Tata Steel plans to raise as much as 128 billion rupees (2 billion U.S. dollars) in its equity offerings to expand its India-based capacity, given that steel demand in India is expected to triple in the coming decade.
Tata Steel said in a paper submitted to the exchange on Tuesday that the money will be used to build and buy steel mills and to pay off its debts. The board also approved an increase of 5 million metric tons of capacity at its Kalinganagar mill in Orissa. According to the paper, the capacity expansion will lasted 48 months, cost 235 billion rupees, Tata Steel's local production capacity will eventually be increased to 18 million tons.
Tata Steel sold some of its previously beleaguered UK assets and, at the same time, reached an agreement with ThyssenKrupp to consolidate the two European steel operations and shift more focus to the Indian local market. India is the second largest populous nation in the world. Based in Mumbai, Tata Steel and its domestic rival, JSW Steel, have high hopes for increased demand for steel from the Indian Prime Minister's domestic construction plan, including the construction of highways, ports and power plants. In addition, the growing consumer demand for automobiles and homes will also drive steel sales.
The document also mentions that increasing the capacity of steel mills is to meet the steel demand in the automotive, engineering and other high value-added production areas. The costs involved in increasing Kalinganagar's capacity include the expansion of raw material capacity, the cost of upstream and midstream plants and cold rolling facilities.
Tata Steel has an annual capacity of 13 million tons and is the third largest steel producer in India excluding JSW Steel and the Indian Iron and Steel Authority.
According to the Indian Iron and Steel Institute, by 2030, Indian steel consumption is expected to rise threefold to 240 million tons, mainly from the construction industry.
