Tata Perpetual Bond, a fixed income opportunity?

Economics 20 July 2021 1:54:PM

Tata_Perpetual_Bond_Investment Tata_Perpetual_Bond_Investment

The private placement of Tata Motors comes with a coupon of 9.10 percent.

The private placement of Tata Motors Finance Ltd (TMFL) comes with a coupon of 9.10 percent. The private placement of a perpetual bond by Tata Motors Finance Limited is up for a bid. The claims of the holders of the Debentures shall be:

  1. Superior to the claims of the holders of the equity shares issued by the Issuer; and.
  2. Subordinated to the claims of all other creditors of the Issuer.
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It will be listed on the Wholesale Debt Market ('WDM') segment of the Bombay Stock Exchange Limited ('BSE'). If we speak about the essence of the instrument, it is unsecured but useful. This is also a daily source of income received on an annual basis, and investors should expect it to continue for a long time if the issuer is financially balanced.

Tata motors finance perpetual bonds June 2021:-


Issuer: Tata Motors Finance Ltd

Issue Size - 50+150cr
Coupon: 9.10%
Type: Unsecured, Listed, Rated, Redeemable, Subordinate Perpetual NCDs.
Call Option: 10 years from the date of allotment (15 June 2031 - tentative)
Ratings: A Stable by CRISIL
Face Value: 10 lacs
Interest payment: Annual
Step up - 100 bps (If the call option is not exercised after 10 Years)
Allotment date - 15th June 2021 (Tentative)
Deal value date - 18th June 2021 (Tentative)
Note: Offer is at a Clean price of 100.10+ Accrued Interest of 3 days
Booking is already started, Demand is very high, Please confirm your requirements at the earliest.

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About the Issuer of perpetual bonds:


Tata Motors Finance Limited (TMFL) is a non-deposit-taking, systemically important (ND-SI), non-banking financial and asset financing company and one of the major financiers of commercial vehicles and passenger vehicles for Tata Motors Limited's customers and channel partners.  TMFL is a wholly-owned subsidiary of TMF Holdings Limited (TMFHL), which in turn is a wholly-owned subsidiary of Tata Motors Limited (TML). In the domestic CV industry, TML has one of the most diversified product portfolios with a presence spanning light, medium, and heavy-duty segments of the CV industry. The company’s product portfolio in the PV segment also spans passenger cars, UVs, and multi-purpose vehicles (MPVs). TMFL reported a CRAR (Capital Adequacy Ratio) of 17.80% in 9MFY2021 vs. CRAR of 16.85% in FY20 and net NPA reduced to 2.94% in 9MFY2021 from 5.10% in FY20. Net worth has improved marginally to Rs. 3,308.14 Cr in 9MFY2021 from Rs. 3,118 Cr in FY20.
(Sources: Company’s Annual Report FY2020, CRISIL, ICRA & CARE rating)

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Take a look at the previous offerings of Tata perpetual bonds: 


Perpetual bonds do not have a specified date of maturity. The issuers can buy back the bonds after a certain period, and it is generally five years or 10 years. Like other bonds, these bonds are also listed on the stock exchanges and provide exit opportunities to the Investors. Nowadays, Perpetual Bonds are making some noise in the market for all the right reasons.
Investors are now pulling out their investments made in bank fixed deposits (FDs) and putting them into perpetual bonds. Also, the rate cuts made by the Reserve Bank of India (RBI) since 2019 and aggravating COVID-19 impact has made FDs lose their shine.

Tata Motors Finance Limited has issued Six tranches since Sept 2020 starting with a coupon of 10.25% to 9.75 twice, 9.60 & 9.55 twice in Jan & March 2021, and currently up for a deal at a rate of 9.10%. In all the tranches the issuer has raised the amount successfully one because of the Brand Name and the second the terms of the issue.
 The issuer also promises to pay additional 100 bps to the base coupon if the call date is not exercised means the coupon will be revised to 10.20% from 9.20% at the end of the 10 years from the allotment date.

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