Home >companies >news >Tata Motors raises $750 million in bond sale

Mumbai: Tata Motors Ltd, the passenger and commercial vehicle manufacturer of the $103 billion Tata Group, has raised a total of $750 million by selling bonds to investors in Asia and Europe in a transaction which closed on Friday.

“This is a benchmark issuance which is likely to be listed in Singapore," said a person familiar with the issue, adding that Citibank NA, Credit Suisse Group AG, Australia and New Zealand Banking Group Ltd (ANZ) and Standard Chartered Plc were the bankers to the issue.

Tata Motors confirmed the bond issuance in a press release.

“The proceeds from the issuance and sale of the notes will be used to refinance external commercial borrowing of the company, incur new additional capital expenditure and for general corporate purposes," the company said.

“We are pleased to have completed this transaction successfully and we thank the investors for demonstrating their confidence in our company," Vijay Somaiya, vice-president, finance and head treasury & investor relations, Tata Motors was quoted as saying in the release.

Separately, Bloomberg reported citing a person familiar with the development that the 5.5 year bond was priced at 4.62% while the 10-year bond was priced at 5.75%.

Tata Motors got $4.2 billion orders for the $500 million 5.5 year bond while the 10-year bond managed to get orders worth $350 million for a $250 million issue, Bloomberg said.

Investors based out of Asia dominated the 5.5 year issue cornering 61% of the bonds sold while the 10-year issue was lapped up by investors based out of Europe and the Middle East which cornered 78% of the share.

Mutual funds bought 69% of the 5.5% years and also bought 50% of the 10-year bonds, Bloomberg said. Insurers bought 40% of the 10-year bond, the agency added.

Indian companies usually raise money by selling bonds abroad to retire existing debt or for expanding their business abroad.

Tata Motors could use this money to invest in its hot selling UK based luxury car brand Jaguar Land Rover Automotive Plc (JLR).

In a note on Thursday, global credit rating agency Standard & Poor’s had said Tata Motors primarily expects to use the proceeds of the bond “to refinance a part of its debt and fund its capital expenditure."

The rating agency had assigned a BB long-term issue rating to the issue while highlighting Tata Motors’ increased dependence on JLR.

“We believe the good operating performance of Tata Motors’ fully owned subsidiary JLR, if sustained, could improve Tata Motors’ consolidated financial strength. Conversely, a weaker operating performance of JLR could lower Tata Motors’ ratio of funds from operations to debt to about 30%, compared with 37% in fiscal 2014 (ended 31 March). This is given that JLR’s annual capital expenditure will likely remain high at about £3.5 billion for the next couple of years to add new products, engines and platforms, increase production capacity, and to meet emission standards," S&P said.

“The ratings on Tata Motors reflect the company’s small size and narrow product suite compared with many global peers’, and its likely negative free operating cash flows because of high capital expenditure. JLR’s established and improving market position in the global premium automotive segment and its strong operating performance temper these weaknesses," the rating agency added.

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