Mumbai: The Tata group plans to raise its stake in the country's largest private steel maker, Tata Steel Ltd., to ward off possible hostile takeover bids, Chairman Ratan Tata said on Wednesday.
Last week, the world's top steel maker, Mittal Steel - which agreed $32.54 billion deal to acquire rival Arcelor - said it was eyeing acquisitions in emerging markets such as China and India.
"The steel industry is highly fragmented and considerably vulnerable. The only safeguard is to increase promoters' stake over time," Ratan Tata told shareholders of Tata Steel.
He said the group's stake in the steel firm, held by holding company Tata Sons and other firms, would rise to 33.6 per cent by the end of this financial year in March 2007 from 26.79 per cent.
Last month, Tata Steel said it planned to raise up to Rs 65 billion through one or more equity-related issues, which would increase the company's paid up capital by 15 per cent.
Tata Sons' stake in the steel firm may rise to 27.5 per cent of the expanded capital after a preferential issue of ordinary shares, he said.
"Tata Sons is also willing to consider shareholders approval for a 10 per cent preferential issue – at the price determined by SEBI according to a formula at what I think at today's price is 515 rupees per share – in two tranches," he said.
SEBI, or the Securities and Exchange Board of India, is the market regulator.
The first tranche of the issue will raise up to Rs 13 billion in the current financial year, Tata said.
Tata Steel produced more than 5 million tonnes in the year to March 2006 and plans to reach 7.5 million tonnes by 2008. India is forecast to raise its steel production capacity to 65 million tonnes by 2011 or 2012 from 38 million now.
Easy availability of raw materials such as iron ore and coal and a burgeoning domestic market have drawn global majors such as Mittal Steel and POSCO to India.
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