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Tata Sons mopping up $500 million via foreign loans

These loans would mature in three or four years.

Jul 15, 2019, 07.54 AM IST
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Tata Sons will continue to tap the foreign loan market to raise more funds, officials said.
Mumbai: Tata Sons is raising $500 million in the first tranche of its scheduled offshore borrowings, the proceeds from which will likely be used to fund multiple ongoing expansion and restructuring plans, said three people with knowledge of the matter.

The loan may be priced after adding 115 basis points over and above the London Interbank Offered Rate, a global benchmark gauge, said market sources. These loans would mature in three or four years.

Tata Sons declined to comment on the matter. A group official said planned growth of businesses will need more funds across companies run by one of India’s oldest conglomerates.

Tata Sons is the principal investment holding company of the Tata Group. ET reported on May 23 that Tata Sons is planning to tap the foreign loan market to raise $2 billion, its largest such borrowing to date, as group companies including Tata Steel and Tata Motors are expected to need liquidity support from the conglomerate’s holding company.

Another official close to Tata Sons said proceeds from overseas borrowings would help refinance Tata Sons debt. “Earlier, the refinancing used to be done through domestic borrowings, but since that route has been cut off, the dependence on overseas borrowings is higher,” the person said.

Tata Sons will continue to tap the foreign loan market to raise more funds, officials said. An estimated $2.5 billion will be raised as part of this change in the group’s financing strategy, officials close to the matter said.

Eight global lenders, including Standard Chartered Bank, DBS Bank, MUFG, Sumitomo Mitsui Banking Corporation (SMBC) and Scotiabank, are expected to syndicate this loan, sources said. Individual banks could not be connected immediately for comments.

“Several group companies planning expansions and also dealing with debt would need support,” one of the persons cited above told ET. Going private has restricted Tata Sons’ access to long-term funds, such as those from LIC. The Insurance Regulatory and Development Authority of India (IRDAI) does not allow insurers to subscribe to investments in private limited companies that are not regarded as secured Tata Sons bought back nonconvertible debentures (NCDs) worth an estimated ?3,000 crore from the country’s largest insurer, Life Insurance Corp of India (LIC), ET reported on June 5.

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