After the successful Nano launch, Tata Motors now has another reason to celebrate. The company’s fixed deposit scheme has already mopped up Rs 2,000 crore in a short span of four and a half months, at a time when most other company deposit schemes are floundering.
The largest amount of subscription came in before April 15, when Tata Motors was offering 11 per cent interest for a minimum subscription of Rs 20,000 with a maturity period of three years. At 11 per cent interest compounded quarterly, the yield on the cumulative plan works out to 12.83 per cent at the end of the deposit period. The deposit offers 0.5 per cent additional interest for senior citizens, employees and shareholders in Tata Motors.
Although the deposit scheme is still open, the cumulative yield has dropped to 11.38 per cent now. The deposit flow is, thus, expected to taper off, but the company isn’t worried since the maximum amount it can raise under the deposit scheme is Rs 2,700 crore.
A Tata Motors spokesperson confirmed the figures.
The company is offering an interest rate of 10 per cent for one-year deposits and 10.5 per cent for two years. That translates into yields of 10.38 per cent and 11.52 per cent respectively, with interest compounded quarterly.
Anil Chopra, CEO, Bajaj Capital, said Tata Motors' 12.38 per cent yield was attractive for investors vis-à-vis bank deposit rates. Investors had surplus cash and since other asset classes are not doing well, the company got good response from investors, he said.
Analysts said the Tata brand name also worked in its favour. Earlier this year, another Tata group company, Tata Capital, floated a retail non-convertible debenture issue that was subscribed five times. It had planned to raise Rs 500 crore, with a green-shoe option of an additional Rs 1,000 crore.
The success of the fixed deposit scheme would be a big relief for the company that last year saw its rights issue devolving on the promoters and underwriters.
Currently, there are more than 35 companies in the market with fixed deposit schemes. TV18 raised close to Rs 110 crore through its fixed deposit scheme that closed recently. But the response to most of these has been muted, as many investors consider bank deposits a safe option in these volatile times.
“Banks are currently offering 8 to 8.5 per cent, but many investors don’t want to compromise on safety. Corporate deposits are unsecured and, therefore, more risky compared to bank deposits," said a distributor who did not wish to be named.
Tata Motors has been looking for various means to repay a bridge loan it took to acquire Jaguar and Land Rover for $2.3 billion last year.
In addition, its commercial and passenger vehicles businesses have been badly hit due to falling demand and non-availability of financing options.
The company had recently asked its lenders to refinance about $2 billion of the bridge loan as a term loan. The bridge loan is due for repayment on June 1.
Tata Motors is also planning to issue non-convertible debentures on a private placement basis to banks and financial institutions.
