Tata Capital to raise Rs 500 cr via non-convertible debentures
Money to help business growth, repaying costlier debt.
Our Bureau
Mumbai, Jan. 30Tata Capital said it would raise Rs 500 crore through a
non-convertible debenture issue, with an option to retain oversubscription of
up to Rs 1,000 crore.
The issue opens on February 2 and closes on February 24, 2009, and offers an
interest rate of up to 12 per cent. The redemption date is five years from
allotment with put and call options offered to investors at the expiry of 36
months and 42 months, depending on NCD payment options chosen.
The minimum application amount is Rs 10,000 for the quarterly, annual and
cumulative interest payment options (coupon rate of 12 per cent an annum); and
Rs 1 lakh for the monthly interest payment option (coupon rate of 11.25 per
cent an annum).
Tata Capital, a non-deposit taking NBFC of the Tata group, will use the
proceeds of the issue for its business growth and also to repay existing
costlier debt, said Mr Pravin Kadle, Managing Director, at a news conference
here on Thursday.
Testing market
On why the greenshoe option is larger than the main issue size, Mr Kadle said
this was the first retail bond issue in India in several years.
"The market is almost not in existence. We want to test it," he said.
The minimum threshold for the issue is 40 per cent of the issue size or Rs 200
crore.
For Tata Capital, this was an effective way to diversify its lending channels,
said Mr Kadle.
One cannot just rely on banking channels. Banks are reluctant to lend to NBFCs
and the private placement market is flat, he noted.
For investors, the NCDs issue would be attractive as returns on equity and from
mutual funds were pretty low, he said. As the NCDs would be listed instruments
on the NSE, there would be no tax deduction at source, which would also make it
an attractive value proposition for small investors, he said.
The company may also consider granting loans against these NCDs.
Advantage Tata
Though there was a danger of interest rates declining, loans to corporates are
still expensive, said Mr Kadle, indicating that Tata Capital would manage good
spreads through non-retail business.
The company's retail business constitutes 30-35 per cent of revenues.
"We are very careful in lending to retail, we only give high-ticket personal
loans and don't do unsecured lending."
Over 40 per cent of Tata Capital's book size consists of non-Tata business,
said an official with the company.
The company's capital adequacy ratio is 26 per cent and its NPA stood at 0.5
per cent. "This is gross NPA and we are more aggressive than the RBI policy in
accounting for NPAs," said Mr Kadle.
The company's debt-equity ratio will rise from 2.66 to 3.38 after the issue
http://www.thehindubusinessline.com/2009/01/31/stories/2009013151221600.htm
ekamber
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