Tata Group Seeks to Raise $3.1 Billion to Fund Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Tata Group (Mumbai), an Indian multinational conglomerate and the second largest group in the country by market capitalization, is striving to raise more than $3.1 billion for projects. This will be in addition to the $2.7 billion raised recently from the sale of equity in Tata Teleservices Limited (BSE:532371) (Mumbai), a telecommunication company of the group. The group is facing a liquidity crunch because of the global economic slowdown's impact on India. The Securities and Exchange Board of India (Mumbai), the regulatory body for securities market in India, has sought some clarifications on the sale of 26% of its equity stake in Tata Teleservices to Japan's NTT DoCoMo (TYO:9437) (Yokohama, Japan), through an open offer in November 2008.

The Tata Group is looking at various options to raise funds that include resource mobilizations through public offer of debt securities, sale of Tata Motors Limited's (BSE:500570) (Mumbai) auto loans, FDI investments, private equity placement through the sale of equity or debt securities, and soliciting public deposits. Exact figures on the amount to be raised through fund mobilizations are unavailable, but it is speculated to be between $3.1 billion and $4.1 billion. Soliciting public deposits will result in nearly $560 million while selling the vehicle loan business of Tata Motors to a group company is expected to bring in $2 billion. Tata Capital, a fully owned subsidiary of Tata Sons Limited, will raise $350 million-$500 million through private equity and another $200 million through a public offer of debt securities.

The group has approached the U.K. and Dutch governments for financial assistance to efficiently manage Corus and Jaguar-Land Rover operations. Corus was merged with Tata Steel while Jaguar and Land Rover were acquired by Tata Motors. The automotive unit of the Tatas has sought a $1.5 billion package from the U.K. government to run Jaguar and Land Rover. A positive outcome is yet to come of the discussions the group is holding with both the governments.

Ratings of a number of Tata group companies such as Tata Motors, Tata Steel Limited (BSE:500470) (Jamshedpur, Jharkhand) and Tata Chemicals Limited (BSE:500770) (Mumbai) have been downgraded recently, around the same time the group is seeking funds for its capital expenditure projects. Rating agency CRISIL Limited (BSE:500092) (Mumbai) downgraded Tata Steel's nonconvertible debentures and fixed deposits because of its weak capital structure. The retail auto financing business of Tata Motors did not see significant growth in 2007-08compared to the previous year. Loans for $2.1 billion were given in 2007-08, compared with $1.9 billion in 2006-07. Further, a higher rate of loan defaulters at 9.7% has caused CRISIL to downgrade the rating for Tata Motors and Tata Motors Finance Limited's retail finance businesses, which in turn has made raising debts difficult and costlier for the group.

The auto business in general is seeing a slowdown in Britain. According to the Society of Motor Manufacturers and Traders, new car registrations were down by 23% in October 2008 compared with the previous year, but Tata's Jaguar saw an increase in sales. Sales of the group's Land Rover declined by 58% in October 2008. The group plans to invest the funds raised to implement projects in steel, mining and telecommunication sectors.

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