Tata Motors, the flagship of India’s biggest conglomerate Tata Group, has withdrawn plans to launch a £100 million non-convertible debenture (NCD) offering, citing “higher cost expectations from participants due to tight money market conditions.”
The decision comes two days after the company approved to issue unsecured, redeemable NCDs worth £100 million in three tranches. Tata Motors is the first major company to scrap its NCD offering after the nationwide lockdown prompted by the coronavirus pandemic, underscoring the tight liquidity conditions in the bond market. Mutual funds, insurance companies and bank treasuries are mostly the largest subscribers of NCDs.
Tata Motors, however, added that the company continues to have sufficient liquidity and would “consider issuance of NCDs at appropriate time and under normalised market conditions”. Thanks to the lockdown, the automaker for the first time in its 75-year history sold zero vehicles in April.
In the recent past, several companies have announced plans to launch NCD offerings to create a cash buffer to tide over the current challenging situation. Tata Motors’ sister companies Tata Steel and Tata Power (via subsidiary Coastal Gujarat Power) said they plan to raise funds via NCDs.
In the last two months, investors have shifted to lowrisk assets. As a result, while the demand for central and state government bonds has risen, there are not many takers for corporate debt instruments, thus pushing up yields on these papers.