Mumbai, Jan. 30Tata Capital said it would raise Rs 500 crore through a non-convertible debenture issue, with an option to retain oversubscripttion of up to Rs 1,000 crore.
The issue opens on February 2 and closes on February 24, 2009, and offers an interest rate of up to 12 per cent. The redemption date is five years from allotment with put and call options offered to investors at the expiry of 36 months and 42 months, depending on NCD payment options chosen.
The minimum application amount is Rs 10,000 for the quarterly, annual and cumulative interest payment options (coupon rate of 12 per cent an annum); and Rs 1 lakh for the monthly interest payment option (coupon rate of 11.25 per cent an annum).
Tata Capital, a non-deposit taking NBFC of the Tata group, will use the proceeds of the issue for its business growth and also to repay existing costlier debt, said Mr Pravin Kadle, Managing Director, at a news conference here on Thursday.
Testing marketOn why the greenshoe option is larger than the main issue size, Mr Kadle said this was the first retail bond issue in India in several years.
“The market is almost not in existence. We want to test it,” he said.
The minimum threshold for the issue is 40 per cent of the issue size or Rs 200 crore.
For Tata Capital, this was an effective way to diversify its lending channels, said Mr Kadle.
One cannot just rely on banking channels. Banks are reluctant to lend to NBFCs and the private placement market is flat, he noted.
For investors, the NCDs issue would be attractive as returns on equity and from mutual funds were pretty low, he said. As the NCDs would be listed instruments on the NSE, there would be no tax deduction at source, which would also make it an attractive value proposition for small investors, he said.
The company may also consider granting loans against these NCDs.
Advantage TataThough there was a danger of interest rates declining, loans to corporates are still expensive, said Mr Kadle, indicating that Tata Capital would manage good spreads through non-retail business.
The company’s retail business constitutes 30-35 per cent of revenues.
“We are very careful in lending to retail, we only give high-ticket personal loans and don’t do unsecured lending.”
Over 40 per cent of Tata Capital’s book size consists of non-Tata business, said an official with the company.
The company’s capital adequacy ratio is 26 per cent and its NPA stood at 0.5 per cent. “This is gross NPA and we are more aggressive than the RBI policy in accounting for NPAs,” said Mr Kadle.
The company’s debt-equity ratio will rise from 2.66 to 3.38 after the issue.
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