Tata Capital Secures $200 Million Through Foreign Term Loans

26 Mar 2024 , 02:51 PM

Tata Capital Ltd, the main financial services arm of the Rs 31 lakh crore Tata Group, has raised $200 million with a three-year loan from Singapore’s DBS Bank and Taiwan’s CTBC Bank.

The company has the option to price the loan 120 basis points higher than the one-month, three-month, or six-month Secured Overnight Financing Rate (SOFR), depending on market conditions. The loan is part of the company’s routine borrowing plan.

CEO Rajiv Sabharwal stated that the funds were raised as part of the company’s $750-million external commercial borrowing (ECB) scheme, in accordance with Reserve Bank of India requirements.

“This is part of our regular fundraising initiatives. Borrowing international cash allows us to diversify our finance needs. The landed cost of funds is almost or equal to our domestic cost of funds,” Sabharwal stated.

Tata Capital would initially pay roughly 6.55% for these dollar funds, 120 basis points above the three-month SOFR rate, which is presently around 5.35%, though the ultimate rupee rate might be higher after hedging and tax liabilities.

The company’s net profit in the quarter ended December 2023 was ₹1,023 Crore, up 78% from the same period a year earlier, owing mostly to increasing interest revenue, despite rising financing expenditures.

At the end of December, the company’s loan book was ₹1.49 Lakh Crore, with retail and SME clients accounting for around 90% of the loans.

According to a presentation on the company’s website, domestic bank loans and non-convertible debentures account for 86% of the company’s funding profile, with ECBs accounting for 6%, which is consistent with the company’s liabilities mix a year earlier.

The business said that it would focus on raising more granular, sticky liabilities with sufficient liquidity.

Last month, the corporation obtained a first-time long-term issuer credit rating of ‘BBB-‘ from global rating agencies Standard and Poor’s (S&P) and Fitch Ratings, which is equivalent to India’s sovereign rating.

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