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Tisco to raise Rs 2.5 bn through preference shares

Rakesh Kumar Dubey in Calcutta

Tata Iron and Steel Company Limited is planning to raise Rs 2.50 billion by issuing preference shares to meet long-term investments.

Senior vice-president and executive director (finance) Ishaat Hussain said to enable the issue of the preference shares, the company plans to increase its authorised capital from Rs 4.40 billion to Rs 6.90 billion.

It has not yet been decided when these shares would be issued and whether it would be bodies corporate, financial institutions, banks, foreign investors, mutual funds, trust or other entities, he said.

Citing the reason for going in for preference shares, Hussain said it had become an attractive avenue of investment, offering good scope for the issuer to reduce the overall cost of funds without reducing the post-tax yield to the investors.

The company would issue 2.5 million cumulative redeemable preference shares of Rs 100 each which would confer on the holders, the right to a fixed preferential dividend from the date of allotment, at a rate to be fixed at the time of the issue, he said.

The preference share would rank of capital and dividend, including all dividends undeclared upto the commencement of winding up, and for repayment of capital in a winding up, pari passu inter se and in priority to the ordinary shares of the company, but would not confer any further or other right to participate either in profits or assets.

It would be redeemed at any time after six months, from the date of allotment, but not later than ten years, and a final decision on this would be taken later.

Incidentally, the steel major had raised Rs 5 billion by way of secured and unsecured redeemable non-convertible debentures to finance its capital expenditure and working capital requirements and for general corporate purposes.

A buyer's credit facility of 6.778 billion Japanese yen was also arranged with the Export-Import Bank of Japan and the outstanding amount of $ 98.086 million of the 2.25 per cent foreign currency convertible bonds were redeemed on March 31.

Company's profit after tax during the last financial year declined to Rs 2.82 billion from Rs 3.22 billion in 1997-98, but board of directors had recommended a dividend of 40 per cent to the shareholders.

UNI

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