MUMBAI: Tata Industries, the holding company for new-age businesses at Tata Group, raised Rs 250 crore by selling corporate bonds to Birla Sunlife Mutual Fund, Aditya Birla Finance and Kotak Mutual Fund as it looks to refinance existing debt and spend on general business purposes.
Tata Industries issued 2,500 nonconvertible debentures (NCDs) of the face value of Rs 10 lakh each, according to documents seen by ET. Kotak Mutual Fund and Birla Sunlife Mutual Fund subscribed to Rs 100 crore worth of NCDs each while Aditya Birla Finance subscribed to Rs 50 crore worth of NCDs. ICICI Bank was the sole arranger of the private placement.
“We do not share information on such matters. Suffice it to say that, from time to time, Tata Industries raises funds as part of its ongoing activities,” a Tata Industries’ spokesperson replied in an email. Currently, Tata Sons directly and indirectly holds 52.8 per cent stake in Tata Industries. It started two new divisions — Digital Health Platform and Insights & Quants. It also has invested in its subsidiary, Tata Unistore Ltd, which is gradually scaling up its operations.
NCDs are debentures that cannot be converted into equity shares, and carry a higher interest rate than securities that can. Drop in interest rates after demonetisation are making NCDs attractive for investors.
The redemption of the securities will take place on June 3, 2018. The company can exercise a call option to redeem the NCDs on March 7, 2018. “Tata Industries’ financial flexibility is driven by investment into listed companies of the group with high market capitalisation and ample liquidity,” said Crisil in a report.
“Crisil believes that Tata Industries’ ratings will continue to benefit from the company’s access to financial and management support from Tata Sons as it is a strategically important company for the group.”
Tata Industries is the vehicle for Tata Group’s strategic investments in new and high-technology areas and therefore, enjoys access to significant need-based financial support from parent Tata Sons as well as other Tata Group companies. It also holds a minority stake in other listed Tata group companies, the market value of which stood at Rs 3,578 crore as on May 30, 2017.
Tata Sons as well as other Tata Group companies have demonstrated their support to Tata Industries in the past by subscribing to its rights issues in fiscal 1998, 2000, 2004, and 2011.
Crisil also said since Tata Industries will continue to invest in start-up businesses or other ventures that need to be nurtured for long periods, returns from these investments are likely to be low in the short term, and may continue to exhibit a certain degree of commercial, technological, and regulatory risks inherent in such projects.