Tinplate Company India Ltd, a subsidiary of Tata Steel, is embarking on a massive expansion programme with the support of its parent.

In line with Tata Steel’s stated strategy to increase the share of value added products in the sales mix, the tinplate capacity is being expanded by 300,000 tonnes at a capital expenditure of Rs 2,254 crore.

After the completion of a three-year project starting this fiscal, TCIL’s capacity in Jamshedpur will go up to 6,79,000 tonnes from the present level of 3,79,000 tonnes. Used mostly in the food processing industry and beverages as a packaging material, the expansion comes on the back of strong demand from these sectors.

As of now, TCIL is the domestic leader in the business with a market share of around 39 per cent.

Apart from the demand push coming out of urbanisation, tinplate demand is going up after the import of low grade tinplate, which can cause health hazards, was stopped. Apart from TCIL, JSW Steel is the other major player in India that produces tinplate.

While the new line will be ready by 2024-25, Tata Steel has set a target of 1 million tonnes tinplate capacity by 2030, in tandem with its own target to double primary steelmaking capacity. Tata Steel intends to reach 40mt output by end of the decade and it would need enhanced downstream facilities to churn out value-added products.

In an interview with this newspaper earlier this week, Tata Steel executive director and CFO Koushik Chatterjee, who is also the chairman of TCIL, had explained the growth strategy of the group and capex plan: “…growth in downstream value-added products like tinplate, wires, tubes, coated products and logistics and infrastructure investments will manifest in a very significant momentum of growth for Tata Steel”.

Financing plan

Tata Steel, which owns a 74.96 per cent stake in TCIL, proposes to render financial assistance by providing a loan of an aggregate value of Rs 1,900 crore (including additional contingent funding of Rs 200 crore).

Seeking approval from the shareholders for the proposed arrangement, which falls under related party transaction, Tata Steel explained: “This financial assistance from the company to TCIL will help TCIL carry out financial closures with the shortest time spans and flexible repayment terms, which will help TCIL ramp-up the expansion plan which in turn will benefit Tata Steel in its growth strategy.”

The shareholder loan will be disbursed between 2022 and 25 and the repayment will be made for 12 years commencing from 2026-27 to 2037-38. TCIL is a debt free company at present with good cash reserves. It earned a profit of Rs 352.91 crore on a turnover of Rs 4,249.51 crore. The market cap of the company also doubled in the last one year reflecting the strong financial performance.

Tata Steel added that the pricing of the loan is proposed to be in the range of 10.13 per cent to 10.76 per cent a year as on date, based on applicable government securities plus margin basis credit profile of TCIL. The pricing may change in case of any movement in the credit profile of TCIL.