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Rediff.com  » Business » India Inc back on GDR expressway

India Inc back on GDR expressway

July 22, 2009 11:19 IST

India Inc is back in the overseas equity markets with a bang. If Sterlite Industries raised $1.5 billion from the US market last week, Tata Steel and Suzlon Energy today raised $700 million through issue of Global Depository Receipts in a move to fund expansions and partly repay liabilities.

Tata Power also joined the queue on Tuesday and launched its $250-million GDR issue, with an option to retain a higher amount. The fund is expected to be used for setting up greenfield projects, having a capacity of 5,660 Mw at a cost of Rs 25,000 crore (Rs 250 billion). The company had tied up for Rs 18,000 crore (Rs 180 billion) debt and was looking at external borrowings.

Tata Steel, the world's sixth largest steelmaker, raised $500 million (approximately Rs 2,415 crore) through the GDR issue, the largest by an Indian company in the London market, exceeding SBI's $370-million issue in 1996. Further, wind energy major Suzlon has raised $201.91 million (about Rs 976 crore) by issuing GDRs, as well as Foreign Currency Convertible Bonds.

"We are seeing interest for Indian paper from investors in Asia, India and Europe, though they are being selective," said Vedika Bhandarkar, managing director and head (investment banking), JP Morgan India.

Citigroup Global Markets, Goldman Sachs International, JP Morgan Securities and UBS arranged the share sale for Tata Steel. Tata Steel shares shot up 5.28 per cent to Rs 411.75 on Tuesday, while the Sensex fell 0.85 per cent. Its GDRs on Monday rose 0.7 per cent to $8.13 on the Luxembourg exchange, extending its gain this year to 81 per cent.

Suzlon shareholders, however, reacted negatively to the securities issue, with the shares falling 3.45 per cent to Rs 90.95 on the Bombay Stock Exchange.

Tata Steel sold 65.4 million shares at $7.644 each as part of the GDR issue. That's a 6 per cent discount to yesterday's closing price in Luxembourg. The shares will be listed in London, the company said in a statement.

Suzlon has issued 14.6 million GDRs priced at $7.40 each and each GDR would represent four equity shares of the company.

The Tata GDR will lead to an equity dilution of 7.4 per cent and the total equity capital post issue will be Rs 887.40 crore. The promoters' stake in the steelmaker will be reduced to 31.16 per cent from 39.87 per cent. After the equity dilution of 3.75 per cent, the promoters' stake in Suzlon will reduce to 57.58 per cent from 59.82 per cent.

Suzlon has raised $108.04 million through the issue of GDRs and remaining $93.87 million through bonds, the company said in a statement to BSE. The GDRs will be listed on the Luxembourg Stock Exchange.

The fund raised will be used for the expansion of Tata Steel's largest plant in Jamshedpur and development of overseas mines, said Koushik Chatterjee, Tata Steel group's chief financial officer. Moreover, company sources said a part of the fund would be used for the acquisitions of iron ore and coking coal mines abroad.

In May, Tata Steel UK, a subsidiary of the Indian steel maker, had received lenders' approval to reset the covenants in its £3.7 billion Corus acquisition-related debt, after it agreed to infuse £425 million into the European business. As part of the package, around 200 million pounds will be used to prepay debt and de- leverage the European balance sheet, Tata Steel earlier said in a statement.

Suzlon will use the proceedings from the GDR for capital expenditure, working capital and repayment of loans, said an official. However, the fresh FCCB issue is mainly to restructure its earlier $500 million zero-coupon FCCBs. The existing bondholders of the $500 million issue could swap for new convertible bonds. Those who disagree with swap could receive certain fees, said the official.

Tracey Pierce, head of equity primary markets at the London Stock Exchange Group, said, 'today's announcement by Tata Steel is a vote of confidence in the continued strength of the London Stock Exchange's offering to international companies.'

Tata Steel, which became global player after buying Corus for $12 billion in 2007, plans to raise its production in India to 10 million tonne as domestic demand for the metal rises. Corus, which cut 40 per cent production in December, is looking for raw material security to reduce input costs and raise profit margins.

BS Reporter in Mumbai
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