Tata Motors issue raises rupees 4,200 crore

Tata Motors has said it raised Rs 4,200 crore ($840 million) through secured non-convertible rupee debentures. The funds will be used to part repay the $3-billion bridge facility taken to acquire Jaguar Land Rover. Tata Motors had earlier prepaid $1.11 billion. The issue opened for bids on Wednesday at 10 am and closed at 5 pm. Tata Motors Ltd acquired the JLR brands from Ford Motor Co for $2.3 billion last year.

The debenture issue is among the largest by an Indian company, Tata Motors said. The debentures—issued in four tranches with maturities ranging from 23 to 83 months—carry a coupon of 2% and will be redeemed at varying premia on maturity. All the tranches are guaranteed by State Bank of India.

Tata Motors CFO C Ramakrishnan said, “The issue was quite a success and well oversubscribed.

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Reserve Bank of India cuts short-term rates

The Reserve Bank of India has acknowledged that GDP growth for 2009-10 would be a disappointing 6% unless banks substantially increase their lending to industry and the retail sector. For this, banks need to reduce interest rates on loans, it said.

In RBI’s annual policy statement announced on Tuesday, governor D Subbarao therefore slashed by 25 basis points the repo (the rate at which banks borrow from RBI) to 4.75% and reverse repo (the rate at which they park funds with RBI) to 3.25% with immediate effect.

However, even though the country’s second-largest bank, ICICI Bank, responded by lowering its floating reference rate by 50 basis points to 13.25 % from Wednesday

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Rupee slide persists

The rupee fell the sharpest in a decade on speculation that the trouble on Wall Street would lead to emerging-market asset sell-offs by jittery global investors.The currency hit its lowest level against the dollar in more than two years. The Sensex also fell for a sixth day in tandem with equity markets world wide. It lost a marginal 12.47 points to end at 13,518.80, heading for its first annual loss since 2001.

The rupee may come under more intense pressure as FIIs continue to hawk Indian equities. The Indian currency ended at 46.89/90 against the dollar, off a trough of 46.99-its lowest since July 24, 2006-as banks arbitraged with a weaker overseas market. Dealers suspected RBI intervened to halt the slide just short of 47 against the greenback. JPM organ forecasts the rupee to drop to 47 by the end of the year. The rupee was the second biggest loser among the ten most active currencies in Asia outside Japan on Tuesday.

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Banks need Rs 5.7 lakh crore more within 5 years: report

The Reserve Bank of India, in its ‘Report on Currency and Finance 2006-08', said as banks will have to maintain capital for operational risks, overall capital requirements are likely to go up even if there is an expected decline in the capital required on account of credit risk.

Since most of the banks in India are at present operating at capital adequacy ratios higher than the prescribed level, meeting the Basel II requirements is not an issue in the immediate future. In the medium to long-term, however, banks would need to raise capital resources to keep pace with the expansion of their business. An assessment made in the report suggests that the total capital requirements in the five years 200708 to 2011-12 are projected to go up by about Rs 5,70,000 crore assuming that banks maintain CRAR at 12%, while the total capital requirements by public sector banks are projected to go up by about Rs 3,70,000 crore.

As regards the various options available to banks, more than 85% of the capital requirements in the past were met by banks through internally-generated resources. Apart from internal resources, banks have also headroom available to raise Tier 1 capital under innovative perpetual debt instruments (IPDI) and perpetual non-cumulative preference shares (PNCPS).

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Cash Reserve Ratio caught in Reserve Bank of India crosshairs again

The Reserve Bank of India (RBI) on Tuesday made it clear that its priority would be to rein in inflation. The central bank did this by hiking the cash reserve ratio (CRR) the funds banks have to keep with RBI by another 25 basis points, to 8.25%,sucking out around Rs 9,000 crore from the system.

While this may not immediately prod banks to hike lending or deposit rates, banks may review their liquidity positions later and hike rates, if necessary.

In the Annual Policy Statement for 2008-09, RBI governor Yaga Venugopal Reddy, however, kept the other two key rates the repo rate (the rate at which banks borrow from RBI) and the reverse repo rate (the rate at which banks park short-term funds with RBI) unchanged at 7.75% and 6%, respectively.

RBI had, on April 17, hiked CRR by a hefty 50 bps to suck out excess liquidity and cool inflationary expectations.

The CRR hike aims to make liquidity scarce for banks.This may eventually force banks to realign their lending and deposit rate store flect the higher cost of funds. But bankers say this may not be immediate, or across the board, and would be selective. Since funds parked as CRR don't earn interest, the banks' earnings would be reduced to that extent.

RBI has made some concessions on home loans. It has hiked the limit of housing loans,to individuals,having a lower risk weight of 50% to Rs 30 lakh from Rs 20 lakh. This is good news for households since 75-80% of all home loans belong to the Rs 30 lakh or under segment. Interest rates on home loans will remain stable, or even head lower, reckon experts. This could spur demand for real estate.

According to Reddy: "High priority has been accorded to price stability, well-anchored inflation expectations and orderly conditions in financial markets, while sustaining the growth momentum."

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Indian Oil Corporation plans Rs 80k crore war chest

Indian Oil Corporation is preparing a war chest of Rs 80,000 crore to fund a major acquisition in the exploration & production (E&P) sector. The country's largest oil refining & marketing company will ask its board to approve a doubling of its borrowing limits on Tuesday.

IOC can currently borrow up to Rs 20,000 crore from the domestic market through loans and credits, besides foreign currency loans of up to Rs 18,000 crore ($4,500 million). The company's paid-up capital and free reserves, as on December 31, 2007, works out toRs41,341crore.

"IOC keeps exploring the possibility of acquisition, particularly in the field of E&P. The additional funds (following the increase in borrowing limits) may also be required in case of (any) acquisition," states an IOC note for consideration by its board. IOC holds E&P assets in Libya, Gabon, Iran and Nigeria."It is on the look out for an oil producing company, mainly in Africa or in CIS countries," said a senior company official.

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