Tata Steel is going to invest up to Rs 6,600 crore in equity of Neelachal Ispat Nigam Ltd (NINL) to part fund the upcoming expansion plan of the long products subsidiary.

The investment will be made in Odisha-based NINL, which was acquired by Tata Steel from a divestment process for Rs 12,100 crore in early 2022, over a period of two years.

After acquisition of the state-run entity, Tata had focused on restarting the plant and take it to the existing capacity of 1.1 million tonne. In the next phase, the company plans to expand NINL capacity by another 4 MT to take the capacity to 5 MT in the interim.

On Thursday, Tata Steel sought shareholders’ nod for the equity investment in NINL to capitalise the subsidiary in order to prepare the long-steel maker for the next phase of growth. The parent holds 99.66 per cent equity of NINL and also 100 per cent of the preference share capital. The transaction will fall under related party transaction (RPT) of the company.

“…considering the underlying objective of optimising the funding structure in NINL by way of long-term equity support and meeting the capex requirements towards expansion plan of NINL, the company may invest in NINL through equity infusion for an aggregate amount up to Rs 6,600 crore, over the period of next two years from the date of approval of the shareholders,” Tata Steel informed shareholders.

Apart from the steel capacity of 1.1 MT, NINL also has a captive power plant of 62MW and captive iron ore mines of 90 MT. The facility is situated in close proximity to Tata Steel’s steel plant at Kalinganagar, where a 5 MT capacity expansion is nearing completion.

While the Kalinganagar expansion is going to step up Tata’s offerings in the flat products (hot rolled and cold rolled coils) segment, NINL will focus on long products (wire, bars and rods).

The Rs 6,600 crore equity will, however, not be enough to take care of the entire NINL capex alone. There will also be a debt component in the expenditure mix. Tata Steel is all likely to finalise the contours of NINI expansion in FY25, soon after it commercialises the ongoing Kalinganagar expansion. The NINL growth plan is part of Tata Steel’s roadmap to reach 40 MT capacity in India by end of this decade.