Tata Steel has successfully completed India's first-ever offering of corporate hybrid securities with an issue of Rs1,500 crore ($332 million). The issue of perpetual bonds was arranged by JP Morgan Securities India Private Ltd and ICICI Bank Ltd.
The bonds are perpetual in nature with no maturity or redemption and are callable only at the option of the company. The interest rate on the securities (which may be deferred at the company's option) is 11.8 per cent per annum.
The bonds have a step up provision for interest rate if the securities aren't called after 10 years.
These securities rank senior only to the share capital of the company. This provides equity characteristics to the bonds and makes them "hybrid" securities.
"The issuance of these perpetual hybrid securities is an important step in the overall financing strategy and capital structure management of the Tata Steel Group.
As Tata Steel continues to develop and execute its significant and earnings-accretive growth plans, this innovative long-term funding with equity features but without the associated economic dilution helps to diversify our financing option," said Kaushik Chatterjee, chief financial officer of the Tata Steel Group.