Tata Capital to launch debt fund

Tata Group HQ in Bombay

Tata Capital, a subsidiary of Tata Group, is planning to launch a $100 million to $250 million debt fund to help fund its infrastructure plans, a source close to the company told Infrastructure Investor. The debt fund will be raised from domestic and international investors.

The source said that the company is currently working on the debt fund with more details to be announced soon.

In related news, Tata Capital is also planning to launch a wholly-owned subsidiary to more easily raise infrastructure financing by the end of 2011, the source said. That separate company – classified under Indian law as an infrastructure finance company (IFC) – aims to raise long-term overseas funds for the infrastructure sector.

Praveen Kadle, managing director of Tata Capital, told reporters at a press conference in Kolkata that setting up an IFC will allow Tata Capital to more easily raise long-term funds through external commercial borrowings, since it is very difficult to raise the kind of long-term funds required for the infrastructure sector in the local bank market.

Last month, the Reserve Bank of India, the country’s central bank, announced its decision to permit take-out financing through external commercial borrowings, relaxing norms for infrastructure companies in India that have thus far largely depended on mostly short-term financing from local commercial banks.

Tata Capital plans to raise about INR3 billion (€50.1 million; $64.3 million) by March 2011 through various means such as short-term debt, long-term debt, private placements and retail debt to support its business plans, media reports suggest. The company has already raised INR 1 billion.

With a capital base of INR 2.2 billion, Tata Capital has 105 branches spread across 68 locations in the country. The company’s product suite includes commercial finance, investment banking, private equity, infrastructure finance among others.