Country’s largest truck maker may finalise plan by middle of the next week

Tata Motors, the country’s largest truck maker which raised Rs 4,200 crore on Wednesday through issue of secured non-convertible debentures (NCDs), is raising another Rs 4,750 crore ($ 1 billion) through the external commercial borrowing (ECB) route.

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In January, it said that it had repaid $1.11 billion from the proceeds of the rights issue and stake sale in Tata Steel and Tata Teleservices to other group companies. The remaining $1.89 billion (about Rs 8,956 crore) is due for repayment on June 1. With the company raising Rs 4,200 crore through NCDs, its remaining requirement is that of Rs 4,756 crore.

“The remaining amount is being raised as a foreign currency loan,” said a banker familiar with the development, without disclosing the terms of the loan. Foreign currency borrowings had completely dried after the collapse of Lehman Brothers in September. It would be the first large borrowing, of about $1 billion, by an Indian company since the debacle.

Citigroup and JP Morgan were the lead managers to the $3-billion loan, which was raised with the help of other banks, such as SBI, Standard Chartered, BNP Paribas and Tokyo Mitsubishi UFH. Citigroup is expected to be the lead managers of this issue as well.

According to investment banking sources, the best rate available for a credit-worthy company is 6 per cent in the ECB market. That translates into a 550-basis-point spread over the benchmark London Interbank Offered rate (Libor).

The Libor rate for three-month dollar loans touched a historic low of 66 basis points on Thursday. Most loans in the overseas capital markets are priced at Libor plus a risk premium, known as a credit spread.

The ECB is expected to be finalised by middle of the next week.

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