Tata Motors Finance plans to raise up to $1 billion through NCDs

TMFL will be 3rd major company from Tata group this year to tap overseas market

Taking a cue from Tata group companies, Tata Motors Finance (TMFL), the vehicle financing arm of Tata Motors, plans to raise up to $1 billion from international markets by way of issuing non-convertible debentures (NCDs). 

With this, TMFL would be the third major company from the Tata group this calendar year to tap the international market after the holding firm Tata Sons raised $1.5 billion and Tata Capital Financial Services took the board’s permission to raise $1.5 billion.

According to a source, the TMFL board cleared the foreign bond issue on Thursday. The proceeds of the issue will be used to repay old debts and on-lend to Tata Motors customers, and dealers. The company’s debt instruments were recently downgraded by the Indian rating agency after its parent firm, Tata Motors, struggled with slowing sales and was also downgraded.

The Tata group’s finance company is not alone in tapping the international markets. Several Indian companies are raising funds overseas due to lower rates and demand for good Indian paper.  

The gold financing NBFC, Muthoot Finance, also appointed banks to raise funds from the overseas markets early this week. Manappuram Home Finance is another NBFC that is tapping the local bond markets to meet its funding requirements. The fundraising from international market was also necessitated after the NBFC sector faced difficulty in raising funds in India after the IL&FS crisis hit the sector last year.

Bankers said while Tata Sons used the overseas funds to replace the bonds bought back from the insurance companies, Tata Capital Financial Services plans to use the funds for lending to retail customers. 

The international offering from Tata Motors Finance comes against the backdrop of continuous fund infusion by its holding company into the company. Tata Motors, which is facing a crippling slowdown in its sales and profits, is regularly infusing equity capital in TMFHL (TMF Holdings) to maintain adequate capitalisation levels. Since October 2018, Tata Motors infused Rs 600 crore in TMFHL, the holding company of TMFL. TMFHL, in turn, infused equity capital of Rs 300 crore in TMFL in financial 2019 and in June this year, TMFHL again infused Rs 150 crore as equity in TMFL.  

During the first quarter of current financial year, TMFL reported a loss of Rs 45 crore on total income of Rs 931 crore on a standalone basis due to an increase in interest cost and credit costs. During the June quarter, TMFL’s slippages increased as its standalone gross NPA and net NPA ratios stood at 4.49 per cent and 2.87 per cent, respectively.