The Hindu Business Line : Moody's ranks Tata Steel on par with global majors

MOODY'S Investor Services has positioned Tata Steel on par with steel majors, Arcelor and Thyssen Krupp, by assigning a `Baa2' rating with stable outlook.

This assumes importance as Tata Steel plans to raise Rs 5,000 crore for its expansion programme. The rating for Tata Steel is one notch above Moody's current sovereign rating for India of Baa3 and is also the highest rating for an Indian company.

The senior implied rating reflects Moody's opinion on Tata Steel's ability to honour its financial obligations as if it had a single class of debt and a single consolidated legal entity structure, the company said.

At this level, Tata Steel is one notch below New Corp, Posco and Nippon Steel, Mr B. Muthuraman, Managing Director, Tata Steel, told reporters. The company has scheduled an extra-ordinary general body meeting to seek its shareholders' approval for raising Rs 5,000 crore. Apart from internal accruals, the company will look at a combination of rupee and foreign currency debt. At the end of the current fiscal, Tata Steel's outstanding debt will be Rs 3,000 crore. The company plans to take its steel production to 15 million tonnes (mt) by 2010 from 4 mt in 2004.

Some of its plans include investment in NatSteel; 2.4-mt expansion at Jamshedpur; 6-mt greenfield expansion at Orissa; a greenfield project at Bangladesh; port infrastructure at Dhamra, Orissa; a coke project at Haldia; a limestone joint venture in Thailand; a ferro-chrome project in South Africa and a titania project at Tamil Nadu.

Tata Steel has completed the techno-commercial feasibility study for its titanium project. "We are in the process of acquiring land," he said. Environmental studies are being conducted by World Wildlife Fund and National Environmental Engineering Research Institute for the Dhamra Port joint venture with Larsen & Toubro. Mr S. K. Mohapatra, former chairman of Paradeep Port Trust, has been appointed as the chief of the joint venture.

For the Greenfield project at Bangadesh, a pre-feasibility study is on and should be completed by the end of April , Mr Muthuraman said. "There are three stages in the feasibility study. After the second feasibility report, we will apply for coal mining licence," he said.

Steel prices to go up

Steel prices will be stable or may go up marginally in the next 12 months, said Mr B. Muthuraman.

"When raw material availability increases, prices will drop," he said. In the interim, Tata Steel is likely to raise prices of its steel products, including those that are supplied through long-term contracts, as input costs have been rising. But Tata Steel prices are competitive and lower than other domestic players and imported goods, he said.

Domestic demand for steel is expected to remain firm. Mr Muthuraman said that Tata Steel is not dependent on price changes.

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