Tata Group of companies (represented by five largest listed entities) would generate Rs100 bn in free cash flows in FY2010E, against Rs117 bn in debt coming due for repayment/refinance, implying a funding gap of Rs17 bn. Coverage ratios at the group level are 2.8X net debt/EBITDA (4X debt/EBITDA) and 4.3X EBITDA/interest based on FY2010E EBITDA estimates. Within the group, the most pertinent issue remains Tata Motors’ Rs113 bn debt coming up for repayment/refinance in FY2010.
Tata Motors’ incremental borrowing capacity at close to Rs115 bn (US$2.3 bn). Additionally, the company could raise Rs20-25 bn (US$400-500 mn) through stake sales in subsidiaries including Tata-Daewoo, Tata Construction and Tata Technologies to repay a part of the loan.
Tata Sons has the financial flexibility to support group companies in extreme cases such as a significant drying up of the debt capital markets or deterioration in the domestic and/or global demand environment. Options that could generate a significant amount of money include a sale of Tata Sons’ stake in TTSL and TCS.
Top five listed companies within the Tata Group, which account for over 80% of the group’s capitalization and revenue.