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Anirban Nag & Arijit De
Mumbai, Apr 12: Tata Engineering & Locomotive Co (Telco), close on the heels of the successful launch of its small car -- Indica, is finalising modalities of the first bond issue of the financial year. The auto major plans to raise Rs 200 crore through the issue of 10-year non-convertible debentures (NCDs) to part-fund capacity expansion of its small car project.
Telco proposes to increase annual capacity of Indica from 60,000 units to one lakh units by next year. For the purpose, the company has lined up investments of around Rs 300 crore during the current fiscal at the Pune plant. Another Rs 50 crore is expected to go into normal capex.
The company's eventual plan is to increase Indica's capacity to 1.5 lakhs annually. Telco, which has already invested Rs 1,700 crore in the project, has said that it will break even with sales of 60,000 units of Indica.
Telco officials, when contacted, refused to disclose "strategic information". The mandate for arranging the issue is expected to be awarded shortlyand a host of merchant bankers are in the race. Indications are that the issue may be priced at 13.50 per cent, which is about 150 basis points higher than the central government security of the same maturity.
The company, at the end of the 1998-99 fiscal, has a total debt burden of Rs 3,880 crore on an equity base of Rs 255.88 crore. The average cost of its borrowings is around 15 per cent.
Telco's performance has been hit badly over the last year with sales declining and the company reporting losses in all the three quarters of the 1998-99 fiscal.
Analysts feel the company, following the unprecedented response to the Indica, would be better placed if it could increase capacity and push through greater numbers of the small car at the earliest.
Telco had grossed close to Rs 3,000 crore from the first round of the Indica booking, with total bookings having crossed 1.15 lakhs. It retained around Rs 1,400 crore of the bookings proceeds and squared off its entire short-term debt liability of around Rs1,150 crore.
Analysts expect the saving in interest of around 2.5 per cent accruing to the company in the process to add up to Rs 30 crore to its sagging bottomline in the current fiscal.
Telco, as earlier reported in The Financial Express, had raised $30 million at 275 basis points over Libor from BankAm and SBI to repurchase part of its $200 million Yankee bond which was going at a significant discount.
Recently, it announced an upward revision of HCV and LCV prices ranging from Rs 4,000 to Rs 6,000, but chose to keep the prices of the Sierra, Sumo, Safari and Estate unchanged.
The price revision is a direct fallout of the hike in excise duty of commercial vehicles from 15 per cent to 16 per cent announced in the budget. The revision for the different models work out to around 2-3 per cent against a 1 per cent increase in excise rates.
Telco is expected to give better numbers both in terms of sales and production for both the LCV and HCV category, after sales dipped significantly due to therecession. The price increase of both HCVs and LCVs would mean a better bottomline for the company.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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