Mumbai: Tata Capital Ltd, the non-banking financial services unit of the Tata group, will raise $1 billion (Rs4,660 crore) for its private equity (PE) unit by December 2011, said chief executive officer and managing director Praveen P. Kadle. The company has already got commitments from domestic investors for $200 million and will raise the rest from international investors. The money will be divided among four PE funds—a mid-markets fund, a special situation fund that will invest in distressed assets, an innovation fund and another that will put money into healthcare companies.
That, however, is only part of the business. Tata Capital will also focus on commercial finance to expand the size of its loan book to some Rs16,000 crore by March 2011 compared with Rs10,200 crore a year ago, Kadle said. The company is also floating a new unit called Tata Capital Infrastructure Finance for which it has secured the Reserve Bank of India’s approval, he added. In an interview, Kadle further talked about the company’s expansion plans, investments and how the Tata group ecosystem helps. Edited excerpts:
Tata Capital now has the scale. What’s stopping you from going public?
We need sufficient scale and (need to) create sufficient value for our existing shareholders. We need to set all our five businesses on a strong foundation. So once we do that, we could then look at a public listing. At the present juncture, we don’t really need any additional equity capital. We can raise long-term debt funding and we are not in a hurry. We also need to go through one more business cycle, experience the impact of the business cycle on our operations. Then we will look at a public issuance.
Tata Capital has a stake in Development Credit Bank Ltd (DCB). What is the investment motive behind the 5% stake? Is it to keep yourself ready when regulations allow corporate groups to enter banking?
Right now, to be very frank, it is a portfolio investment. Current regulations don’t allow us to take more than 5% equity stake. It is an independent bank and we don’t have any nominees on the DCB board.
Successful NBFCs have a niche. What is your niche?
A strong corporate finance business with lending, investment banking, private equity and advisory is the core of Tata Capital. Then our presence in consumer finance through home finance and mortgage finance, wealth management, distribution and broking are the other three key areas we’ll concentrate on, in the consumer finance and advisory services segment.
You talked about a core Tata group ecosystem, which will give you business. Can you elaborate?
We help in terms of lending support to them for both long-term and short-term debt raising and overall financial restructuring. We support our group companies in their M&A (mergers and acquisitions) activities or fund-raising activities. We also provide support in areas of private equity. In short, we provide end-to-end solutions to all our clients who are operating in the ecosystem.
There is a rush of equity-backed fund-raising by Tata Motors, Tata Steel and Tata Chemicals. Is Tata Capital involved in the exercise?
These are all board-driven listed companies. Just because we are a Tata group company, the mandate will not be granted to us, unless we really offer some value-added services that are better than what others are offering. There is no dearth of investment bankers in the marketplace. We need to have an expertise in raising money outside India. Some of the larger companies in the group will raise money not only in India, but also outside India.
Tata group has myriad companies in the financial services business—Tata Investment, the two insurance companies and the asset-management company. When will the group consolidate all the businesses under Tata Capital?
Too early to comment. There are better ways to get synergies. We are one of the largest distributors for Tata Asset Management. We also distribute products of Tata AIG Life and Tata AIG General Insurance.
But what’s stopping the group from consolidating the private companies under one roof?
Good point. But in due course, if it happens, we’ll certainly bring it to the public domain.