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Debt levels should be seen in context of business growth: Mistry
Tata Sons' Chairman Cyrus P Mistry has said that debt levels of some of the group companies should be seen in the context of business growth, increasing cash from operations, and capital projects underway which will lead to future growth.
 
Mistry said this during an interview with Tata Group's online platform -- tata.com. The interview was published on Tuesday. 
 
When asked about the significant debt levels of some of the group companies, Mistry replied: "This has to be seen in the context of business growth, increasing cash from operations, and capital projects underway which will lead to future growth."
 
"As the group has been growing significantly in the past, the total capital employed has also grown. Proportionately, there has been increase in debt."
 
According to the Tata Sons' Chairman, over the last three years, the gross debt across the group has increased by about two per cent per annum in US dollar terms, while cash and equivalents have grown at over 10 per cent, leading to a reduction of 3.3% in net debt in the same period. 
 
"This excludes our financial services businesses, where debt is integral to the product offering and, hence, their model is different from other businesses," Mistry elaborated.
 
"As of March 2016, the group had a net debt of about $24.5 billion. Capex has been on average $9 billion in each of the last three years. In the financial year 2016, cash from operations reached $9 billion a year and exceeded the capex."
 
Mistry further said: "At the group level, therefore, the aggregate debt is not something I feel concerned about."
 
"In fact, such aggregations at the group level could mislead, as the companies which have high cash generation, capex and debt are not all necessarily the same, and resources of different companies are not fungible with one another, as they are distinct legal entities with different shareholders."
 
"Of course, for a more meaningful discussion, these numbers would require to be viewed at each company's level."
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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SBI's bond issue to set pricing benchmark for others
Credit rating agency Moody's Investors Service on Wednesday said the State Bank of India's (SBI) issuance of additional tier 1 (AT1), Basel III compliance securities would set the pricing benchmark for other issuers.
 
Moody's said the SBI's issue price would also provide Indian banks with an alternative funding option.
 
"We expect more Indian banks will look to raise capital via this route to overcome some of the limitations of the domestic bond market," Alka Anbarasu, Vice President and senior analyst was quoted as saying in a statement.
 
"In particular, most Basel III securities issued by the banks domestically have been privately placed, thereby offering limited liquidity for investors," she added.
 
On Wednesday Moody's assigned a B1 (hyb) rating to to the perpetual non-cumulative capital securities issued by SBI, Dubai International Financial Centre (DIFC) branch. 
 
The terms and conditions of the capital securities incorporate Basel III-compliant non-viability language in accordance with Reserve Bank of India (RBI) guidelines, and will qualify as AT1 capital securities.
 
The securities are issued under SBI's $10 billion Medium Term Note (MTN) programme, via the bank's DIFC branch.
 
According to Moody's the other recent measures like capital infusion by the Indian government and issue of securities will boost SBI's loss absorbing capacity and help in managing its bad loans.
 
The credit rating agency said it does not consider the securities as high trigger capital securities.
 
"This is because even though the trigger threshold is above the Basel recommended level, Indian AT1 securities will not absorb losses prior to the trigger events as defined by the RBI. Their loss absorption is at the point of non-viability and not in advance of a bank failure," Moody's said.
 
This contrasts Moody's interpretation high trigger capital securities are designed to absorb losses prior to a bank-wide failure.
 
Moody's also said that with SBI's majority stakes owned by the Indian government, it does not assume that the AT1 securities -- which are designed to absorb losses -- will receive extraordinary government support.
 
India adopted the use of AT1 securities on April 1, 2013. Since then Indian banks have issued about Rs 106 billion ($1.6 trillion) of Basel III-compliant AT1 securities in the domestic market.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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