Tata Motors, the country's largest automobile company, may tap its vehicle loans to raise funds for working capital and refinancing of loans for Jaguar and Land Rover acquisitions, investors and analysts said.
Tata Motors may need to tap its estimated Rs 8,000-crore car loan pool to raise cash for running its factories as sales of vehicles slow and inventories pile up, a recent report released by Enam Securities said.
With banks turning shy in extending loans and unsold stock climbing, the company's immediate concern is to generate cash to meet the working capital requirements.
Tata Motors declined to comment on the possibility of bundling out the vehicle loans. "We do not have any comments to offer. As a matter of policy, Tata Motors does not comment on speculation," a company spokesperson replied in response to a detailed questionnaire.
The Mumbai-based auto maker's corporate credit rating was recently cut one notch to BB from BB- by Standard and Poor's and placed on credit-watch with negative implications because of faster than expected deterioration in the automobile market conditions.
Tata Motors' sales in October and November fell by 20 per cent and 30 per cent respectively, the credit rating agency said in its report released last week.
The downturn in the domestic automobile sector, which is one of the worst in the past seven years, has forced several players to cut production, which in some cases has been as much as 50 per cent.
The company could liquidate its loan portfolio in part or full to fund any shortfall in working capital, the report said. Reeling under cash crunch, Tata Motors for the first time in 13 years, recently unveiled a scheme to raise money through a public deposit plan offering 11 per cent interest for a period of three years. The company is raising Rs 2,700 crore through the scheme.
Tata Motors may sell the vehicle loans --to generate cash-- to some of the group companies, analysts who Business Standard spoke to said. Banks have been wary of expanding their vehicle financing portfolio and may be reluctant to buy additional loans.
Tata Capital, a group company of the Tatas, is slated to raise Rs 1,000 crore to fund its expansion plan. Tata Capital provides services in areas such as capital market, housing finance and vehicle financing.
