Tata Steel’s cash and cash equivalents as on March 31, 2014, were Rs 11,373 crore; its net debt was Rs 67,326 crore.
“Though the net debt figure was reduced to Rs 67,300 crore in January-March 2014, the capital expenditure guidance for 2014-15 has been raised to Rs 16,000–17,000 crore. The company’s capital expenditure and debt are likely to peak out in 2014-15. Capital expenditure in 2015-16 is expected at Rs 10,000 crore, with an upward bias,” said Goutam Chakroborty, institutional research analyst for metals and mining at Emkay Global Financial Services.
Tata Steel has spent around Rs 16,400 crore on capital expenditure in 2013-14, with a large portion deployed at its greenfield plant in Odisha.
“Despite this significant spend, we were able to keep the net debt level stable over the last quarter. Liquidity remains adequate with around Rs 18,000 crore of cash and cash equivalents and undrawn credit lines, in addition to the undrawn KPO financing,” Koushik Chaterjee, group executive director for finance and corporate had said while announcing the company’s results on May 19.
Last month, the company sold its 25-acre Borivili land parcel in Mumbai to Oberoi Realty through e-auction for Rs 1,155 crore. In the same month Tata Steel and L&T also sold Dhamra Port for Rs 5,500 crore to Adani Ports. Analysts said the company would most likely use the funds to reduce debt.
“Tata Steel had invested in the port to help it ship products from its new plant in Kalinganagar. The plant will start production by this year-end. Over the past few years, Tata Steel’s borrowing has risen alarmingly after the acquisition of Corus and it has been selling assets to reduce debt. The company’s ongoing capital expenditure plans for this financial year would further escalate its debt,” said Sanjay Jain, analyst at Motilal Oswal.
However, the company’s loans are expected to come down once investment in the Kalinganagar project is completed, as steel demand is expected to revive both in the domestic and overseas market by then, improving the company’s cash flow.
“In 2014-15 Tata Steel’s crude steel volume is likely to touch 9.7 million tonnes, with finished steel at 9.2 million tonnes. The Odisha project is progressing and is likely to start producing from fourth quarter of 2014-15. Most of the capex in 2014-15 would be in Odisha, with possibility of Rs 4,000- 5,000 crore debt drawdown,” Chakroborty of Emkay said.
Volumes from the company’s European operations in 2014-15 are expected to be broadly similar to 2013-14, with slight scope of improvement.
Kamlesh Bagmar, at Prabhudas Lilladher also felt that the company’s ongoing investments in the Kalinganagar project would keep Tata Steel’s debt at a higher level. However, as steel demand is expected to improve from the second half of this year, the company’s net debt may slowly start declining, as higher steel realisation would help the company improve its future cash flow.
Source: mydigitalfac.om
