Tata Capital Financial to raise $1.5 billion overseas to settle old loans

Fundraising to be one of the largest by an NBFC outside India in past 3 yrs

The board of Tata Capital Financial Services (TCFSL) is meeting on June 17 to take a call on raising up to $1.5 billion by way of an euro medium term note programme. 

This will be one of the largest fundraising overseas by Indian non-banking financial companies (NBFCs) in the last three years. TCFSL, a subsidiary of Tata Capital, will be using the funds to retire old loans and for its lending business. 

According to a source close to the development, the financial services business of the Tata group received Rs 2,500 crore fund infusion from its promoter Tata Sons in the fiscal ending March 31, which helped it boost net worth and meet liquidity norms.

With the overall financial services business in doldrums, the fundraising by the Tata group’s financial services arm will pave the way for other NBFCs to follow suit.  The group holding company does not want to put any more funds into the business but wants the financial services businesses to fix its operating ratios first.

Other private sector NBFCs, which raised funds in recent times, include Shriram Transport Finance, which mopped up $500 million in April, followed by Indiabulls Housing Finance, which raised $350 million in May. 

Shriram Transport had raised another tranche of $400 million in February this year. Most of the funds raised overseas have been by government-owned finance companies such as Rural Electrification Corporation (REC) and Power Finance Corporation with REC topping the charts at $700 million in November 2018.

A CRISIL analysis of TCFSL’s asset-liability maturity profile as of December 2018 had showed minor negative mismatches for next year. 

As on December 2018, TCFSL had outstanding commercial papers to the tune of Rs 6,515 crore, which constituted about 18 per cent of the total borrowings. Between December 2018 and June 2019, TCFSL had Rs 5,515 crore of commercial papers up for maturity.

Against this, the company has available cash and mutual fund investments of Rs 1,950 crore and unutilised working capital lines of Rs 4,242 crore. 

Additionally, the liquidity position is supported by business inflows by way of repayments/prepayments of around Rs 3,250 crore a month, CRISIL said. The overseas fundraising will help the company meet the mismatch, said the source.

The financial services business of the Tata group has been identified as a top priority by Tata Sons, which has three financial services firms.

Tata Capital and its subsidiaries cater to the funding requirements of various entities associated with the group, such as suppliers, vendors, and dealers.  

In the coming months, the group will strengthen the integration of Tata Capital with the overall Tata group’s consumer services business.

In the first half of FY19, TCFSL reported a profit after tax of Rs 198 crore on total income of Rs 2,620 crore as compared to a profit of Rs 206 crore on total income of Rs 2,110 crore in the first half of fiscal 2018.