Tata Motors arm raises $600 mn from six banks

New Delhi: Singapore-based TML Holdings Pte Ltd, a subsidiary of Tata Motors Ltd that holds or owns securities of companies other than banks, has raised a $600 million loan from six banks, a company spokeswoman said.

“The loan will be utilized to refinance its USD (US dollar) and SGD (Singapore dollar)-denominated loans signed in November 2013,” the spokeswoman for Tata Motors said in reply to a Mint questionnaire on Thursday. Those loans were taken to infuse money into the company’s operations.

The spokeswoman added that Tata Motors will look to monetize some of its non-core assets and investments, besides exploring capital optimization through better operating efficiency in working capital, among other things.

According to a Mumbai-based analyst, who spoke on condition of anonymity, Tata Motors is invested in other Tata group ventures such as Tata Technologies Ltd, Tata-Hitachi Ltd and Tata International Ltd.

“Of these, it makes sense for the company to divest their stake in Tata Technologies and Tata-Hitachi,” said the analyst.

The company spokeswoman did not elaborate on this matter.

Six banks—State Bank of India, Australia and New Zealand Banking Group Ltd, DBS Bank Ltd, Standard Chartered Plc and Crédit Agricole Corporate and Investment Bank SA and First Gulf Bank PJSC—have agreed to extend the loan in two tranches of $300 million each, for five-year and seven-year periods.

The first tranche is priced at 176 basis points above the London interbank offered rate (Libor) and the second on a pro-rata basis, in a range between 206 basis points and 227 basis points above Libor.

Libor is a benchmark interest rate. One basis point is one-hundredth of a percentage point.

The company held road shows in Taipei on 19 October and in Singapore on 20 October.

The company held road shows in Taipei on 19 October and in Singapore on 20 October.

“Syndication of the facility has been launched and is planned to close by end November 2015,” the Tata Motors spokeswoman said.

The loan is part of an attempt by the company to cut its debt and fund operations.

In May, Tata Motors had raised Rs.9,040.56 crore through a rights issue—sale of stock to existing shareholders.

The company spokeswoman said the rights issue had resulted in a reduction of almost Rs.2,000 crore of gross debt, boosted cash and cash equivalents by Rs.3,937 crore and consequently led to the reduction of net debt-to-equity ratio to 0.63 as of 30 June 2015 from 1.36 as of 31 March 2015.

The issue led to an equity dilution of 5.22% and shored up the promoter’s holding to 37.76% from 34.33%.

After the rights issue, the firm’s gross debt has dropped to Rs.19,137 crore at the end of June, from Rs.21,134 on 31 March.

Tata Motors has been battling a slowdown in sales in its home market for the past five years. A recent slowdown in the Chinese market, where it sells the Jaguar and Land Rover models, has added to its woes.

According to Mahantesh Sabarad, deputy head of research at Mumbai-based brokerage firm SBI Cap Securities Ltd, the company would do well to focus on increasing its sales in India, where passenger vehicle sales are projected to increase during the ongoing festive season and rise further as borrowing costs and fuel prices drop.

“It is more about improving sales in the market,” Sabarad said. “The moment they do that, it will drive up the profits and bring down the debt levels.”

Sales of Tata Motors’ vehicles have shown signs of improvement in recent months. Sales of its passenger vehicles grew 4% to 76,102 units in the six months ended September after declining 19% during the fiscal year ended 31 March. A decline in commercial vehicle sales has been arrested too. Sales of Tata’s trucks and buses declined 0.63% to 138,265 units during the first half of the current fiscal year.

In the last fiscal year, sales declined by 8.64%.