ICICI Bank has extended a debt facility of ₹2,675 crore to Tata Steel for a term of three years. This facility will be used by Tata Steel to repay its existing debt. The details of this development were shared by sources familiar with the matter. However, both ICICI Bank and Tata Steel have not responded to requests for comments from ET (Economic Times).
Tata Steel raises funds through unsecured fixed-rate bonds
Tata Steel has successfully raised ₹2,700 crore through unsecured fixed-rate bonds. According to documents filed with the National Securities Depository Ltd, these bonds carry an interest rate of 7.79%. The repayment for these bonds is scheduled for March 27, 2027.
Bond pricing and refinancing efforts
The bonds issued by Tata Steel have been priced attractively at 72 basis points over three-year government securities. This is notable considering that these are unsecured bonds. A bond trader has highlighted this favorable pricing.
In addition, a report by CareEdge Ratings in July 2023 revealed that Tata Steel had already refinanced around 60% of its debt obligations for FY24. The company was expected to complete another tranche of refinancing, covering approximately 40% of its debt obligations for the year, by the first half of FY24. The report also mentioned that Tata Steel’s management was on track to achieve its repayment target of $1 billion.
Tata Steel’s capacity expansion plans and liquidity position
Tata Steel is one of the leading steel producers in India, with a standalone capacity of 21.6 million tonnes per annum of crude steel. The company aims to expand its total capacity to 40 million tonnes per annum by FY30. A report by India Ratings, released in February, highlighted that a significant portion of this capacity expansion is expected to be achieved through brownfield projects since the existing plant locations have room for additional capacity.
India Ratings also expects Tata Steel’s liquidity to be supported by strong cash accruals and on-balance sheet liquidity of ₹10,800 crore for the nine months ended December 2024. The company has scheduled annual consolidated repayments of ₹16,000 crore in FY25.
Impact of restructuring and future plans
The restructuring of Tata Steel’s UK operations is expected to have a positive impact on the company’s consolidated financial profile. These operations have been a drag on Tata Steel’s cash flows. As part of the restructuring, Tata Steel plans to replace blast furnaces with more cost-efficient and environment-friendly electric arc furnace-based steelmaking capacity of 3 million tonnes per annum by FY27. The UK government has reportedly agreed to fund up to GBP500 million of the planned capex of GBP1.25 billion.
India Ratings anticipates a reduction in fixed cost overheads from FY26, which will result in positive cash accruals for Tata Steel’s UK business.
Overall, Tata Steel is making significant efforts to strengthen its financial position, refinance its debt, expand its capacity, and enhance its operational efficiency. These initiatives are expected to positively impact the company’s financial profile and support its future growth plans.
The ICICI Bank has taken splendid action to provide credit facility of Rs 2675/- crore This facility will be used by Tata Steel to repay its existing debt. The details of this development were shared by sources familiar with the matter. However, both ICICI Bank and Tata Steel have not responded to requests for comments from ET (Economic Times). This is matter of great concern for us that these are restructuring of Tata Steel’s UK operations is expected to have a positive impact. Tata sterel isdues Bonds as Govt. securities for three years. But the Bank must once organise to meet either the financial advisers of Tata steel and get updated