Tata Motors' distributors woo NCD applicants for FD scheme

Distributors of the Tata Motors’ fixed deposit (FD) scheme are now wooing the unsuccessful applicants of Tata Capital’s non-convertible debenture (NCD) issue.

The NCD issue of the Tata Group’s non-banking finance company was subscribed six times and about Rs 1,500 crore was returned a few weeks ago to unsuccessful applicants as the issue surpassed the prescribed limit, including the green shoe option.

“We have been able to convince about 60 per cent of such applicants to invest in Tata Motors’ FD scheme,” said Harish Sabharwal, chief operating officer, Bajaj Capital, a leading distributor of financial products. A Tata Motors spokesperson said that the company has so far collected Rs 1,160 crore through FDs since the scheme started in December. Over the last four weeks, the company has added HDFC Securities, ICICI Securities and Stock Holding Corporation of India as additional distributors to push the scheme.

Tata Motors is currently offering 12.83 per cent yield on a three-year cumulative deposit plan. However, for Tata Motors’ shareholders the yield for the FD scheme is up to 13.5 per cent. Anyone can avail of the benefit along with buying a share of Tata Motors, which was available for Rs 203 a share on Bombay Stock Exchange today. A large number of applicants whose funds have been returned are high net worth individuals who are still looking for a safe haven for their money. Currently, public sector banks are offering 8-9 per cent annually for deposits with a tenure of up to three years.

“Since both are Tata group companies, there is comfort,” said Vipul Shah, head, JM Financial, one of the main distributors for the Tata Motors’ fixed deposit scheme.

“So people who want to take such a call are doing so,” he said. The yield offered on the NCD issue of Tata Capital was also 13.5 per cent annually for three years investment making the return similar.