ICICI Bank provides Rs 2,675-crore debt facility to Tata Steel for three years

Mumbai: ICICI Bank has provided a ₹2,675 crore debt facility to Tata Steel for a term of three years to repay its existing debt, said people aware of the development.
Tata Steel has raised ₹2,700 crore through unsecured fixed-rate bonds at 7.79%, show documents filed with National Securities Depository Ltd.

Tata Steel will make a bullet payment to both investors on March 27, 2027, as per the documents.

ICICI Bank and Tata Steel did not respond to ET's request for comment.

The bonds are finely priced - at 72 basis points over three-year government securities - more so because these are unsecured bonds, said a bond trader. Three-year G-sec was traded at 7.07% last week.

"The company has successfully refinanced around 60% of its debt obligations for FY24 and is expected to complete another tranche of refinancing (around 40% of its debt obligation for the year) by H1FY24," CareEdge Ratings said in a July 2023 report. The report said that the management was expecting to achieve its repayment target of $1 billion.

Tata Steel is among the top three steel producers in India with 21.6 million tonnes per annum of crude steel capacity on a standalone basis. The company targets to expand its total capacity to 40 mtpa by FY30. A large part of the balance capacity is likely to be brownfield as each of its India plant locations is capable of accommodating additional capacity, a report by India Ratings released in February said.

India Rating expects Tata Steel's liquidity to be supported by strong cash accruals and on-balance sheet liquidity of ₹10,800 crore in the nine months ended December 2024. It has scheduled annual consolidated repayments of ₹16,000 crore in FY25.

India Ratings pointed out that Tata Steel's consolidated financial profile is likely to benefit from the restructuring of TSL's UK operations, which have been a drag on the company's cash flows. TSL is expected to replace its blast furnaces with more cost-efficient and environment-friendly electric arc furnace-based 3mtpa steelmaking capacity by FY27. The management has conveyed to the rating agency that the UK government has agreed to fund up to GBP500 million of the planned capex of GBP1.25 billion.

The agency expects fixed cost overheads to reduce from FY26, resulting in positive cash accruals in the UK business.