Four Tata Group companies to raise $2.5 bn via foreign loans.

Four Tata group companies have hired bankers to raise $2.5 billion this quarter, one of their biggest overseas fundraising exercises in recent times. Tata Steel, Tata Motors, Tata Power and Tata Communications are raising money to retire their old loans.

Statistics collated by Bloomberg says Tata group companies had raised $1.06 billion in 2015. While Tata Steel has launched a $1.5-billion deal in general syndication in January, Tata Power has hired seven banks to raise $460 million for a loan, which is due to be paid next month. Tata Communications is also marketing a five-year loan to raise $250 million, while Tata Motors-owned TML Holdings has launched a $250-million loan last month.

The gross debt of the four companies was whopping Rs 208,229 crore in FY15 (see box) and these companies were taking several steps to bring down debt levels, including sale of assets and reduction of interest costs by retiring old loans and replacing them with cheaper new loans, bankers said.

Tata Steel, for example, is reducing capacity in the UK and has signed a letter of intent with Greybull Capital for the divestment of long products business in Europe. Besides, by December-end, Tata Steel had also successfully refinanced the offshore debt facilities of $1.5 billion, resulting in significant cost savings. Tata Steel is getting an average rate of Libor plus 235 basis points for its two loans of $750 million each.

While Tata Steel is struggling with its European operations, Tata Motors needs money to launch new models from its Jaguar Land Rover stable and in India. A bulk of Tata Motors’ loans were taken by the company when it took over JLR. It is now refinancing its old loans with newer ones at the rate of Libor plus 165 basis points, which bankers say, is good rate considering the volatility in the overseas markets.

BS