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Tatas don't plan overseas listing yet: Muthuraman
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January 31, 2007

Indian corporate giant Tata Steel outbid Brazil's CSN on Corus in a nerve-wrecking auction that lasted more than eight hours. The bid which started at 455 pence per share in October, finally ended at 608 pence/share for Corus.

In an exclusive interview with CNBC-TV18, Tata Steel's managing director, B Muthuraman informs that they will bring Corus' EBITDA to Tata Steel's levels.

According to him, the combined EBITDA margin of 25 per cent is seen in 4-5 years. He further mentions that Tata Steel's contribution of $4.1 billion will be a combination of debt and equity.

He adds that the loan on SPV should be serviceable via Corus' operations. Muthuraman states they have not considered an overseas listing in the board meeting.

Excerpts of CNBC-TV18's exclusive interview with B Muthuraman:

Could you give the markets some guidance about what could be the consolidated EBITDA of the two entities maybe in 2008-2009, once you consolidate operations?

I can't give you answers specifically about 2008-2009, EBITDA and so on. But the basic idea is that over time and over the next few years, the attempt is to bring the EBITDA level of Corus approaching to the EBITDA level's of Tata Steel. It will happen in many ways.

It will happen starting with some synergies in the market place, in manufacturing, in shared services, in many other areas then it will start happening in terms of our de-integrated manufacturing philosophy that we will employ on another future date. So the basic idea is to approach the EBITDA levels that Tata Steel has been able to achieve over the years.

How long would it take before you to get to something like 25-30% consolidated EBITDA?

I would expect 25-30 per cent EBITDA levels in about 4-5 years time.

You spoke about $4.1 billion being the contribution of the Tatas in terms of non-debt towards this deal. Do you have any loose numbers of how equity contribution would be and how much equity you would have to raise?

As we explained in the press conference, Tata Steel plus Tata Sons together is about $4.1 billion, which has many components. Not all of it is equity and not all of it is debt. So there is a mixture of debt and equity in that and that is something, which we will do it very prudently, so that it doesn't impact Tata Steel.

What would be the roadmap for Tata Steel in terms of its own equity-raising plan for its contribution. Would you do a domestic issue or rights issue or global issue?

I won't be able to comment on that just now.

How sensitive is this figure of 25-30% operating EBITDA, consolidated EBITDA in 4-5 years to how steel prices may move in that period?

We have looked at all of that which is why we were willing to pay the price that we have paid for Corus. We believe that at this price, Tata Steel's own performance, in terms of its ability to execute all its announced projects, its ability to service its loans, its ability to pay dividends to shareholders - all of them are not affected, in fact they get enhanced.

At the same time, we are ensuring that the loan that we take on the SPV (Special Purpose Vehicle) is serviceable from the earnings of Corus with improved operations of Corus. So these are factors that we have taken into consideration while making this bid and making this acquisition.

What are the chances that Tata Steel itself will do a global listing and raise capital from the global equity market in the next 1-1.5 years?

I can't comment on that at this stage.

Have you discussed it at all at the board level?


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