The Hindu : Business : Tata Steel raises Rs.1,500 crore

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Saturday, Mar 19, 2011
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Tata Steel raises Rs.1,500 crore

NEW DELHI: Tata Steel on Friday said it had raised Rs.1,500 crore through issuing perpetual corporate hybrid securities to part-fund its growth plans. “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 options,” Tata Steel Group Chief Financial Officer Kaushik Chatterjee said in a statement. A hybrid security is an instrument having characteristics of both debt and equity. Fund raising through such securities is common in the U.S. and Europe.

It is only catching up in Asia. These securities allow higher flexibility for corporate financing while reducing capital costs for issuers. At the same time, it adds to the investors' choices for portfolio allocations. “The unique feature of the securities that they are perpetual in nature with no maturity or redemption and are callable only at the option of the company. These (hybrid) securities rank only to share capital of the company. This provides equity characteristics to these hybrid securities,” Tata Steel said. Tata Steel has kept the distribution rate at 11.8 per cent per annum with a step-up provision if the securities are not called after 10 years, the release said. — PTI

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