Tata Capital, the non-banking finance company (NBFC) of the Tata Group, said on Thursday that it has plans to raise at least Rs 500 crore through a public issue of secured non-convertible debentures (NCDs) to fund its expansion plans.
This is the first NCD issue in the past two-three years and it comes with an option to retain oversubscription of an additional Rs 1,000 crore.
Elaborating on the small size of the issue, Tata Capital Managing Director and Chief Executive Officer Praveen P Kadle said, “We are testing the market as it is the first retail bond issue in many years.”
The issue opens on February 2 and closes on February 24. Citigroup Global Markets India, ICICI Securities and DSP Merrill Lynch are the lead managers to the issue. Tata Capital has an asset base of Rs 6,828 crore as on September, 2008, up from Rs 3,329 crore in March 2008.
Tata Capital provides services in areas such as capital market, housing finance, assets and vehicle financing, retail finance, merchant banking and private equity investment. The company is offering 12 per cent per annum interest rate for the annual and cumulative interest payment options.
Currently, the yield on the 10-year benchmark government bonds is around 6.04 per cent, about 100 basis points less than what it was a couple of months ago. Yields have come down in line with the changes in interest rate cycle. The sharp drop in inflation and increase in liquidity have resulted in declining yields.
However, in the light of the global economic slowdown and concerns over the financial health of companies, spreads over benchmark papers have increased.
Corporate houses are still paying over 10 per cent, reflecting the lack of confidence in the money market. Reliance Industries (RIL) recently raised Rs 1,000 crore in two tranches through NCDs. For bonds (worth Rs 500 crore) having three-year maturity, RIL will pay 10.10 per cent annually, while for bonds (worth Rs 500 crore) with 10-year maturity, the interest rate will be 10.75 per cent.