TATA STEEL, SUZLON HIT THE GDR TRAIL

AIM TO MOP UP RS 4,440 CRORE

TATA Steel and Suzlon Energy aim to raise up to $925 million (about Rs 4,440 crore at current exchange rates) by selling shares to international investors, three days after India's largest copper producer Sterlite Industries collected $1.5 billion (about Rs 7,200 crore) from a sale of shares in the US.
    The sale of these issues began on Monday and is expected to be over by Tuesday. Tata Steel, the world's sixth-largest steel maker, will issue global depository receipts (GDR) worth $400 million with an option to collect $350 million more, depending on investor response. Suzlon, the world's fifthlargest wind turbine maker, is offering GDRs worth $100 million, but has kept an option to collect $75 million more.
    A number of Indian companies sold shares in the market this year to repay expensive debt and fund expansion plans, encouraged by an improvement in economic indicators and a strong rally on local bourses. Tata Steel and Suzlon have been planning to sell shares to foreign investors for some time, but the success of the Sterlite issue that was sold out in six hours prompted them to hit the market now, said a banker. Many other firms could follow their lead, he said, requesting anonymity.
    Sterlite Industries, part of the Londonlisted Vedanta Resources, on Wednesday raised $1.5 billion through an issue of American depository shares (ADS), the first such issue by an Indian company in two years. Sterlite said it would use the ADS issue proceeds to finance its power generation plans and other planned capital expenditure. Of the $1.5 billion raised, about $500 million (about Rs 2,400 crore) would come from parent Vedanta, while $1 billion (about Rs 4,800 crore) was from institutional investors. Tata Steel will use the proceeds to part finance its growth plan, said a person familiar with the matter. Tata Steel to invest Rs 10k cr to raise capacity
"THEcompany doesn't have any liquidity requirement, nor any repayment obligation," he said, requesting anonymity.
    Tata Steel is in the process of investing Rs 10,000 crore in the country in the next two years to raise capacity by 3 million tonnes. The company has an annual production capacity of 30 million tonnes in India and overseas.
    Tata Steel's GDR is priced at the rupee equivalent of Rs 370. At this price, a collection of $750 million will mean a 3.5% equity dilution by the Tata group, which currently holds around 34% stake in the company.
    Tata Steel's GDR rose 2% to $8.07 on the Luxembourg Exchange on Monday, extending the gain this year to 80%. Tata Steel shares fell marginally to close at Rs 391.10 on the BSE on Monday. Tata Steel officials declined comment on the development. The Tulsi Tanti-controlled Suzlon Energy will utilise the proceeds of the issue to retire debt.
    The company also plans to divest its entire 61% stake in its Belgian subsidiary Hansen Transmissions to retire debt of around Rs 12,000 crore, said a person aware of the development, who asked not to be named. The GDR is priced at the rupee equivalent of Rs 89.55, he said. Suzlon has been in talks with potential buyers including Spanish wind turbine maker Gamesa and Vestas of Denmark to sell Hansen.
    Suzlon is expected to earn over $1 billion from the sale. Suzlon shares fell marginally to close at Rs 94.10 on the BSE on Monday. Citi, UBS, JP Morgan and Goldman are arrangers to the Tata Steel issue while Citi, Deutsche Bank and Credit Suisse advised Suzlon.