Tata Steel board okays Rs4,000 crore FPO

The board of Tata Steel on Tuesday approved its plans for a follow-on public offer (FPO) of 5.7 crore shares to raise about Rs4,000 crore. The sale proceeds would be used to bring down its $10-billion debt it took to buy European steel producer Corus (See: CSN blinks at 603p, Tata Steel bags Corus for $12.11 billion).

The FPO would result in an equity dilution of nearly 6 per cent in the expanded capital base of Tata Steel, the seventh largest steel producer. The promoter's holding will come down by about 2 per cent.

The issue also includes reservation of 1.5 million shares for employees of Tata Steel.

The company didn't disclose details of the offer and said that it was consulting merchant bankers to decide on the price band and the minimum lot of the issue. At Tuesday's market price of Rs648, 5.7 crore shares will fetch nearly Rs3,700 crore to the company.

After the additional issuance of equity, Tata Group's holding in the company will decline from 32.48% to 30.55%. Tata Steel become the group's flagship after the Jamshedpur-based company acquired Corus in 2007, boosting its revenues manifold.

In November last year, Tata Steel said that it was planning to raise as much as Rs7,000 crore and was looking at various options, including equity issuance with differential dividend and voting rights, global depository receipts and foreign currency bonds.