India’s foremost private sector steel company, Tata Steel, plans to increase crude steel capacity to 30 million tons a year by 2025, from the present level of approximately 20 million tons a year.
Toward that goal, the steelmaker said it will raise U.S. $600 million. Part of this would go to refinance its own loans and the rest will be used to fund the CAPEX of phase two expansion at its pilot plant at Kalinganagar.
According to a Live Mint report, Tata Steel was focused on increasing free cash flow to reduce its debt burden, according to CFO Koushik Chatterjee. He made this statement while addressing the media after the company’s annual shareholders meeting.
According to media reports in India, Tata Steel’s debt had started worrying shareholders. The company was staring at debt running into billions of dollars, some of it due to two recent buyouts in the last fiscal year.
According to the CFO, the company’s target was to cut down gross debt by $1 billion in FY 2020, after Tata Steel’s proposed merger of its European operations with Thyssenkrupp AG fell apart following failure to meet Europe’s antitrust requirements.
Tata Steel is still optimistic that would eventually make its European operations self-sustainable. Much of its earnings will go to servicing its European operations.
According to Tata Steel Chairman N Chandrasekaran, the company’s first aim is to increase capacity in India, the Economic Times reported.
During Tata Steel’s 112th Annual General Meeting (AGM) on July 19, the chairman told shareholders that last year Tata had talked of a merger of the European subsidiaries in the Netherlands and Britain with Thyssenkrupp. But the plan, he said, unfortunately, did not meet the standards of the E.U.’s competition commission.
To generate cash flows, the company will dispose of certain assets and bring down the number of subsidiaries through mergers, the chairman said during the AGM.
The company CFO told reporters there are no plans to increase borrowing after raising the $600 million, according to the Economic Times.