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Capital Markets

India: Corporates scrabble for cash

India’s largest corporates, desperate to shore up working capital or pay the interest on overpriced flagship acquisitions, are trying every trick in the book to raise cash from investors, banks and non-bank financial institutions.

Tata Motors, the Indian car manufacturer owned by Mumbai-based Tata Group, saw the value of its American Depositary Receipts fall 77% in the year to December 15 2008. Desperate to raise cash to pay off the $3 billion bridge loan secured to buy UK car marques Land Rover and Jaguar in March 2008, it is turning to retail investors keen to pump capital into the beleaguered corporate.

Tata Motors is seeking to raise no more than Rs27 billion ($570 million) from the Indian public, offering between 11% and 11.5% in annual interest to retail investors willing to enter into a fixed-deposit scheme with Tata at group level. The minimum amount investable is about $400. The group chose this route for the simple reason that, while not cheap when adding in interest and middleman costs, it is quick and easy: raising cash this way from the public requires no intervention by regulators such as the Securities and Exchange Board of India, or the Reserve Bank of India, only shareholder approval.

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