Tata Motors opens public fixed deposit tap

Company fixed deposits (FD) were once hot with companies and investors. They enticed investors with slightly higher interest rates and offered a little more to shareholders and investors. But as the fund raising options before corporates increased and India entered into a stable and falling interest rate regime, companies began to close their FD schemes. The main reasons were the slightly higher interest rates, commission to agents, administrative costs and compliance which made it unatttractive.

In recent years, a few companies have started accepting fixed deposits but it’s a surprise to see a triple-A rated company like Tata Motors coming to the public. The company is offering 10%-11% for a tenure of 1-3 years, with a minimum of Rs 20,000. Shareholders, employees and senior citizens get half a percentage point more. Banks are offering similar but marginally lower interest rates on FDs. When corporate FDs were popular, the Tata group FDS were a coveted instrument, with no dearth of investors even at relatively low interest rates. The company will be hoping that some of that charm still remains. The fine print says that the company can vary the terms, including interest and brokerage for deposits of Rs 20 lakh and above.

So, TML will be pinning hopes on shareholders, employees and even senior citizens to keep their money with one of India’s most trusted group. And, then spread the net out to catch high networth individuals who will be offered preferential interest rates by Tata Motors. It’s a smart, even if expensive, way to raise funds in a market where tight liquidity conditions prevail.

JM Financial Services, Kotak Securities and Tata Securities are the authorised brokers for the scheme and HDFC Bank is the collecting bank.

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