Tata Steel plans $332m perpetual bonds: Sources

Tata Steel, the world's seventh-largest steelmaker, plans to sell Rs 1,500 crore (USD 332 million) of perpetual bonds, two sources with direct knowledge said, marking the first ever issuance of hybrid corporate bonds in India.

The Tier-I bonds will carry a coupon of 11.8% payable semi-annually but the schedule for the issue has not yet been decided, one of the sources told Reuters on Wednesday, adding that ICICI Bank and JPMorgan are arrangers to the deal.

Separately, a company source with direct knowledge who did not wish to be named told Reuters: "We want to launch the issue this month. There is no pressing need to raise capital and we will go ahead if pricing continues to be attractive."

In December, Tata Steel said it received shareholder approval to raise USD 1.5 billion, it subsequently raised USD 770 million in a share sale in January.

The share sale was to fund a 3-million-tonne capacity expansion at a plant in eastern India and repay a part of its USD 10 billion debt.

The company had net debt of USD 11.8 billion at December-end.

Bankers say the demand for Tata Steel's perpetual bonds, or perps, would depend on the final structure of the issue.

"It will also be a function of how it is structured. If there is a very attractive step up step up, then you might see interest from institutional investors as well," said Nirav Dalal, managing director and country head of fixed income and debt capital markets at Yes Bank in Mumbai.

"We could see some well-rated corporates issuing perpetual bonds, coupon will have to be attractive and upwards of double-digits for sure."

(USD 1 = 45.2 rupees)