With the total assets of Tata group finance companies — Tata Capital Financial Services (TCFSL) and Tata Motors Finance (TMFL) — crossing the Rs 110,000 crore mark in 2018-19, the stage is now set for the behemoth to aggressively push its financial services business with additional investments in the current financial year.
The additional investment comes at a time when the non-banking financial services (NBFC) segment is going through a liquidity crisis.
Tata Capital is a subsidiary of Tata Sons, while Tata Motors Finance is a subsidiary of Tata Motors.
Tata Sons invested Rs 2,500 crore in Tata Capital as equity infusion in 2018-19, while Tata Motors invested equity capital of Rs 600 crore in its vehicle financing subsidiary during the same year.
Sources said the group would be making further investments this year. In the first quarter of 2019-20, Tata Motors Finance Holding, a subsidiary of Tata Motors, has already infused Rs 150 crore of equity and subscribed to Rs 300 crore of subordinated debt in TMFL.
"In the last few years, we have been growing at a rate of 24 per cent compound annual growth rate (CAGR). We aim to grow at 20 per cent in a sustained and balanced manner. Any capital infusion will be based on our growth requirements," said Rajiv Sabharwal, managing director & chief executive officer (MD & CEO) of Tata Capital Limited.
As per Tata Sons' annual report of 2019, Tata Capital's loan book has increased from Rs 61,455 crore as on March 2018 to Rs 77,100 crore as on fiscal ending March 2019 on a consolidated basis, while Tata Motors Finance's loan book was Rs 35,000 crore for the fiscal ending March 2019.
The combined total assets of both companies shot up from Rs 86,519 crore in fiscal 2018 to Rs 1.13 trillion in fiscal 2019.
TCFSL is currently in the process of raising Rs 4,000 crore from investors by issuing non-convertible debentures and also plans to tap international markets to raise up to $1.5 billion.
Sabharwal said that due to the recent NBFC crisis, the company saw an increase in its cost of funds, but after February, the company did see costs coming down.
"With the government and the Reserve Bank of India (RBI) stepping in, providing guidance and emphasising on the importance of the NBFC sector, there has been an improvement in investor sentiment. This has also resulted in increase in liquidity and flow of credit," he added.
TCFSL expects growth to come from the small-medium enterprises (SME) sectors and value-added products across categories. "These include channel finance, working capital, sales invoice discounting and leasing, among others. On the retail side, we see growth potential in personal loans, business loans and used car loans as well as two-wheeler loans," he said.
According to ratings firm CRISIL, while TCFSL is showing positive asset liability maturity (ALM) profile, TMFL's ALM profile as of July 31, 2019, shows negative mismatch in the next six months to one year. This is raising the possibility of additional funding support from the parent.
TMFL's total debt repayments coming up till October 31, 2019, are Rs 6,369 crore as per the ALM statement. Of this, Rs 5,131 crore was in the form of commercial papers. Against this, TMFL had collections/prepayments of Rs 2,431 crore. Moreover, TMFL had cash and equivalents of Rs 1,031 crore, investments of Rs 668 crore and unutilised cash of about Rs 1,830 crore.
|Total assets: Rs 32,917 crore||Total assets: Rs 80,477 crore|
|Total income: Rs 1,208 crore||Total income: Rs 3,266 crore|
|Net profit: Rs 204 crore||Net profit: Rs 590 crore|
*For fiscal 2019 (consolidated)