Through NCDs, Tata Steel will raise Rs. 2,000 crore

Through NCDs, Tata Steel will raise Rs. 2,000 crore

Domestic steel producer Tata Steel announced on Wednesday that its board of directors has resolved to sanction financing of Rs. 2,000 crores through the private placement of non-convertible debentures (NCDs).

The committee has given its approval for the issuing of debt instruments in the form of NCDs, the business stated in a statement with the BSE. 20,000 NCDs with a face value of $100,000 each will be issued in two series, with Series 1 Debentures totalling $500 billion and Series 2 Debentures totalling $1,500 billion.

According to Tata Steel, the issue is broken into two series.

Amount of the problem

Two series make up this issue:

• 500 crore worth of 5,000 NCDs with a face value of 10,000 apiece make up the Series 1 Debenture.
• 15,000 NCDs with a face value of $10,000 each make up the Series 2 Debenture, which is worth $1,500 crore.

5,000 NCDs with a face value of $20,000 each will be issued in series one to raise a total of $500 million.

The first series has an allocation date of September 20, 2022, and a maturity date of September 20, 2027.

In contrast, 15,000 NCDs with a face value of $1,000,000 each will be issued as part of the second series to raise an additional $1,500 crore. The date of allocation is September 20, 2022, and the date of maturity is September 20, 2032.

India Ratings and CARE Ratings gave the NCDs an AA+ rating.

The wholesale debt market (WDM) segment of BSE Limited is where the NCDs are intended to be listed.

Tata Steel Group is one of the largest steel manufacturers in the world, with an annual capacity of 34 million tons of crude steel.

For the quarter ending June 30, 2022, the steel major’s net profit decreased 12.83% to 7,764.96 crores on a consolidated basis. Sequentially, the PAT fell by 20.4% from the $9,756 crore realized during the January–March quarter.

On Wednesday, September 14, 2022, shares of Tata Steel increased 1.25% to 109.10.

A newly integrated private steel company was established in 1907 in India as Tata Steel. Moreover, they created the first industrial city in India Jamshedpur with this initiative. The company is one of the world’s leading steel manufacturers today.

Fundamental: The corporation is involved in every step of the steel production process, from mine and processing coal and iron ore to creating and marketing completed goods. The business sector is strong, and items will continue to be in demand.

1. In the steel industry, the company ranks second.
2. Quarterly and yearly net profits are increasing.
3. As the company’s assets increase, it grows.
4. It has a very strong cash flow.
5. The promoter, FII, and DII shareholders account for 75% of the shares.
6. Approximately 42% of equity returns are generated.
7. With a dividend yield of 4.75%, the stock provides a good return on investment.

Advice on buying NCDs

• NCDs are exclusively used by businesses to raise money in order to achieve a certain goal. Read the terms and conditions, and don’t invest if they don’t make it clear how or where your money will be utilized.
• Risks can be significantly decreased by diversification or investing across several companies and time periods.
• It is risky to invest in NCDs from a specific industry (NBFCs that specialize in personal loans). Heightened exposure to risk may result from this.
• In the past, NCDs from secondary markets have regularly generated higher earnings. You buy earlier NCDs when a business publishes a new one.
• Don’t base decisions only on interest rates. Even a low NCD yield won’t make a difference because that yield determines your real returns.
• Your NCD’s interest payment date is the ideal moment to sell it. A non-convertible debenture is trading at its best right now. More money can be expected as a result.

Companies can generate long-term capital through a public offering by using non-convertible debentures as a strategy. Lenders often receive a greater rate of return than they would with convertible debentures in order to offset the disadvantage of non-convertibility.

In addition, NCDs provide the owner with a number of other advantages, including high liquidity through the stock market listing, source tax exemptions, and safety since they can be issued by businesses with a solid credit rating, as defined in the RBI’s NCD issuing guidelines. Typically, in India, they must have a minimum maturity of 90 days before they may be issued.

edited and proofread by nikita sharma