MUMBAI: Tata Steel, in a bid to prevent a hostile takeover, will see its promoter, Tata Sons, increasing its stake in the company from the current 20 per cent to about 27.5 per cent in the future, according to Ratan Tata, Chairman, Tata group.

Addressing shareholders at the company's 99th annual general meeting here on Wednesday, Mr. Tata said the company was planning to raise around Rs. 6,500 crore largely from overseas markets to fund future acquisition, expansion and greenfield requirements.

As part of the fund raising programme, Tata Steel will be making a preferential allotment to Tata Sons in two tranches in the next two years.

Allotment of warrants

It will offer Tata Sons 2.7 crore ordinary shares of Rs. 10 each at a price of Rs. 516 per share (as per the Securities and Exchange Board of India pricing formula), involving an amount of Rs. 1,393.20 crore and 2.85 crore warrants where each warrant will entitle Tata Sons to one ordinary share of the company against payment of cash.

Tata Sons can exercise the option after April 1, 2007, but not later than 18 months from the date of issue of the warrants.

The price at which the warrants will be exercised will be determined in accordance with the SEBI pricing formula at that time.

Steel prices to remain firm

Mr. Tata expected that the steel prices would remain firm and the domestic consumption of steel would grow at 8 per cent but said that the steel industry was likely to see further consolidation in the future.

Tata Steel's capital expenditure for the year is at Rs. 500 crore, while it would spend up to Rs. 70,000 crore over the next ten years to take its steel capacity to around 30 million tonnes annually. The Tata Steel Chairman said that work on the company's ferro chrome manufacturing facility in South Africa would commence in a month and it would be completed over 24 months at a cost of Rs. 440 crore.

The Chairman ruled out a merger of the Tata group's metals companies, namely, Tata Metaliks and Tata Sponge Iron, with Tata Steel.

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