Tata Steel targets 30% ROC in 5 yrs

Koushik Chatterjee, Group CFO of Tata Steel said that external capital will be tough to raise. They have syndicated their entire Corus acquisition debt, he said. The company does not have any immediate fund requirements or any balance sheet issues, he said. Cost of capital is higher as the premium on risk is much higher, he said. Overall leverage will not allow companies to take on too much external capital, Chatterjee said. Steel growth will be tad lower than the 6.5% forecasted, he added. Even at lower demand, steel would have supply constraints, he said. Chatterjee feels that spot steel prices have softened a bit. Raw material metal spread is still at comfortable levels, he said. The company is targeting combined return on capital of 30% in five years. The precious metals have bounced back drastically. So gold and silver had 11-15% rallies but base metals generally have been grinding down globally over the last couple of months. Here is a verbatim transcript of the interview with Koushik Chatterjee on CNBC-TV18. Also see the accompanying video. Q: How will companies like you fund yourselves going forward given the turmoil that you are seeing? A: I think structurally the world is a better place than where we were 10-15 years back. But event risks are something which can always happen and we need to see as to how we can manage it. What’s going on now would be classified more as event risk. The world of finance is volatile and turbulent. Moreover, at this point of time one needs to focus on the fundamentals because it will carry companies and organisations through and that’s why we have been focusing on our own performance improvements and cash flows which will fund our growth in the short-term. External capital will be difficult; the global cost of capital has increased significantly. Q: Does it have balance sheet ramifications for a company like you which is just digesting a very large global acquisition? A: Fortunately enough we have syndicated the entire acquisition debt which was done well in time last year. So there are no immediate capital requirements apart from our planned growth which is anyway funded from internal generations. So there aren’t any balance sheet issues as far as we are concerned. But to tide over all of this, it’s important that the real sector continues to perform well and that is something that we are focusing on just now.