Tata Capital raises Rs 1,500 crore from Tata Sons, IFC via rights issue

The company will use the proceeds for further lending and to improve its leverage ratios

Tata Capital (TCL), the financial services arm of the Tata group, has raised Rs 1,500 crore via a rights issue, as per the company’s regulatory filings.

 

Tata Sons, which owns 93 per cent stake in the company, has subscribed to its entire entitlement. Other small shareholders, including IFC, have also subscribed to the issue, which has been launched before the company’s planned listing by September this year. The company will use the proceeds for further lending and improving its leverage ratios.

 

An email sent to Tata Capital did not elicit any response.

 

The initial public offer (IPO) will raise around Rs 17,000 crore and the company has appointed 10 banks to manage the issue. Tata Capital plans to file its documents with market regulator Securities and Exchange Board of India (Sebi) via the confidential route. The Tata group holding firm Tata Sons’ shareholding in Tata Capital is unlikely to fall below 75 per cent in the foreseeable future following TCL's planned public listing, rating firm Fitch said in a statement in February.

 

Tata Capital, like its parent Tata Sons, was designated as an “Upper Layer” non-banking financial company (NBFC) by the Reserve Bank of India (RBI) and is, therefore, subject to higher regulatory requirements, including a public listing. The public issuance should improve the company's capital base and further reduce leverage. TCL's debt-to-tangible equity ratio moderated to 6.3x by September-end last year from 7.2x at the end of 2021-22 (FY22), as per Fitch.

 

Apart from the IPO, Tata Capital is also raising up to $750 million through external commercial borrowing (ECB) as part of its $2 billion medium-term note programme, as per RBI data.

 

In December, Tata Capital had sought clearance from the RBI to mobilise over $750 million from international markets. Its subsidiary Tata Capital Housing Finance also asked for approval to raise $200 million, according to RBI data. HSBC and Standard Chartered have been appointed joint book-runners for the issue, according to Bloomberg.

 

Tata Capital is expected to launch the dollar-denominated senior unsecured bond with a three-year tenor, maturing in December 2028, as part of the group’s plans to go big in the financial services sector.