India's leading Vehicle manufacturer, Tata Motors Ltd has launched a fixed deposit scheme with the aim to raise money from the public at a time of serious liquidity crunch, credit market seizure and unwillingness of banks to lend. The company announced the scheme through a newspaper advertisement on Monday.
Tata Motors will offer 10% for a one-year deposit, with senior citizens getting an extra 0.5%. The company has approval to raise up to Rs 1,931.5 crore from the public, through FDs.
The scheme comes at a time when the company is finding it difficult to refinance the $3-billion debt it had raised for the acquisition of Jaguar Land Rover (JLR). Tata Motors stock slumped to near its 52-week low of Rs 122. Citi has highlighted the lack of clarity relating to JLR and the funding risks related to the refinancing of the $3 billion debt. The debt is maturing in June 2009.
Tata Motor’s consolidated cash and bank balances stood at Rs 3833.17 crore at the end of FY 08, while it had generated a cash flow (net profit plus depreciation) of Rs 1056.8 crore in the first half of FY 09. The company's net debt to equity was 0.495 in FY 08 and Citi expects this to rise to 1.08 by the end of FY 10, due to the deteriorating operating environment at JLR.