The board of Tata Motors Finance is meeting on Monday to take a call on raising Rs 5,000-crore debt from local institutions and another $400 million as foreign bonds. The funds will be used to repay its debt, part of which is due next month, say lending sources. After restructuring in FY17, Tata Motors Finance Holdings has become the holding company for the financial services business of Tata Motors.
The Tata group also runs a separate financial services business under the umbrella of Tata Capital. While Tata Motors Finance funds new vehicles of Tata Motors, its promoter Tata Motors Finance Solutions (TMFSL) funds pre-owned vehicle financing business and its dealers. A Tata Motors Finance official confirmed the fundraising but declined to divulge details.
According to lenders, Tata Motors Finance’s total debt of Rs 25,585 crore as on March 31, about Rs 6,332 crore will fall due to redemption by next month. Tata Motors Finance has sanctioned and unutilised cash credit limit of Rs 1,860 crore and another around Rs 625 crore in the form of bank loans. Besides, the firm expects Rs 825 crore of cash flows in the next three months.
The fundraising will help it to repay the debt.
Interestingly, Tata Motors, promoter of Tata Motors Finance, is infusing equity at regular intervals so that the two companies — TMHFL and Tata Motors Finance — can maintain their capital adequacy norms.
The auto major infused Rs 1,150 crore from FY11 to FY14 and has pumped another Rs 300 crore equity into TMFHL in the fourth quarter of FY18. It had to Rs 300 crore in TMFHL in October last year and a similar amount was infused in Tata Motors Finance in FY19.
Tata Sons, the holding firm of Tata Group, has separately invested Rs 2,500 crore to boost its net worth in FY19.
In the current financial year, the group is planning to bring all the financial services arms, including Tata Capital, the insurance arms and the asset management business, under a single umbrella, with a new head leading the entire vertical. The additional equity infusion will help the firm to grow its business in the NBFC segment where the new entrants have made a significant impact.