Tata Cap may advance NCD issue closure on good demand
Tata Capital, the financial services arm of the Tata group, is considering the possibility of advancing the closure date of its non-convertible debenture (NCD) issue following a favourable response from investors.
By MV Ramsurya, ET Bureau |
MUMBAI: Tata Capital, the financial services arm of the Tata group, is considering the possibility of advancing the closure date of its non-convertible debenture (NCD) issue following a favourable response from investors. Officials said this indicates a popular preference for fixed-income instruments as against equity market issues.
The Rs 500-crore issue, which was scheduled to close on February 24, has already got applications exceeding that amount, according to people close to the development. The issue also has the option to retain oversubscription of up to Rs 1,000 crore. The issue opened on February 2.
When contacted, Tata Capital CFO Govind Sankarnarayanan said: ���We are considering that possibility, although no final decision has been taken in this regard.��� He also said that given the volatile equity-market situation, the returns could have appealed to investors, prompting the rush for the issue.
The bonds offer up to 12% interest for annual and cumulative options, much higher than comparable instruments, especially bank deposits that currently offer about 8%. ���Also, interest rates are declining and are expected to fall further,��� an analyst with a Mumbai-based brokerage said. ���In such a market, 12% is too good.���
The quarterly interest payment option offers a coupon rate of 11.25%; for the quarterly, annual and cumulative interest payment options, the minimum application size is Rs 10,000 with additional investments in multiples of Rs 1,000.
Mr Sankarnaraynan said that Tata Capital would invest the issue proceeds in the existing business. ���There have been queries from investors as to whether the amount so generated would be invested in group companies. Tata Capital has no such plan. The proceeds will be used to support our lending activities,��� he added. The company is already in auto, construction equipment and loans.
Investors have been apprehensive about the end use of the NCD proceeds, especially as Tata group companies have huge financial commitments. While Tata Motors acquired Jaguar and Land Rover from Ford for $2.3 billion last year, Tata Steel had bought out Corus for $13 billion the year before. Then, there have been other acquisitions and large capital expenditure for which group companies have tapped holding company Tata Sons for financial assistance.
The Rs 500-crore issue, which was scheduled to close on February 24, has already got applications exceeding that amount, according to people close to the development. The issue also has the option to retain oversubscription of up to Rs 1,000 crore. The issue opened on February 2.
When contacted, Tata Capital CFO Govind Sankarnarayanan said: ���We are considering that possibility, although no final decision has been taken in this regard.��� He also said that given the volatile equity-market situation, the returns could have appealed to investors, prompting the rush for the issue.
The bonds offer up to 12% interest for annual and cumulative options, much higher than comparable instruments, especially bank deposits that currently offer about 8%. ���Also, interest rates are declining and are expected to fall further,��� an analyst with a Mumbai-based brokerage said. ���In such a market, 12% is too good.���
The quarterly interest payment option offers a coupon rate of 11.25%; for the quarterly, annual and cumulative interest payment options, the minimum application size is Rs 10,000 with additional investments in multiples of Rs 1,000.
Mr Sankarnaraynan said that Tata Capital would invest the issue proceeds in the existing business. ���There have been queries from investors as to whether the amount so generated would be invested in group companies. Tata Capital has no such plan. The proceeds will be used to support our lending activities,��� he added. The company is already in auto, construction equipment and loans.
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Investors have been apprehensive about the end use of the NCD proceeds, especially as Tata group companies have huge financial commitments. While Tata Motors acquired Jaguar and Land Rover from Ford for $2.3 billion last year, Tata Steel had bought out Corus for $13 billion the year before. Then, there have been other acquisitions and large capital expenditure for which group companies have tapped holding company Tata Sons for financial assistance.
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