Tata Motors launches FD scheme to raise money

MUMBAI: Tata Motors Ltd has launched a fixed deposit scheme in an attempt to raise money from the public at a time of serious liquidity crunch, credit market seizure and unwillingness of banks to lend. The maker of Indica and Indigo cars announced the scheme through a newspaper advertisement on Monday.

Tata Motors will offer 10% for a one year deposit with senior citizens getting half a percent more. The company has approval to raise Rs 1931.48 crore from the public via FDs.

Tata Motors' move comes when the company is fighting an uphill battle to raise cash to refinance the $3 billon debt related to the acquisition of Jaguar-Land Rover. Tata Motors stock slumped to near its 52-week low of Rs 122. At 3:00 pm, it was trading at Rs 132.65, down 2.71 per cent.

Meanwhile, Citi has highlighted the lack of clarity relating to JLR and the funding risks related to the refinancing of the $3 billion debt. This debt is maturing in June 2009. Tata Motors consolidated cash and bank balances stood at Rs 3833.17 crore at the end of FY 08, while it had generated a cash flow (net -profit plus depreciation) of Rs 1056.8 crore in the first half of FY 09. The company's net debt to equity was 0.495 in FY 08 and Citi expects this to rise to 1.08 by the end of FY 10, due to the deteriorating operating environment at JLR.

During the September 2008 quarter, the volume of JLR sales had already declined 11.2 per cent y-o-y to 61, 421 units, and the company in its presentation had highlighted that this was due to a 19.1 per cent drop in Land Rover sales.