Tata Sons may look to set aside $5 billion to invest into its group companies over a period of time to counter any short-term liquidity challenges that may arise due to the cost pressures post COVID-19 pandemic.

"The group wants to have a strategy in place to ensure that the group companies don't see a severe impact," said a source aware of the development.

"They are looking to set aside up to $5 billion that can be invested into its companies should there be cost pressure. At this stage though things are very volatile. So it's not necessary that they may invest the entire amount. It will be based on how the situation progresses in the days to come," he added.

The group is looking to invest the amount as per the needs in the time frame of one to two years.

"They are exploring options to raise funds should the need arise," added another banker who did not want to be named. "In the short to medium term, Tata Sons may look to raise up to $2 billion and are exploring two routes - RCF (Revolving Credit Facility) and ECBs (External commercial borrowings) to raise capital. They may break this up into both options. They could look at raising $1 billion via RCF (Revolving Credit Facility) and another $1 billion via ECB's (External Commercial Borrowings). For the possibility of the RCF, some foreign banks are already in discussion with the group," he explained.

These are just the options being explored at this point. The group, the banking official added, is looking at all options of raising funds where needed.

The sources added that while the capital will be deployed across group companies, a significant portion may be deployed into Jaguar Land Rover, Tata Steel and the consumer-facing businesses that have been hit by the impact of COVID 19.

Tata Motors recently announced that it has temporary halted production for JLR. Tata Steel has also been hit by severe demand crunch, specially in Europe that may lead to job cuts in some areas.

However, the banking source added that the consumer companies were more resilient and may not need as much infusion. "All the consumer-facing businesses are resilient and while the pressure on the business due to the pandemic is inherent, in the medium to long term the group expects them to bounced back. The big hit is in businesses that were already facing the brunt of global economic headwinds before the pandemic," added the source.

Tata group stocks, especially Tata Steel & Tata Motors, rose in trade today on the news.

First Published:Apr 23, 2020 1:37 PM IST