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Tata Steel's proposal to sell 57 million shares through a follow-on public offer could see the company dilute equity by around 6 per cent.
Though they could raise Rs 3,600 crore at the current market prices, the company may have to raise funds at a discount, as most follow-on offers in recent times have been priced lower than the market.
The move comes as the company gets set to put up a Rs 10,000 crore (3.2 million tonne) steel capacity at its Jamshedpur facility by the beginning of 2011-12 and procure equipment for its Rs 22,000 crore, 3 million tpa facility at Odisha, which it hopes to commission by early-2014.
Tata Steel's consolidated debt stood at just over Rs 56,000 cr in the period ended September 2010.
The additional equity which the company hopes to raise would lower its debt equity ratio to around 1.6 from the current 2 levels. However, the reprieve from debt could be temporary as the company may need to borrow additional amounts for its Orissa expansion.
In an effort to lower borrowing costs, the company had refinanced its debt at lower rates late last year.
The company had issued 27 million shares and warrants valued at between Rs 1,200 cr and Rs 1,300 cr in May 2010 to promoter Tata Sons.
The company also sold assets such as a chemical subsidiary of Corus, 27 per cent stake in Malaysian steel company Berhad for $75 million and is in the process of selling its loss-making slab casting facility at Teeside, UK to a Thai steel company for an estimated $500 million.
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