Tata Motors drops plan to issue debentures
Tata Motors on Thursday said it has decided to withdraw a non-convertible debenture (NCD) issue to raise up to Rs 1,000 crore, because of “tight market conditions” — an indication that many companies will find it hard to raise funds at cheap rates.
On May 5, the company said a board-constituted committee had approved raising up to Rs 1,000 crore through the issue of non-convertible debentures on a private placement basis.
“We hereby inform that the company has decided to withdraw the issue for private placement of unsecured NCDs in view of the higher cost expectations from the market participants because of the tight money market conditions,” Tata Motors said in a communication to the bourses.
Tata Motors added that it continues to have sufficient liquidity and would consider the issuance of NCDs at an appropriate time and under normal market conditions with necessary approvals.
bd approved the offer for subscription, on a private placement basis, up to 10,000 rated, listed, unsecured, redeemable, non-convertible debentures (NCDs) of a face value of Rs 10,00,000 each at par, aggregating up to Rs 1,000 crore.
Tata Motors had planned to issue the NCDs in three tranches of Rs 500 crore, Rs 300 crore and Rs 200 crore with redemptions due on September 30, 2022, November 28, 2022 and December 29, 2022, respectively.
The nationwide lockdown has affected the corporate bond markets, with investors largely preferring AA rated bonds and above. Fitch Ratings had downgraded the long-term issuer default rating (IDR) of the company to “B” from “BB-” with a negative outlook.
Fitch had said that the downgrade reflects its significantly lower expectations for Tata Motor’s profitability and cash flow over the next few years due to the effect of the coronavirus pandemic on demand and disruption to its Indian operations as well as to key auto markets globally that are served through its fully owned UK-based subsidiary, Jaguar Land Rover Automotive plc.