Tata Group firms seeking $2.5b in syndicated loans
India's biggest conglomerate is asking loan bankers for almost as much money as global fund managers have pulled from the nation's stock and bond markets this year. Tata Communications Ltd, Tata Motors Ltd, Tata Power Co. Ltd and Tata Steel Ltd are seeking to borrow a combined total of about $2.5 billion in syndicated loans. That compares with the $2.7 billion that foreigners have pulled from the nation's equity and bond markets this year amid an emerging market rout.
Indian firms are looking to syndicated bankers for relief as offshore note sales fell to a six-year low so far in 2016, the rupee suffered the second-biggest loss in Asia and the Sensex stock index slumped 12%. Reliance Industries Ltd is among a pipeline of companies seeking about $6.5 billion in dollar loans after costs plunged to an eight-year low. Borrowers can point to an economy growing at 7% annually, the highest among major emerging economies, and a central bank stockpiling foreign reserves.
"With China slowing down, Brazil shrinking and Europe stagnant, choosing India is like picking the best among the weakest," said Sudarshan Shreenivas, director for corporate ratings at India Ratings and Research. "Growth is still visible." Lenders aren't spoiled for choice. China's economy is growing at the weakest pace in 25 years, Russia is reeling from the oil price slump and Brazil's sovereign rating was cut to junk this week by Moody's Investors Service amid the nation's worst recession in a century.
The Tata borrowings will be most by the group companies at the start of any year if successful, according to data compiled by Bloomberg. They're part of group chairman Cyrus Mistry's mission to reduce the debt burden across his $109 billion coffee-to-cars conglomerate by either selling assets or refinancing debt at cheaper rates.
Tata Power this week mandated seven banks for a $460 million loan offering 195 basis points over the London interbank offered rate (Libor), people familiar with the matter said. The deal will refinance a bridge facility costing 225 basis points. Tata Steel began marketing a $1.5 billion facility to lenders last month, while Tata Communications and Tata Motors have loans of $250 million each in syndication.
Tata Power declined to comment beyond exchange filings while e-mails to the other three Tata companies went unanswered. Other borrowers marketing loans include refiner Hindustan Petroleum Corp. Ltd, ONGC Videsh Ltd, the overseas unit of the nation's biggest explorer Oil and Natural Gas Corp., and Reliance, owned by India's richest man Mukesh Ambani. "Foreign banks are showing an increasing interest in Indian loan syndication markets, especially the Taiwanese and Japanese names," said Sidharth Rath, Mumbai-based president for treasury, corporate and transaction banking at Axis Bank Ltd. "The market inspires confidence for better- known Indian companies and so margins are more favourable to them."
The central bank may also provide some comfort. Reserve Bank of India ( RBI) governor Raghuram Rajan is rebuilding foreign reserves to fight a slide in the rupee and high inflation. The currency stockpile rose $4.3 billion in the three weeks through 12 February, the longest run since October, as the rupee flirted with touching a record low this month.
Indian borrowers refinanced a record $11.4 billion of overseas borrowings last year, spurred by average margins on dollar loans falling to 187 basis points more than Libor, the lowest since 2007, according to data compiled by Bloomberg. Tata companies also took advantage of the cheap financing to raise more than $1 billion of loans last year. That followed almost $2.9 billion of facilities in 2014, the most in a full year for the conglomerate, according to Bloomberg-compiled data.
"The group overall still enjoys a very good reputation versus its Indian peers," said Pierre Faddoul, head of credit research at Tokio Marine Asset Management International in Singapore. "I don't necessarily think the fundamental picture or outlook for India has changed much over the past few months."