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Saturday, Dec 11, 2004

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IFC may fund Tata Steel's NatSteel buy

N. Ramakrishnan

Jamshedpur , Dec. 10

INTERNATIONAL Finance Corporation, the private finance arm of the World Bank, is likely to part-finance Tata Steel's acquisition of NatSteel Ltd of Singapore.

According to reliable sources, IFC is now evaluating the request made by Tata Steel for a loan of about Rs 800 crore. The loan is likely to be disbursed to NatSteel with Tata Steel providing a "comfort letter," according to the sources.

The sources said that IFC was also expected to pick up a "small equity stake." Among the issues being evaluated by IFC as part of its appraisal process are Tata Steel's social initiatives such as schemes for the welfare of tribals in and around its steel plant in Jamshedpur, Jharkhand.

It may be recalled that Tata Steel had announced in August 2004 its decision to acquire the steel business of NatSteel Ltd of Singapore. Under the agreement, NatSteel would spin off its entire steel business into a wholly-owned subsidiary, NatSteel Asia Pte Ltd, after which Tata Steel would acquire 100 per cent stake in NatSteel Asia for a sum of Rs 1,313 crore.

NatSteel has a capacity of 2 million tonnes and has plants in China, Thailand, Vietnam, the Philippines and Australia. The acquisition also brings with it NatSteel's 26 per cent stake in Southern Steel Berhand of Malaysia, a 1.3 million tonne steel producer.

Tata Steel had described its acquisition of NatSteel's steel business as a beachhead investment in high growth markets.

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