TATA group-owned company, Tata Steel has informed that it has secured a loan worth Rs 2,000-crore from Life Insurance Corporation (LIC), India's largest financial institution.

Under the arrangement, LIC will subscribe to Tata Steel's non-convertible debentures (NCD) that carry an interest rate of 10.5%.

It should be noted that LIC, which already holds an 11.68% stake in Tata Steel, is the second-largest shareholder in the steel maker after the Tata Group.

Sources revealed that the funds will help the world's fifth-largest steel producer make additional equity infusions into its UK subsidiary.

Apart from latest development, Tata Steel plans to raise Rs 3,000 crore through the NCD issue. The proceeds of the NCD, along with the existing cash balances available with Tata Steel, would also proposed to be used to enhance the capital base of Tata Steel UK.

According to a company official who did not want to be identified, informed that Tata Steel's UK unit will use part of the amount to prepay some of its debt obligations and the balance will be retained within the business, keeping the consolidated net debt levels unchanged.

Rating agency Fitch has placed Tata Steel's bonds at AA Ind, indicating low risk of default.

At 2:31 pm, the scrip of the company was trading at Rs 373, up 13% compared to previous close of Rs 329.