Tata Sons likely to raise Rs 7,000 cr to retire old high-cost debt

Other top companies to follow suit as the central bank has released funds

Tata Sons is set to join a host of top-rated companies such as Reliance Industries, L&T, and HDFC to raise low-cost funds from banks, after the Reserve Bank of India opened a special window to infuse liquidity into the system.
 

Banking sources said Tata Sons may raise around Rs 7,000 crore and plans to use the funds to retire older high-cost loans. “It’s a good opportunity for good A-rated companies to raise funds. HDFC plans to raise around Rs 4,000 crore.
 

While reducing the repo rate by 75 basis points (bps) on March 27, the RBI had also released additional funds to banks, saying that the liquidity has to be deployed in investment grade corporate bonds, commercial papers, and non-convertible debentures, as on March 27, 2020.
 

Lenders had already raised Rs 50,000 crore in two tranches from the RBI to on-lend to corporates. This led to several top companies raising funds from banks over the last one week, said the person cited above, adding, “banks are currently flush with funds and they want to lend it to top-rated firms.”

Besides this special window, the central bank also reduced the cash reserve ratio (CRR) of banks by 100 bps to 3 per cent of net demand and time liabilities, with effect from the reporting fortnight beginning March 28, for a period of one year.

This reduction in the CRR (cash reserve ratio) would release primary liquidity of about Rs 1.37 trillion uniformly across the system. Bankers said Indian companies with a good credit rating could look forward to raising funds at a later date for capital expenditure and new projects.
 

While Reliance Industries is investing in the telecom business — mainly in capital expenditure, the Tata group’s holding company consistently invested in new businesses like financial services and aviation during FY20. This included a Rs 1,000-crore fund infusion into Tata Capital Financial Services, besides that in its two airlines Vistara and AirAsia India.