Monday, January 19, 2009

Tata Capital: Public Issue; Why now?

Some of the large Indian Business Groups true to form diversified into every conceivable business and Tatas possibly lead the pack in this.

2008 was a forgettable year: Corus, JLR, Singur and the blasts took a toll on the group that still possibly represents true blood Indian Corporate: Mai-baap types.

So which is the one business that trust is very important? Banking for sure. Considering that financing as a NBFC was not making any great deal of money (and NBFC s have gone of out of fashion) now, banking is the only business left. Tata Capital (coming in with a fund raise, download document here) is possibly the first step in that direction.

The prospectus will be for non-convertible debentures, 500 Cr raise. The pricing possibly will be determined at the time of the offer. The total leverage of the NBFC would be about 3.38 times post the issue, not bad except that most the funding is in the retail sector which could end up leaving higher NPA s than the current 0.5 times. The document per se is very interesting.

Proceeds of the issue is general purposes mostly. At 6,000 odd crores, the business does possibly need capital - but the timing is odd. RBI is unlikely to hand out banking licenses to industrial groups, primarily because of the obvious conflict of interest.

In a falling interest rate regime, should be interesting to look at the pricing that the market offers.

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