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Tata Cap to raise Rs 1K cr from bond sales

Tata Capital, the non banking finance company (NBFC) of the Tata Group, is raising new money to lend when other companies prefer to just keep it under their pillow.

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Tata Capital, the non banking finance company (NBFC) of the Tata Group, is raising new money to lend when other companies prefer to just keep it under their pillow. The 16 month old NBFC - formed in September 2007 - is in the process of raising Rs 1,000 crore by selling bonds.

The money raised will be used to lend to companies for their day to day requirements and also to individuals wanting to buy cars, commercial vehicles or even homes.

Govind Sankaranarayanan, chief financial officer of the company, says loan demand has weakened but creditworthy borrowers are still out there to be taken because more established competitors are cautious in lending.

“We are still seeing a fair amount of demand. We will use this period to make clients, recruit people and build infrastructure and technology,” he said.

ICICI Securities, Citigroup and DSP Merrill Lynch are the lead managers to the issue, which is tentatively scheduled for the last week of January and will be open for “two-three weeks” he said.

Other NBFCs have almost stopped lending, fearing defaults and also as companies are going slow on investments.

“We are also cautious, but we have a strong risk management team and we also tap credit data,” Sankaranarayanan said. Tata Capital has a Rs 8,000 crore loan book equally split between corporate and retail.

Less than 1% of Tata Capital’s loans are non-performing loans (NPLs), but Sankaranarayanan admitted that loan demand has come down from its peak of Rs 500-600 crore in June-July 2008.

Signs on the individual borrowings are also not great with people delaying their monthly installments, he admits.

Sankaranarayanan is betting that cash starved companies will demand credit to overcome their liquidity crunch.

“Other funding avenues like external commercial borrowings, equity markets and also the commercial paper market have dried,” he said. But then doesn’t the ongoing Satyam fiasco bother him? “It depends on the character of the top management.

But we do our part of auditing the accounts and also do physical checks,” he said. Tata Capital has about 30 branches currently and it is also tapping the 20 branches of its subsidiary brokerage firm Tata Securities.

There are also plans to tap the 100 plus offices of Tata Motors. Further plans include entering the money spinning investment banking business, focussing on mergers and acquisitions and private equity (PE) advisory.

Tata Capital also has a Rs 1,900 crore loan book to the small and medium enterprises segments (SMEs), which has seen some stress in the current downturn. But Sankaranarayanan is confident that there is enough space among SMEs to grow his book.  

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