The Tata group’s debt is set to exceed Rs1 trillion by April, but the company will comfortably meet both its funding requirements and debt obligations, a brokerage has said in a recent report.

Free cash flows: The Tata group’s outstanding debt has increased by at least Rs30,000 cr from a year ago. Harikrishna Katragadda / Mint.

“We expect the total debt of the Tata group as of the end of FY09 at over Rs1 trillion, of which Rs117 billion is due through March 2010,” analysts at Kotak Institutional Equities Research said in a report.

“We are not in a position to comment on such reports. As you are aware, Tata Sons (the holding company) does not aggregate the debt of individual group companies as each company is a stand-alone legal entity and is evaluated accordingly,” a Tata Sons Ltd spokesperson said.
The group’s outstanding debt has increased by at least Rs30,000 crore from a year ago, primarily due to aggressive capital expenditure plans and past acquisitions, the analysts said.
The analysts, however, said the group’s funding challenges are manageable and its debt obligations could be met through free cash flow generated at various group companies and proceeds from a possible stake sale by Tata Sons.

“We believe the group’s liquidity position is comfortable at an aggregate level,” the Kotak analysts said, adding that fund-raising options include monetizing Tata Motors Ltd’s commercial vehicle division as well as stake sales in Tata Consultancy Services Ltd (TCS) and Tata Teleservices (Maharashtra) Ltd.

“We believe the Tata group of companies (represented by five largest listed entities) would generate Rs10,000 crore in free cash flows in fiscal 2010, against Rs11,700 crore in debt coming due for repayment/refinance, implying a funding gap of Rs1,700 crore,” the analysts wrote.
The debt of the five group entities—Tata Motors, Tata Steel Ltd, TCS, Tata Power Co. Ltd and Tata Communications Ltd, which account for 90% of the group’s revenues, is estimated at Rs91,000 crore in fiscal 2010, they added.

“Within the group, the most pertinent issue remains Tata Motors’ Rs11,300 crore debt coming up for repayment/refinance in FY2010,” the analysts said.

Tata Motors needs to refinance $2 billion (Rs10,320 crore) of its $3 billion one-year bridge loan due in June, while another Rs1,300 crore debt is due in its books.