Tata Motors, the biggest automobile manufacturer in India, is raising Rs 300 crore through bonds in order to meet its capital expenditure requirements.
The company has lined up an investment of Rs 3,000 crore for the current financial year for the domestic operations. Focusing on new markets and product development, Jaguar Land Rover, its British luxury car unit, has reportedly raised its capex plan to 3.5-3.7 billion pounds for the 2014-15, up from its earlier projection of 2.7 billion pounds in 2013-14.
The funds are being raised through four-year-11-month bond at a 10%. The bonds are rated AA+ by Care Ratings, and Deutsche Bank is the sole arranger to the bond sale.
Confirming the move, Tata Motors spokesperson said, "Like most large companies, Tata Motors continues to access the capital market for meeting the capital and product development expenditure from time to time."
The company has been struggling in the domestic market on account of high competition in the passenger vehicle segment, while slowdown in the economy has impacted sales of company's commercial vehicles.
Spending on new products will be one of the key initiatives by the company as it prepares to take on the competition. The company recently showcased its new vehicles – Bolt and Zest – at the recent Auto Expo held in Delhi, which is expected to be launched in the next fiscal. While the company will be reportedly spending Rs 1,500 crore on new trucks and buses in the next fiscal.
"Tata Motors has been lagging as far as the new launches are concerned. However, most auto companies are investing on enhancing and redesigning their products. The company will utilise portions of these funds for product development," said an analyst from domestic brokerage, who did not wish to be quoted.
"The primary driver for Tata Motors on a consolidated basis has been JLR's performance for the past 7-8 quarters. The company has enough cash through JLR's strong performance. Tata Motors has received 150 million pounds of dividend from JLR in fiscals 2013 and 2014," said Dhaval Patel, analyst with Care Ratings.