Tata Motors raised Rs 264 crore through revised fixed deposit scheme

Tata Motors, India’s biggest automobile company this year in August had launched revised fixed deposit scheme and company has raised Rs 264 crore through this scheme. Company has the permission to raise Rs 1,300 crore from the revised scheme

The rate at which the market has retorted to the revised fixed deposit scheme has narrowed considerably, especially in comparison to its previous deposit scheme, when the company had collected Rs 2,700 crore in nine months.

Previously the amount was raised on higher payment of interest rates, which the company has now revised to downwards by 325 basis points to 8.75 per cent for a period of three years.

From the earlier FD scheme the Tata Motors was able to raise an average of Rs 300 crore per month, when deposit schemes of other companies were struggling. According company annual report the FD scheme was launched to cater the funding requirement of the company.

In November last year when company launched the scheme it offered 11 per cent interest rate for a period of three years on a minimum amount of Rs 20,000. In August the company revised interest rate to 8.75 per cent keeping in order to similar cut in FD’s offered by banks.

According to Tata Motors spokesperson, “Tata Motors had introduced a fixed deposit scheme, under which we could raise about Rs 2,700 crore. We did raise that amount. On the date of the annual general meeting (AGM) this year (August 25, 2009), we renewed our FD scheme. The company is now authorised to raise about Rs 4,000 crore. Since August 25, Tata Motors has raised about Rs 264 crore.”

According to market experts the Tata Motors launched first FD scheme at the time when liquidity in the market was very low and people preferred to save their income than spending it. As the company offered higher interest rate than most fixed deposit scheme of banks and, also carried the brand name Tata, it got a favorable response from the market.

Moreover the revised rate offered by Tata Motors is still higher than most banks, including ICICI bank, HDFC bank and State Bank of India, which are offering 6-7 per cent interest for the comparable terms.

As per the norms, Tata Motors can float its current FD scheme till the next AGM or till it meets the Rs 4,000 crore target.

Recently the company has cleared the $3 billion debt it had taken to buy the two UK-based brands of Jaguar and Land Rover, thus it has the option of not to stock on the FD scheme a lot. It aims to use the funds for day-to-day operations, including catering of the working capital requirement.