Fresh Tata Motors FDs to fund ops

It got the board approval to issue fresh fixed deposit plans that will be within the maximum borrowing limit of Rs 30,000 cr recently approved by the shareholders

Tata Motors, India's biggest automobile manufacturer, will issue fixed-deposits to the public and shareholders to fund operations.

The Mumbai-based company got a board approval to issue fresh fixed-deposit schemes within the Rs 30,000 crore borrowing limit recently approved by its shareholders.

Tata Motors said the deposits would be credit-rated every year and the company may even provide deposit insurance.

Tata Motors repaid Rs 362 crore to the public and shareholders last year as part of its fixed-deposit scheme launched in December 2008. The repayment figure stood at Rs 1,868 crore in 2012-13 with interest rates ranging from 8-12.5 per cent.

ATTEMPTS TO FIX CAPITAL

Rs 30,000 cr Maximum borrowing limit up to which Tata Motors can issue fresh fixed-deposit plans
Rs 362 cr Amount repaid by the company in FY14 to public and shareholders, as part of the FD scheme launched in December 2008
Rs 1,868 cr Debt repayment in FY13 at interest rates between 8 and 12.5%
2009-10 The last time it issued an FD scheme for repaying short-term debt taken to buy Jaguar Land Rover from Ford Motor Company
8.5-9.75% Interest rates that the company might offer this time, higher than those offered by banks currently for a three-year tenure

This will be a fixed-deposit scheme from Tata Motors after more than four years. The last time the company issued fixed-deposits was to repay debt taken to buy Jaguar Land Rover from Ford Motor Company. Tata Motors raised over Rs 2,000 crore in five months in 2009 when most other company deposits were floundering. The company offered 11 per cent interest on a minimum subscription of Rs 20,000 for three years.

Details of the proposed issue are not out yet, but if it follows earlier issued interest rates could be higher than those offered by banks, in the range of 8.5-9.75 per cent for three years.

“Tata Motors, like any other large company, believes in diversifying its sources of borrowing through different financial products. Fixed-deposits are a part of this diversification. Tata Motors has in the past used this route of financing. The approval from shareholders is an enabling resolution and the board of directors will finalise the details”, a company spokesperson said.

Companies like Jaiprakash Associates, Allied Digital Services, Plethico Pharmaceuticals and TV 18 have issued fixed-deposits. Many company deposits are unsecured and do not have the insurance cover banks provide for deposits below Rs 100,000. Some company deposit schemes do not carry credit ratings.

Tata Motors will spend about Rs 3,500 crore in capital expenditure in 2014-15 in a desperate attempt to claw back market share it has lost to rivals like Maruti Suzuki, Hyundai and Mahindra & Mahindra.

The company’s market share in passenger vehicles has fallen to below eight per cent from nearly 15 per cent a few years ago. The company is looking to strengthen its commercial vehicle business too which faces competition from new entrants like Daimler and older rivals like Eicher.