Auto major Tata Motors today said its move to raise capital by borrowing from the public, through which it can raise up to Rs 2,700 crore, will be for its "ongoing requirement".
"...This (inviting public deposits) is for the company's ongoing requirement. We also believe that from the investor's point of view, it is an appropriate fixed-income instrument, in the light of the current market environment," a Tata Motors spokesman said.
As per the Companies (Acceptance of Deposits) Rules, 1975, amended by the Companies (Acceptance of Deposits) Rules, 1978, Tata Motors could raise up to Rs 2,700 crore, the spokesman added.
The company, however, did not specify how much capital it has planned to raise from the public through this initiative and also the purpose for such a step.
This is the first time since 1995 that Tata Motors is borrowing from the public.
Yesterday, Tata Motors had announced borrowing from the public by offering up to 11 per cent annual interest for a period of up to three years. It would offer 10 per cent interest on a minimum public deposit of Rs 20,000 for a year, 10.5 per cent for two years and 11 per cent for three years.
The company met with a cold response from investors in its two recent separate rights issues to raise Rs 4,147 crore for part funding the JLR deal. It is clear that the company needs funds to replace the $3 billion bridge loan, taken to acquire JLR, the transaction for which was completed in June.
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The rights issue closed in October with a weak response from the public, forcing the promoters to subscribe a major chunk, thereby taking their holding to 42 per cent from the earlier 33 per cent.
The share of the company today closed at Rs 128.40, down 3.28 per cent on the Bombay Stock Exchange.