Funding of Corus transaction
April 17, 2007

At the board meeting held today, the board approved the following sources of funding Tata Steel's investment of $4.1 billion (about Rs17,750 crore) in its wholly owned subsidiary Tata Steel Asia Holdings (Singapore), which would in turn invest the same in Tata Steel UK which has acquired Corus plc UK.

1. As part of Tata Steel's contribution, the company has already invested the following as part of its equity commitment:
   
   a) Internal generation — Rs3,000 crore ($700 million).
   b) External commercial borrowings — Rs2,170 crore ($500 million).
   c) Funds from the preferential issues of equity shares to Tata Sons (which were approved earlier and have since been allotted) — comprising equity shares of the face value of Rs56 crore at an average price of Rs499.7 per share, which has provided a total amount of Rs2,770 crore ($640 million).
   
   
2. The following proposals have now been approved by the board:

• A rights issue of equity shares to the shareholders in the ratio 1:5 at a price of Rs300 per share (of Rs10 each), which would involve issue of equity shares of the face value of Rs122 crore and would provide an amount of Rs3655 crore ($862 million).
• A simultaneous but un-linked rights issue of convertible preference shares in the ratio of 1:7 having a coupon rate of 2 per cent with conversion into equity shares after two years at a price in the range of Rs500 to Rs600 per share as may be determined at the time of the issue. This issue would provide a total amount of about Rs4,350 crore (about $1000 million).
• Tata Sons would stand-by to take up the unsubscribed portion of both the above issues in fulfilment of its support to Tata Steel for the Corus acquisition.
• A foreign issue of an equity-related instrument up to an amount of $500 million (about Rs 2,100 crore, including the premium) in such form as may be considered appropriate. This issue would be made on an ex-right basis and on terms as may be determined at the time of the issue subject to approval of the shareholders.

The following important points of this total financing scheme of $4.1 billion (about Rs17,750 crore) may be noted:

a) For the acquisition, Tata Steel will be utilising additional debt of only $500 million (about Rs2,170 crore) which represents only 12 per cent of the total amount required.

b) Apart from the preferential issues of equity shares of Rs56 crore allotted to Tata Sons (at prices which were higher than the then prevailing market prices), Tata Steel would be raising additional equity share capital of the face value in the range of about Rs250-280 crore depending on the final pricing of the various issues. This increase in the equity capital will come into effect only in stages during the three financial years 2007-08 to 2009-10 which will therefore ease the burden of servicing.

c) The post-tax cost of this total financing package on completion is expected to be around 4.3 per cent per annum.

The above-mentioned issues and the details thereof would be subject to such approvals as may be required and such modifications as may be considered necessary in the course of implementation.

The long term financing pattern for the net acquisition consideration of Corus would be $12.9 billion and Tata Steel UK would be funded in the long term from the following sources:

a) Tata Steel will provide $4.1 billion from the various sources indicated above and will invest the above quantum through its wholly owned indirect subsidiary Tata Steel UK.

b) Non-recourse debt financing arranged by a consortium of banks of $6.14 billion directly at Tata Steel UK.

c) The balance amount of $2.66 billion has presently been raised in the form of bridge finance in Tata Steel Asia Singapore, and discussions are under way to raise these funds through appropriate instruments.