A Tata remunera ''depósitos'' a 10 ou 11% para financiar a compra da JLR...
=DJ FOCUS: Led By Tata Motors, Indian Cos Turn To Deposit-Taking
By Neelabh Chaturvedi
Of DOW JONES NEWSWIRES
NEW DELHI (Dow Jones)--Indian companies with large funding needs are banking on the country's burgeoning middle class to see them through the credit crunch, and as Tata Motors Ltd. (TTM), has shown, they are seeking deposits from the public to do so.
While local banks and finance companies have always taken deposits, in recent days, cash-strapped blue-chip corporates have begun tapping India's large savings pools, their first such moves in over a decade.
In a newspaper advertisement Monday, Tata Motors, India's biggest automaker by sales, said it is inviting fixed-term deposits for the first time in 13 years, as it seeks to refinance debt it took on to buy Ford Motor Co.'s (F) Jaguar and Land Rover brands earlier in the year.
Expanding on the scheme, the company said in a statement Tuesday it is offering one-year, two-year and three-year deposits carrying interest rates between 10%-11%. It said it could raise up to INR27 billion from its deposit-taking plan.
Bank deposits for similar tenors fetch between 9.50%-10.50%. The Fertilisers and Chemicals Travancore Ltd, a state-run company, also said in a newspaper advertisement Tuesday that is seeking retail deposits with similar terms to those of Tata Motors' scheme. The company's finance director declined to elaborate on how much it is seeking to raise.
Analysts say other companies could follow.
"We could see an uptrend in corporate deposits in the coming days, especially from companies that have large funding requirements," said Prakash Subramanian K.V., managing director and regional head of capital markets at the Indian unit of Standard Chartered PLC.
"Banks are already strained while mutual funds are still under pressure."
Corporate deposits were the rage in India among large firms like the Tata Group's companies and Reliance Industries until the mid 1990s, when they lost favor as companies found cheaper sources of capital.
Indian regulations allow local entities to seek deposits without a banking license, which is needed if the company wants to issue checks to the public.
As India's economy grew at an average rate of 8.8% per annum in the last five fiscal years, share prices soared while overseas banks and financial institutions competed to lend money to Indian companies.
However, as the global financial crisis deepened, companies began to feel the pinch.
"Money was flowing from everywhere in the last few years for Indian companies but the tap has now run dry," said Namrata Padhye, a fixed income research analyst at IDBI Gilts.
"There is a definite concern in the credit markets as borrowing costs for companies have not come down despite a raft of policy measures," she said.
The Reserve Bank of India has trimmed its key lending rate, the repurchase rate, by 150 basis points to 7.50% since October. It has lowered the proportion of deposits banks must set aside as cash with the central bank by a sizable 350 basis points to 5.50%. And it has also allowed mutual funds and non-banking finance companies to access funds through a special liquidity window.
However, with initial public offerings and bond transactions difficult to complete, Indian companies are competing with each other for bank credit.
The pressure on the banking system may be exacerbated next year as companies seek to roll over their foreign borrowings, Subramanian said.
"Next year we have $80 billion of external commercial borrowings being redeemed and on a best-case scenario, even if $40 billion of that gets rolled over or refinanced, the pressure on the banking system will still be huge," Subramanian said.
Peddling corporate deposits may also be easier at a time when most asset classes are in free-fall and investors are wary of more exotic instruments.
"Bank deposit rates are unlikely to rise much from here given the soft bias in the monetary policy, while people are still averse to taking an exposure to equities," said an analyst at a local brokerage, who asked not to be named.
"The interest rate pickup on corporate deposits is pretty good considering that the risk of default, especially among the large corporates, is pretty low," he said.
India's benchmark 30-stock Sensex has shed over 57% since January as foreign investors fled in droves, dumping stocks worth $13.47 billion on a net basis. Foreigners bought Indian sharesworth $17.2 billion in 2007.
-By Neelabh Chaturvedi, Dow Jones Newswires; 91-11-4356-3311;
neelabh.chaturvedi@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary:
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(END) Dow Jones Newswires
December 02, 2008 07:12 ET (12:12 GMT)
Copyright (c) 2008 Dow Jones & Company, Inc.
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