Tata Capital to raise Rs 20K crore via NCDs to boost core lending biz

Tata's Financial Services arm plans to launch NCDs as demand for retail loan rises

Tata Capital Limited's (TCL’s) board has greenlit a fundraising exercise of Rs 20,000 crore through non-convertible debentures (NCDs). This capital will be channelled into the company’s core lending business and is separate from the Rs 8,000 crore fundraising plan of its home finance subsidiary, Tata Capital Housing Finance.

 Tata Capital, a subsidiary of Tata Sons Private Limited, the holding company of the Tata group, currently encompasses Tata Capital Housing Finance, Tata Securities, and Tata Capital Pte Singapore and its subsidiaries. The debentures will be issued on a private placement basis once Tata Sons approves the fundraising plan, with the option for Tata Capital to raise the funds in one or more tranches.

 

 Among major bond issuances by Indian companies, according to Bloomberg data, HDFC Bank tops the leaderboard; it had raised Rs 25,000 crore in February last year. Piramal Housing Finance had raised Rs 20,455 crore in August 2016, while Reliance raised Rs 20,000 crore via bonds in November 2023.

 With the financial services sector gaining momentum, Tata Sons invested Rs 1,000 crore in the first half of the current fiscal year (FY24) by subscribing to the rights issue of equity of TCL. This followed an infusion of Rs 500 crore during FY23. Previously, Tata Sons invested Rs 1,000 crore in FY20, and Rs 2,500 crore in FY190. The group has earmarked financial services as a core business, supporting it with fund infusion and intra-group business.

Earlier this year, Tata Capital Financial Services and Tata Cleantech Capital were merged with Tata Capital, effective from January 1, 2024. The company’s total lending book grew by 25 per cent, to Rs 1,34,762 as on September 30, 2023, up from Rs 1,19,573 crore as on March 31, 2023. This growth is primarily attributed to a surge in home and personal/business loans. Retail loans’ share of the aggregate portfolio increased to 57 per cent as on September 30, 2023, up from 54 per cent in March 2023, according to a statement by rating firm ICRA.

The group plans to list Tata Capital Financial Services, the holding company of the financial services business, by 2025. This move aligns with the Reserve Bank of India’s (RBI’s) guidelines to list upper-layer NBFCs. Both Tata Capital Financial Services and its parent firm, Tata Sons Private Limited, were identified as NBFC “upper layer” by the RBI in September 2023. This designation necessitates a stringent disciplinary structure and mandatory listing within three years for both companies.

 In addition to Tata Capital Housing Finance, which also plans to raise funds via non-convertible debentures, another Tata group firm, battery cell manufacturer Agratas Energy Storage Solutions, is reportedly planning to raise $500 million as a green loan. Tata group companies, including its holding firm, tapped the overseas debt market to raise funds worth $660 million to fund their operations in the first half of the current financial year, as demand for the group’s products continues to surge.