Tatas' debt to cross Rs 1-trillion mark

By CROW -

Tata group's total debt is set to exceed Rs 1,00,000 crore in the current fiscal, but it appears comfortable on the liquidity front, a report has said.

"We expect the total debt of the Tata group as of the end of FY'09 (ending this month) at over Rs one trillion, of which Rs 117 billion is due through March 2010," analysts at domestic brokerage unit of financial major Kotak group said.

When contacted, Tata Sons spokesperson said, "We are not in a position to comment on such reports. As you are aware Tata Sons does not aggregate the debt of individual group companies as each company is a standalone legal entity and is evaluated accordingly."

Increase of more than Rs 30,000 crore in group's overall outstanding debt position from year-ago level of about Rs 70,000 crore is primarily due to its aggressive capital expenditure plans and past acquisitions, the report stated.

Analysts, however, noted that Tatas' funding challenges are manageable and debt obligations could be met through free cash flow generated at various group companies and proceeds from the stake sale by holding company Tata Sons.
 
"We believe the group's liquidity position is comfortable at an aggregate level," Kotak Institutional Equities Research analysts said, adding that possible fund-raising options include monetising Tata Motors' commercial vehicle division and stake sale by Tata Sons in TCS and Tata Tele Services.

"We believe the Tata Group of companies (represented by five largest listed entities) would generate Rs 10,000 crore in free cash flows in FY2010, against Rs 11,700 crore in debt coming due for repayment/refinance, implying a funding gap of Rs 1,700 crore," the report noted.

Total debt of these five entities -- Tata Motors, Tata Steel, TCS, Tata Power and Tata Communications – which account for 90 per cent of the group's revenues, is estimated at Rs 91,000 crore in FY2010, the analysts said.

This would include Rs 40,600 crore from Tata Steel, Rs 22,800 crore from Tata Motors, Rs 21,400 crore from Tata Power and Rs 6,200 crore from Tata Communications.

"Within the group, the most pertinent issue remains Tata Motors' Rs 11,300 crore debt coming up for repayment/refinance in FY2010," the analysts said. Tata Motors needs to refinance USD 2 billion (Rs 10,000 crore) of its USD 3 billion one-year bridge loan coming due in June 2009, while another Rs 1,300 crore debt is coming due in its books.

To meet group's funding needs, the report said, Tata Sons has the financial flexibility to support group companies in extreme cases like clampdown in the debt markets and its options include stake sale in group companies.

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