ICICI Bank Grants Rs 2,675 Crore Debt Facility to Tata Steel for Three Years

ICICI Bank Grants Rs 2,675 Crore Debt Facility to Tata Steel for Three Years
ICICI Bank has extended a substantial debt facility of Rs 2,675 crore to Tata Steel for a term of three years, according to sources familiar with the matter. This financing arrangement is intended to aid Tata Steel in repaying its existing debt obligations. The move comes as part of Tata Steel's broader strategy to manage its financial obligations effectively.
Meanwhile, Tata Steel has successfully raised Rs 2,700 crore through the issuance of unsecured fixed-rate bonds at a competitive rate of 7.79%. These details were disclosed in documents filed with the National Securities Depository Ltd. The bonds are set to mature on March 27, 2027, with Tata Steel committing to making a bullet payment to investors at that time.
Despite repeated attempts, neither ICICI Bank nor Tata Steel has responded to requests for comments on this development, as reported by ET.
The bond issuance has been perceived positively by market participants, with a bond trader noting the favorable pricing of the bonds. Priced at a slim margin of 72 basis points over three-year government securities, the bonds are particularly attractive considering they are unsecured. Last week, the three-year G-sec was traded at 7.07%.
In a report from July 2023, CareEdge Ratings highlighted Tata Steel's successful refinancing efforts, with approximately 60% of its debt obligations for FY24 already refinanced. The report also noted the company's intention to complete another tranche of refinancing, covering around 40% of its debt obligations for the year, by the first half of FY24. Management targets achieving a repayment target of $1 billion.
Tata Steel, positioned among India's top three steel producers, boasts a standalone crude steel capacity of 21.6 million tonnes per annum. The company aims to further expand its total capacity to 40 mtpa by FY30, primarily through brownfield expansions at its existing plant locations.
India Ratings, in a report released in February, expects Tata Steel's liquidity to be supported by robust cash accruals and on-balance sheet liquidity amounting to Rs 10,800 crore in the nine months ended December 2024. However, the company faces annual consolidated repayments of Rs 16,000 crore in FY25.
The ratings agency also anticipates favorable impacts on Tata Steel's consolidated financial profile following the restructuring of its UK operations. Tata Steel Europe plans to replace blast furnaces with more efficient and environmentally friendly electric arc furnace-based steelmaking capacity by FY27, partially funded by the UK government.

India Ratings projects a reduction in fixed cost overheads from FY26 onwards, leading to positive cash accruals in Tata Steel's UK business. This restructuring initiative is expected to enhance the company's overall financial resilience and competitiveness in the global steel market.v