ICICI Bank Provides Tata Steel Rs.2,675 Crore in Debt Facility

ICICI Bank has extended a debt facility of ₹2,675 crore to Tata Steel for a term of three years to facilitate the repayment of its existing debt, according to sources familiar with the matter.

Tata Steel has successfully raised ₹2,700 crore through unsecured fixed-rate bonds at an interest rate of 7.79%, as per documents filed with the National Securities Depository Ltd. The repayment schedule for the bonds involves a bullet payment to investors on March 27, 2027, as outlined in the documents.

Both ICICI Bank and Tata Steel did not respond to requests for comment from ET.

The bonds have been priced competitively, with a spread of 72 basis points over three-year government securities, particularly notable given their unsecured nature, noted a bond trader. Last week, the three-year G-sec was trading at 7.07%.

According to a report by CareEdge Ratings in July 2023, Tata Steel has successfully refinanced approximately 60% of its debt obligations for FY24 and aims to complete another tranche of refinancing, covering around 40% of its debt obligations for the year, by the first half of FY24. The management is targeting to achieve its repayment target of $1 billion.

Tata Steel ranks among the top three steel producers in India, boasting a standalone crude steel capacity of 21.6 million tonnes per annum. The company aims to expand its total capacity to 40 mtpa by FY30, with a significant portion of the expansion likely to be brownfield, given the capacity potential at its existing plant locations, as highlighted in a February report by India Ratings.

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

Furthermore, India Ratings anticipates that Tata Steel's consolidated financial profile will benefit from the restructuring of its UK operations, which have previously strained the company's cash flows. Tata Steel Europe is set to transition its blast furnaces to more cost-efficient and environmentally friendly electric arc furnace-based steelmaking capacity, targeting a capacity of 3mtpa by FY27. The UK government has reportedly agreed to fund up to GBP500 million of the planned capex of GBP1.25 billion.

The agency forecasts a reduction in fixed cost overheads from FY26 onward, resulting in positive cash accruals for Tata Steel's UK business.