Tata Steel, India’s largest steel producer, will spend Rs 5,700 crore on expansion projects in the next financial year. Around 70 per cent of the money (Rs 3,700 crore) will be earmarked for domestic expansion.

Tata Steel plans to expand capacity to 10 million tonnes at Jamshedpur by August 2011 from 6.8 million tonnes.

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In its overseas projects, the company plans to develop iron ore and coal mines in Canada and Mozambique through two joint ventures. It also plans to develop a mini blast furnace under its Thailand subsidiary.

To finance these plans, the company is planning a rights issue, though some of the money raised will also go towards repaying part of its debt. The company and its European subsidiary had a total debt of Rs 26,946 crore at the end of March 31 this year giving the company a debt equity ratio of 1.78.

Most of the debt is the result of the company’s acquisition of the Anglo Dutch steel maker Corus in early 2007 for about $13 billion. The high debt raised the company’s finance charges 36 per cent on a standalone basis. The company reported finance charges of Rs 1,150 crore for the first nine months of the current financial year (the consolidated number of the company for the period is not available).

“If there are opportunities to put more equity capital in our growth projects that have very significant returns, we will look at doing so at the appropriate time,” said Koushik Chatterjee, group chief financial officer of the company told analysts today. “That will ease some amount of internal cash towards the repayment,” he added.

The company has prepaid Rs 6,600 crore of debt in the current financial year. But it has taken a fresh loan of a similar amount.

The company plans to repay Rs 1,600 crore to Rs 1,800 crore of debt in the current quarter through internal accruals.

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