Tata Motors to raise $750 mn via ECBs

The external commercial borrowing with a spread of six years will be priced about 350 basis points above Libor.

Tata Motors, India’s largest automotive company, is looking to raise $750 million (Rs 3,675 crore) via overseas borrowing to meet working capital requirements and reduce debt.

The external commercial borrowing (ECB), with a spread of six years, would be priced about 350 basis points above the London Interbank Offered Rate, said sources close to the deal. The country’s largest bank, State Bank of India, is one of the arrangers for the deal.

Tata Motors had a consolidated net automotive debt (excluding vehicle financing) of Rs 14,500 crore at the end of June. Stand-alone debt stood at Rs 13,700 crore, according to disclosures made by the company.
 

FUNDING DRIVE

This will be the second big-ticket fund raising the company could do this year after it made a bond issue of Rs 7,500 crore ($1.6 billion) for Jaguar and Land Rover

Tata Motors had a consolidated net automotive debt (excluding vehicle financing) of Rs 14,500 crore as of June

At the consolidated level, the company’s net automotive debt equity stood at 0.69 as of June, which is almost on a par with 0.68 at the end of March 2011

Jaguar and Land Rover, which are posting double-digit growth in sales every month, account for more than half of the company’s total revenue

“We do not have any guidance to provide you with. Suffice it to say that, as a prudent practice, Tata Motors raises debt capital from time to time to increase its debt maturity profile and reduce its interest cost,” said a company spokesperson.

At the consolidated level, the company’s net automotive debt-equity stood at 0.69 at the end of June, almost at par with 0.68 at the end of March. Although the auto maker’s plan was to bring the ratio below one, it is working towards further easing the debt burden.

The company, which owns the UK’s premium and luxury brands such as Jaguar and Land Rover (JLR), has managed to bring down its net automotive debt considerably over the past two years, when it stood at Rs 23,750 crore with a debt-equity ratio of 4:1.

JLR, reporting double-digit growth in sales every month, accounts for more than half of the company’s total revenue. The two brands are self-sustained, with the company reinvesting all the proceeds it generates through sales back into operations.

This will be the second big-ticket fund-raising event for the company after its $1.6-billion (Rs 7,500-crore) bond issue for JLR. The issue, completed in May, saw significant oversubscription from investors.

The three-part sale included a sterling bond and a dollar issue, both with a seven-year maturity. The final tranche is a 10-year dollar-denominated bond. The issue was designed to partly refinance debt and develop its operations, primarily aimed at strengthening JLR’s finances.

While Tata Motors is looking at newer markets for spreading its commercial and passenger vehicle operations, JLR is believed to be looking at expansions and newer investments. It is known that JLR is in talks with some Chinese companies for setting up local assembly operations. China is its fourth-biggest market. It is also looking at expanding its engine operations.

Last month, JLR and Tata Motors announced a plan to spend $561 million towards building an engine plant in central England. The two brands will collectively spend £1.5 billion over the next five years on new product development and expansion of engine range.