Tata Capital To Raise US$ 200 Million Through Domestic Bond Offering
The Financial unit of Tata Sons, Tata Capital, a non banking finance company (NBFC) plans to raise funds by issuing debt worth Rs 1,000 crore or US$ 208 million. Tata Capital provides services in areas such as capital markets, housing finance, assets and vehicle financing, retail finance, merchant banking and private equity investment.
The bond issue is to be marketed to individual investors as well as institutions according to unnamed bankers familiar with the situation who were quoted by the Business Standard in its report. The bonds may yield up to 11.5 per cent.
The Business Standard quoted a Tata Capital Spokesperson as saying “We are exploring various options to raise long-term funds for Tata Capital,” Citibank along with some other unnamed investment banks have been chosen to underwrite the issue the Business Standard report said.
Tata Motors, another Tata Sons group company, plans to raise as much as Rs 2,700 crore or US$ 562 million through term deposit, offering an interest rate of 10 to 11 per cent for maturities of between one to three years to fulfil its financial requirements. The company has to repay a $3-billion bridge that it took to buy Jaguar and Land Rover brands early this year.
Currently, the yield on 10-year benchmark government bonds is around 6.16 per cent, about 100 basis points less than that a month ago. Yields have come down in line with reductions in official interest rates. The sharp drop in inflation and increase in liquidity has resulted in declining yields. However, in the light of the global economic slowdown and concerns over the financial health of companies, spreads over benchmark paper have increased.
Major Indian corporations are still paying interest rates exceeding 10 per cent which reflects the lack of confidence in the domestic bond market. Reliance Industries (RIL) recently raised a similar amount to which Tata Capital wishes to raise and did so in two tranches. RIL issued non convertible debentures and issued bonds worth Rs 500 crore or US$ 104 million with a three year maturity which pay 10.10 per cent annually, whilst the other half of the issue had a ten year maturity with an interest rate of 10.75 per cent.
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