Tata Group companies are increasingly taking the road to Singapore to raise funds, taking advantage of the country's sound economic and institutional strength.
In 2013 itself, three Tata companies — Tata Motors, Tata Communications and Tata Steel — have raised an aggregate of almost Rs 4,000 crore, through the issuance of Singapore dollar-denominated bonds.
In a recent move, a Singapore-based Tata Motors subsidiary, TML Holdings Pte, which owns UK-based Jaguar Land Rover Automotive Plc, is reportedly in talks with banks to raise S$500 million (about Rs 2,500 crore) through syndicate loan to meet various operational requirements. According to sources, Tata Communications, a Mumbai-based telco, is also doing road shows in Singapore to raise funds through a bond issue. The extent of the bond issue is yet undecided.
Backed by Tata Motors, TML Holdings had raised S$350 million in May (Rs 1,545 crore then) through Singapore dollar-dominated Regulation S bonds (Reg S) at an annual coupon rate of 4.25 per cent. The proceeds were to be used for redemption of preference shares issued to Tata Motors and for general corporate purposes.
“As we are in the silent period in view of our imminent results announcement for Q2 (second quarter), we are not in a position to respond to these queries. Like any other large global company, Tata Motors considers various balance-sheet strengthening/ restructuring initiatives from time to time, that will be announced at the appropriate time,” said a Tata Motors spokesperson. Close reach to growth engines of Asia —China and India — backed by government-aided tax incentives to domestic lending institutions, the AAA sovereign-rated south-east Asian nation has become a hot bed for wealth management.
In the Budget speech in February this year, Singapore finance minister Tharman Shanmugaratnam had said the qualifying debt securities (QDS) scheme would be extended by five years to December 31, 2018 in order to promote the local debt market. For debt securities issued during the period between January 1, 2014 and December 31, 2018, the requirement that the QDS be substantially arranged in Singapore will be rationalised to ease compliance for issuers.
Tata Motors group’s fund-raising activity will be the third such case since January this year. In addition to the Singapore bond issue, Jaguar Land Rover Automotive had raised $500 million (Rs 2,750 crore) through senior debt.
The Senior Notes due 2023, at a coupon of 5.625 per cent per annum, were guaranteed on a senior unsecured basis by Jaguar Land Rover Limited, Land Rover, Jaguar Land Rover North America LLC, Land Rover Exports Limited and Jaguar Land Rover Exports Limited.
On an average, Tata Motors invests Rs 2,500-3,000 crore every year towards capital expenditure, of which a major chunk is for new product development. However, this pales in comparison with investment planned by JLR, of £2.75 billion (Rs 22,825 crore) for the current financial year.