Tata Steel Plans $3 Billion Loan to Refinance Corus-Linked Debt

By Anurag Joshi - Jun 13, 2014

Tata Steel Ltd. (TATA), India’s biggest producer of the alloy, is in discussions with banks to raise a $3 billion loan for refinancing debt taken to fund the acquisition of Corus Group Plc in 2007.
The company plans to borrow in five- or seven-year tenor to repay debt used to purchase U.K.-based Corus for $12.9 billion, according to three people familiar with the matter. The funds may be denominated in U.S. dollars and other foreign currencies, the people said, asking not to be identified because the terms aren’t set. Tata Steel spokesman Kulvin Suri declined to comment.
Chairman Cyrus Mistry is seeking to take advantage of a revival in demand in Europe, the company’s biggest market, and falling borrowing costs to refinance part of the $6.14 billion obligation taken to finance the Corus acquisition. Tata Steel has the equivalent of $15.4 billion of bonds and loans due, according to data compiled by Bloomberg.
“Dollar rates are favorable at the moment, and they may seek to take advantage before the U.S. and U.K. raise interest rates,” said Taina Erajuuri, who helps manage the equivalent of about $1 billion in emerging-market assets at FIM Asset Management in Helsinki. “The company’s debt levels are still high and this move will help them repay some of this at lower rates.”
Margins on foreign-currency denominated loans taken by Indian companies have averaged 176 basis points in the first half of 2014 versus 197 in the six months ended Dec. 31, according to data compiled by Bloomberg. Indian companies have borrowed about $10.1 billion from overseas this year, data show.

Convertible Notes

The company may also use part of the proceeds from the planned loan to repay other debt on its books, the people said. Mumbai-based Tata Steel is rated BB, two levels below investment grade, by Standard & Poor’s.
Tata Steel’s shares fell 4.4 percent to 525.55 rupees in Mumbai yesterday, while the benchmark S&P BSE Sensex index dropped 1.4 percent. Prices of Tata Steel’s 4.5 percent convertible notes due in November fell to $101.375, compared with $101.625 on June 12, according to Jefferies Group LLC prices.
The company reported a profit including that of Tata Steel Europe Ltd. of 10.4 billion rupees ($174 million) in the quarter ended March 31, compared with a 65.3-billion-rupee loss a year earlier.
Group steel deliveries rose 16 percent in the quarter to 7.62 million tons. Registrations for new cars in the European Union jumped 5.4 percent in the period, the longest streak of year-on-year gains since 2009, according to Bloomberg Industries.
To contact the reporter on this story: Anurag Joshi in Mumbai at ajoshi53@bloomberg.net
To contact the editors responsible for this story: Arijit Ghosh at aghosh@bloomberg.net Dick Schumacher

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India’s Rupee Drops to One-Week Low on Importers’ Dollar Demand

By Kartik Goyal - Jun 12, 2014

India’s rupee dropped to a one-week low on speculation local refiners boosted dollar purchases to pay for oil imports after the government reported the widest trade deficit in ten months.
The trade shortfall was $11.2 billion in May, the most since July, according to official figures released yesterday. Oil imports rose 2.5 percent to $14.5 billion last month, according to the commerce ministry.
“Looks like the oil companies are in the market and that is weighing on the rupee,” said Naveen Raghuvanshi, a Mumbai-based currency trader at DCB Bank Ltd.
The rupee declined 0.1 percent to 59.32 per dollar as of 10:34 a.m. in Mumbai, according to prices from local banks compiled by Bloomberg. The currency touched 59.3625 earlier, the weakest since June 4.
The yield on the 8.83 percent notes due November 2023 slipped one basis point, or 0.01 percentage point, to 8.53 percent, prices from the central bank’s trading system show. A government report due at 5:30 p.m. local time today may show consumer prices rose 8.4 percent in May, after a 8.59 percent gain in April, according to a Bloomberg News survey of analysts.
One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, declined seven basis points to 7.05 percent, data compiled by Bloomberg show.
Three-month offshore non-deliverable forwards were little changed at 60.07 per dollar, according to data compiled by Bloomberg. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
To contact the reporter on this story: Divya Patil in Mumbai at dpatil7@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Anil Varma, Andrew Janes

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India 2023 Bonds Drop for a Third Day Amid Inflation Concern

By Shikhar Balwani - Jun 11, 2014

Indian government bonds due 2023 fell for a third day on concern inadequate rains will curtail farm output and drive food prices higher.
The monsoon, the main source of water for the nation’s 263 million farmers, will be 93 percent of a 50-year average of 89 centimeters (35 inches), down from an April forecast of 95 percent, the India Meteorological Department said June 9. Ten-year bonds rallied last week, with the yield slumping 13 basis points to 8.51 percent, after the central bank said it could ease policy should inflation slow more than anticipated.
“There are concerns that a weaker rainy season will push up food prices,” Debendra Kumar Dash, a fixed-income trader at DCB Bank Ltd. in Mumbai, said by phone. “Markets were due to consolidate after last week’s rally and the worries around inflation have given them a reason to do that.”
The yield on the 8.83 percent notes due November 2023 rose two basis points, or 0.02 percentage point, to 8.58 percent as of 10:04 a.m. in Mumbai, prices from the central bank’s trading system show. It climbed five basis points in the past two days.
India will issue data on consumer prices for May tomorrow and wholesale-price inflation figures on June 16. Reserve Bank of India Governor Raghuram Rajan, who has raised the benchmark repurchase rate by 75 basis points since taking charge in September, left it unchanged at 8 percent for a second straight meeting on June 3.
The RBI aims to curb consumer-price gains, which were 8.59 percent in April, to 8 percent by January 2015 and 6 percent a year later. A drought in India’s main agricultural regions may hamper efforts to revive economic growth and control prices.
One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, rose two basis points to 8.26 percent, data compiled by Bloomberg show. The contracts slumped 22 basis points last week to the lowest level since July 2013.
To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Robin Ganguly, Anil Varma

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India’s Sensex Declines From Record as Metal Producers Retreat

By Rajhkumar K Shaaw - Jun 10, 2014

India’s benchmark stock index fell from an all-time high amid concern the rally that made it the best performer among emerging markets this year has exceeded the outlook for earnings.
Engineering company Larsen & Toubro Ltd. (LT) halted a six-day, 13 percent surge. Oil & Natural Gas Corp. (ONGC) dropped the most in three weeks. Aluminum producer Hindalco Industries Ltd. (HNDL) slid the most in two weeks, pacing losses among its peers. The top five gainers on the benchmark S&P BSE Sensex (SENSEX) this year dropped more than 1 percent each.
The Sensex lost 0.7 percent to 25,402.07 at 10:39 a.m. in Mumbai. The gauge has risen 20 percent this year amid optimism Prime Minister Narendra Modi will boost spending and speed up project clearances to revive growth from near a decade low. The gauge trades at 15.6 times projected 12-month profits, the most expensive times since January 2011, data compiled by Bloomberg show. The new government is due to present it annual spending plan early next month.
“We’ve had a fabulous run so just take some chips of the table until the budget tells you how the government plans to make things happen,” Anil Ahuja, chief executive officer at Singapore-based IPEplus Advisors, said in an interview with Bloomberg TV India today. The market is “expensive,” he said.
The Sensex rallied to a record for a third day yesterday, sending its 14-day relative strength index to 79.6, the highest reading in two weeks, data compiled by Bloomberg show. Some investors see readings above 70 as a signal to sell.

El Nino

Stocks also declined amid concern inadequate monsoon rain will hurt farm output, potentially boosting inflation. Showers during the June-September period, crucial for crops from sugar to rice and cotton, will be 93 percent of a 50-year average, the state-owned weather office said on its website yesterday. That’s less than 95 percent of the average predicted in April.
“The rain gods could play havoc,” Ahuja said.
Modi will make curtailing food inflation his top priority, President Pranab Mukherjee said yesterday, outlining the two-week-old government’s policies.
Foreign investors bought a net $578.7 million of domestic shares on June 6, taking this year’s inflows to $9 billion, the most among eight Asian markets tracked by Bloomberg.
To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net
To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Ravil Shirodkar, Matthew Oakley

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Indian Stocks Climb to Record as Infrastructure Companies Gain

By Rajhkumar K Shaaw - Jun 9, 2014

Indian stocks climbed to an all-time high as engineering companies and cement makers advanced amid expectations the government will boost spending and accelerate approvals for roads, ports and power projects.
Reliance Infrastructure Ltd. (RELI) rallied to the highest price since January 2011 after the company’s Mumbai Metro rail began service yesterday. Larsen & Toubro Ltd. (LT) increased to a record. Cement producer Grasim Industries Ltd. jumped the most in eight months, pacing a rally among its peers.
The S&P BSE Sensex (SENSEX) added 0.8 percent to a record 25,598.03 at 10:40 a.m. in Mumbai. It rose 4.9 percent last week as energy companies jumped on optimism Prime Minister Narendra Modi will agree to increase natural-gas prices by the month-end. Modi’s party won the strongest electoral mandate in three decades on a pledge to spur an economy where $230 billion of projects have been stalled for want of state clearances.
“This rally is fueled by expectations that the government will undertake reform measures, not only legislative but also executive reforms, which will change the way the bureaucracy works,” David Pezarkar, chief investment officer for equities at BOI AXA Investment Managers Pvt., said in an interview today with Bloomberg TV India in Mumbai.
Foreigners have bought a net $16.1 billion of local shares since Sept. 13, when the BJP named Modi its candidate for prime minister. The inflows have helped lift the Sensex 30 percent in the period, data compiled by Bloomberg show.
The Sensex has climbed 20 percent this year and is valued at 15.6 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s multiple of 10.9.
To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net
To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Ravil Shirodkar, Matthew Oakley

®2014 BLOOMBERG L.P. ALL RIGHTS RESERVED.