Tata Steel is planning to raise ₹12,800 crore through a rights issue to fund expansion of steel capacity to eight million tonnes a year from three million tonnes at its Kalinganagar plant in Odisha.

Besides using the capital for capacity expansion, Tata Steel will also utilise it to deleverage its balance sheet and scout for organic and inorganic growth, said a company statement on Tuesday.

Tata Steel is in the race for buying Essar Steel, which is being auctioned under NCLT-driven bad debt resolution process.

The board of directors of the company met here over the last two days to approve the fund-raising and capacity expansion proposals, said Tata Steel.

The company plans to complete the expansion project at Kalinganagar with an investment of ₹23,500 crore.

The project is expected to be completed in 48 months from the date of start of the project.

Tata Steel, with an annual capacity of 13 million tonnes, is currently logging in capacity utilisation of 98 per cent despite a marked slowdown in demand.

Costs

The company is raising production capabilities to meet the requirements of automotive, general engineering and other value-added segments.

The cost for ramping up the Kalinganagar facility includes raw material capacity expansion, upstream and midstream plants and a cold-rolling complex, it added. Though the demand is yet to revive in India, steel companies are betting on Prime Minister Narendra Modi’s plans to build roads, ports and power plants.

The company is focussing on the Indian market after selling some of the unprofitable assets in the UK and agreeing to merge its European operations with Thyssenkrupp AG.

With Tata Steel’s European business set to be transferred to the proposed 50:50 joint venture with German industrial major Thyssenkrupp AG, the former will be looking to restructure the remaining debt on its balance sheet to more sustainable levels.

However, the proposal is awaiting regulatory clearances.

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