embarked a capital expenditure of Rs 70,000 crore over the next ten years. Tata said that for the next two years, the company will be spending about Rs 500 crore and this would be the normal capital. The company announced a dividend of 130%.