Tata Motors has announced that the Company will raise a sum of ₹1,000 crores through allotment of non-convertible debentures (NCDs) on a private placement basis. A committee, constituted by the company’s board on May 20, has approved the allotment of 10,000 non-convertible debentures (NCDs) with a face value of ₹10,00,000 each. All 10,000 NCDs are being offered to the State Bank of India (SBI) at an interest rate of 8.80% per annum. The debt instruments are proposed to be listed on the wholesale debt market segment of the BSE Ltd and the NSE Ltd.
What this means:
With the announcement Tata Motors joins the bandwagon of other Companies in Auto Industry like, Mahindra and Mahindra, TVS Motor Company Ltd and Motherson Sumi Systems Ltd, who have resorted to fund raising through NCDs. In the current crisis, Auto Industry is one of the worst hit with a steep fall in demand, which might now take a while to get back to more comforting levels. Though a hike in demand for small cars and two wheeler segment is anticipated post lockdown, the industry will still have to deal with liquidity crisis and the current fund raising move will help provide the much needed liquidity injection to the Company to manage their costs and liquidity requirements as sales slowly picks up.