Tata Capital, a non-banking finance company (NBFC), is planning to sell debt worth Rs 1,000 crore to meet fund requirements to execute its expansion plans, according to bankers familiar with the development.
The financial arm of the Tata Group, which was launched to revive the group’s financial services business, is contemplating sale of bonds to individual investors and institutions, they said, adding that the bonds may yield as high as 11.5 per cent return for the investors.
“We are exploring various options to raise long-term funds for Tata Capital,” said a Tata Capital spokesperson in an email response to a query.
Citibank along with some other merchant bankers has been given the mandate for the issue.
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 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 non-convertible debentures. 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.
Tat Motors, another Tata Group company, is raising Rs 2,700 crore through term deposit, offering interest rate of 10 to 11 per cent for maturities of one to three years to fulfill 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.
Tata Capital provides services in areas such as capital market, housing finance, assets and vehicle financing, retail finance, merchant banking and private equity investment.
