Tata Sons set to raise $500 million offshore loan

Mumbai: Tata Sons is set to raise $500 million in offshore borrowings, backed by at least three lenders - Bank of America, SMBC of Japan and Standard Chartered Bank - as the holding company of the conglomerate rolls over debt used to fund Tata Teleservices several years ago, said people familiar with the matter.

The tenor of the loan is likely to be five years. It may be priced 110-120 basis points above the Secured Overnight Financing Rate (SOFR), the benchmark that replaced Libor. The deal is expected to be sealed in the next few weeks.

Tata Sons took three loan tranches in 2018 to cut debt at Tata Teleservices, the consumer mobile business of which was formally acquired by Bharti Airtel in early 2020. The company had reportedly obtained a one-off dispensation for the usage of money from those loans in the past. The banks and Tata Sons didn't comment on the matter.
Tata Sons is not a frequent borrower in the overseas market, which Indian companies are increasingly tapping for loans. International bonds are out of favour with the US Treasury benchmark yield surging as much as 3.44% versus 1.28% a year ago. The US Treasury serves as a benchmark for pricing international bonds.

Piramal Pharma is raising an overseas loan of $225 million, ET reported on September 13. Nearly two months ago, HDFC Ltd, the country's largest mortgage lender, raised $1.1 billion, for which further syndication, or down-selling, is said to be going on now.

However, the cost of hedging makes a difference. If borrowers deploy the money overseas partly or fully - a natural hedge in market parlance - international funds become cheaper than the domestic market.

Tata Sons is ranked among India's best-ranked corporate borrowers.

"It has decided to roll over the loan so it can use the cash in rupee terms for business expansion," said a market dealer.

The group is reportedly seeking investment opportunities in metro rail projects, such as the one in Pune. It is also focusing on digital forays across business verticals, including technology, infrastructure, steel, telecom and automotive.

Tata group is a global enterprise comprising 30 companies in nearly a dozen verticals. It operates in more than 100 countries in six continents. Tata Sons is the principal investment holding company and promoter of the group operating companies. In FY22, the revenue of Tata companies aggregated $128 billion.