Financial Management & Corporate Finance Case Study

Case Title:

Tata Steel’s External Commercial Borrowings: The Payoffs

Abstract:
The main objective of this case study is to understand the redemption pressures encountered by the Indian entities in paying back the external borrowings. With the initiation of liberalisation policies, the Indian financial markets had experienced remarkable changes and Indian companies started borrowing and investing abroad.Many Indian companieshave raised substantial amounts of external borrowings through External Commercial Borrowings (ECBs) for their long-termrequirements.One such company,Tata Steel Ltd. raised $500 million to support its acquisition of Corus in 2007. However, the recent financial crisis and subsequent effects – increased cost of borrowings, rupee depreciation and erratic exchange rates – hit the companies that raised funds through ECB route. In thewakeof liquidity crisis, it is to be seen as to how companies, in particular Tata Steel Ltd., canmanage the redemption pressures.

Pedagogical Objectives:

• To understand the need and importance ofECBs and its merits over other available fund raising options
• To assess the potential of ECBs for funding foreign acquisitions
• To assess the efficacy of Tata Steel's ECBs in the light of its expansion efforts.

Keywords : External Commercial Borrowings; Indian Financial Market; FCCBs; Foreign Currency Convertible Bonds; LIBOR; Currency fluctuations; Interest rates; Course Case Maps; MBA; Financial Management; Financial Management Course Case; Finance for Managers; Course Case Packs; Managerial Finance; Business Finance; Corporate Finance; Principles of Financial Management; Financial Management Course Case Pack