Tata Capital arm to raise Rs 6,000 cr via NCDs

Tata Capital Financial Services (TCFS), a subsidiary of Tata Capital, is planning to raise close to Rs 6,000 crore through non-convertible debentures (NCDs) to fund its lending and investment operations in the next few weeks.

The fund-raising comes at a time when TCFS is preparing to apply for banking licence.

The Reserve Bank of India has recently invited applications for new banking licences.

The board of TCFS cleared the fund-raising plan in a meeting held in March last week, a banking official said, requesting anonymity.

When contacted, an official spokesperson of TCFS said the company would be raising these funds to fund its business plan, but refused to elaborate.

Insiders say a stronger balance sheet will help TCFS consolidate its position in the industry ahead of applying for banking licence.

Apart from the Tatas, the Birlas, Larsen and Toubro Ltd and the Shriram group are also expected to apply for banking licenses by July 1.

Most of the company's borrowers are individuals and small and medium size companies. Tata Capital has sued Deccan Chronicle Holdings Ltd in the Bombay High Court after the cash-strapped Hyderabad-based media firm defaulted on Rs 100-crore loans.

TCFS had raised close to Rs 1,000 crore in December last year, banking sources said. The company received good response from large investors such as Life Insurance Corp of India, General Insurance Corp of India and pension funds for the fund-raising programme.

The proceeds of the new issue will be utilised for launching new products such as portfolio management services, co-branded credit cards and specialised products for the rural sector, said a person aware of the development, who also would not like to be named.

The company has been posting profit for the last few quarters. For the six months ended September 30, 2012, TCFS reported a profit of Rs 120 crore on a total income of Rs 1,330 crore against a profit after tax (PAT) of Rs 70 crore on Rs 1,010 crore a year ago. For 2011-12, TCFS reported a PAT of Rs 169 crore on a total income of Rs 2,220 crore .

According to CRISIL, TCFS's gross non-performing assets (NPAs) increased to 1.94 per cent as on September 30, from 1.29 per cent as on March 31, 2012, primarily because of increased slippages (good laons turning bad) in the corporate finance and project finance segments. TCFS also has a significant wholesale lending book, which is vulnerable to any sustained economic downturn.

The company's gross loan asset size (excluding inter-corporate deposits) as on March 31, 2012, was Rs 17,234 crore.