February 26, 2009 | The Hindu Business Line

Tata Capital NCD subscribed six times

Excerpts from the report.
 
Mumbai: Tata Capital’s non-convertible debenture programme was oversubscribed six times. This is the first large NCD issue in several years. The last was by Reliance Industries, which raised Rs1,000 crore through this instrument in 2003.
 
The Tata Capital issue had opened on February 2 and closed on February 24. The NCD will be listed on the NSE. The company will be retaining the subscription of Rs1,500 crore.
 
“Based on the good response to this NCD, we feel that such bonds will become an instrument of choice for investors and other corporates,” said Praveen Kadle, managing director, Tata Capital.
 
Marketmen, though, said that not just any NCD issue would receive such response. “Investors feel safe with the brand name of Tata, which is one of the reasons why this issue has received such a good response. Any good quality company with a good name among investors will fetch a good response,” said Sidharth Punshi, managing director and country head at Jefferies India Private Ltd.
 
The NCDs also offered higher returns than most other asset classes currently. “When the index falls and people lose faith in equity-linked instruments, investors turn to debt instruments. The Tata Capital NCD offers a high rate of return to the investors when compared to instruments such as fixed deposits, equities, etc,” said B Madhuprasad, vice-chairman, Keynote Corporate Services.
 
The rate of return of the Tata Capital NCD is between 11 per cent and 12 per cent annually under four options. Many people have burnt their fingers in the stock markets as they crashed close to 60 per cent in the last one year. Fixed deposits have a rate of return – between eight per cent and 8.5 per cent – and liquid funds give average returns of close to five per cent, said analysts.
 
“Debentures seem like a safer bet when compared to the other options at the moment,” said Mr Punshi.
 
Issue Deployment: “The issue proceeds are proposed to be used for the company’s various financing activities including lending and investments, business operations including its capital expenditure and working capital requirements and to repay existing loans,” said Mr Kadle.
 
Demat Accounts: The number of demat accounts in the country rose by 76,000 (0.5 per cent) between December 31 and February 15. This could partly be on account of the Tata NCD issue, as the instruments are going to be listed on the NSE. The number of demat accounts on NSDL increased to 55.1 lakh accounts in February 15 from 54.84 lakh on December 31, and on CDSL it increased to 96.5 lakh from 96 lakh.