Tata Motors Ltd, India's biggest truck maker, has raised Rs4,200 crore through an issue of non-convertible debentures to financial institutions, which is among the largest by an Indian corporate and the first of its kind for the Indian capital markets.
The funds will be used to partly repay a $3 billion (Rs14,313 crore) bridge loan Tata Motors had raised last year to acquire marquee brands Jaguar and Land Rover. (See: Tata Motors confirms Jaguar, Land Rover deal with Ford for $2.3 billion)
The company has already repaid $1.11 billion of the loan it obtained for the acquisition from Ford Motor Co last year, after selling over 10 million shares or 1.3 per cent equity of Tata Steel Ltd to group holding company Tata Sons Ltd for a total of Rs485 crore in September 2008. (See: Tata Motors partially divests Tata Steel stake to raise Rs485 crore for JLR)
The remainder is due for repayment on 2 June.
Tata Motors said late on Wednesday that the debentures, issued in four tranches with maturities ranging from 23 to 83 months, carry a coupon rate of 2 per cent and have been guaranteed by the State Bank of India.
The issue was book-built and the maturity yield for the 23-month tranche was fixed at 6.75 per cent, for the 47-month tranche at 8.4 per cent, for the 59-month tranche at 8.45 per cent and 10 per cent for the 83-month tranche. The State Bank has issued a master guarantee for 49 billion rupees.
''The issue structure effectively met the company's requirement of tenors, cost and servicing,'' the company's chief financial officer C Ramakrishnan said in a statement. The issue opened for bids on Wednesday morning and closed by the evening. Life Insurance Corporation has subscribed to a substantial chunk of the issue.
Ramakrishnan said, "The issue was quite a success and well over-subscribed. The issue structure effectively met the company's requirement of tenors, cost and servicing." The issue attracted interest from a wide base of institutional investors comprising mutual funds, banks, insurance companies and financial institutions.
The company is in talks with bankers to raise the remaining Rs4,700 crore in rupee and dollar-denominated loans. While Tata Motors had initially planned to raise the funds through an overseas equity issue and sale of additional investments, the plans did not materialise due to the adverse market conditions. This prompted Tata Motors to seek refinancing from its lenders to whom it had sent a term sheet and was negotiating the interest rate.
However, the plans were reworked, with a large portion coming by way of bonds.
While SBI issued the master guarantee of Rs4,900 crores in favour of the debenture trustee, 10 other Indian banks participated in the facility through counter guarantees provided to SBI.
SBI Capital Markets was the Lead Arranger for the guarantee syndication and Citigroup along with Tata Capital were the Joint Lead Arrangers.
The debentures have been rated LAAA(so) by ICRA and AAA(so) by CRISIL.
Citigroup and JP Morgan were the lead managers for the $3-billion loan, which was raised with the help of other banks, such as SBI, Standard Chartered, BNP Paribas and Tokyo Mitsubishi UFH.
Keeping JLR afloat
After rejecting the UK government's onerous terms for underwriting less than half of EIB's €366 million euro loan for JLR early this month, Tata Group was seeking to fund JLR on its own terms from external sources. (See: After dumping UK guarantee terms, Tata Group to raise funds for JLR revival)
An official of the British department of business, enterprise and regulatory reform said on 17 May that it was still conducting confidential discussions with the Tata Group on a JLR deal guaranteeing loans, but made it clear that the primary financial responsibility for sustaining JLR rests with Tata Motors. (See: Tatas' Jaguar-Land Rover may get UK bailout after all)
In December, Tata Motors had raised around Rs2,000 crore funds from the public through a fixed deposit scheme in a bid to beat the credit market slump as it required the money to shift production base of its Nano small car project from Singur in West Bengal to Sanand in Gujarat. (See: Tata Motors to raise Rs2,000 crore through FD scheme)