Tag: tata motors

Tata Motors FD: Questions

tata-nano3

Tata Motors Fixed Deposit Plan has aroused a lot of investor interest and people have been quite interested in getting more information about this FD plan.

One of the things that I had missed about the Tata Motors FD plan when I wrote about it earlier was the increased rate of interest you get, if you are a shareholder.

Additional 0.25% for Shareholders, Employees and Senior Citizens

You get an additional 0.25% if you fall under the following three categories:

  1. You are the company’s shareholder
  2. You are an employee of the company or its subsidiary
  3. You are a senior citizen. (Over 60 years old)

You just get an additional 0.25%, even if you fall under more than one category. So, if you are a 61 year old employee who happens to be a shareholder of Tata Motors — you still only get an additional 0.25%.

Since, you can’t age overnight and it’s not that easy to become a Tata Motors employee — you could buy a few Tata Motors shares; become a shareholder and increase the rate of interest by 0.25%.

What If I Break the FD?

If you invest in the Tata FD and have to break the FD or withdraw your money prematurely — the investment form says that the withdrawals will be allowed on the sole discretion of the company.

The form goes on to say that there will be a reduction in the interest rate to the extent permissible by the Companies (Acceptance of Deposits) Rules, 1975. And finally, that Tata Motors will deduct the brokerage they paid at the time of issuing the debt.

Here is what the form says:

Premature withdrawal will be permissible at the sole discretion of the Company. All such prematured refunds shall be subject to such terms, including reduction in the rate of interest as prescribed in the Companies (Acceptance of Deposits) Rules, 1975, as applicable. Further any Brokerage paid by the Company at the time of acceptance/renewal, will also be deducted on any premature repayment .

I looked up the Companies (Acceptance of Deposits) Rules, 1975, and it says that if someone breaks a fixed deposit after six months (at least) — the company issuing the fixed deposit can reduce the rate of interest by up to 1%.

So, there are three things you should remember, in case you break the fixed deposit plan before its maturity:

  1. Tata Motors holds the sole discretion to allow you to withdraw your funds.
  2. They will deduct the brokerage they had to pay for setting up the fixed deposit.
  3. They may reduce the rate of interest by up to 1%, if you have at least completed six months with the fixed deposit plan.

These were two questions that I found interesting about this scheme and was interested to find out what the form said about them. You can read the basic details about the plan in a post that I wrote earlier and can be found here.

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Tata Motors Fixed Deposit Plan

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Tata Motors recently announced its Fixed Deposit plan, which is open for subscription to Resident Indians, NRIs, HUFs and Registered Societies, among others.

The fixed deposit plan has generated quite a bit of excitement, as it gives a yield of 12.83% on its 3 year — Cumulative Deposit Plan. Remember, this is the yield and not the interest rate. The interest rate remains 11%, which is still pretty high for a fixed deposit.

I think the frenzy generated by the launch of Tata Nano — the cheapest car in the world has easily over-shadowed the credit downgrade of Tata Motors to B+ by S&P (second one since last December).

From FT:

“S&P cited deteriorating cashflow stemming from Tata’s $2.3bn acquisition last year of Ford’s Jaguar and Land Rover marques as among the reasons for the downgrade – the second by S&P since December.”

Tata Sons is the parent company of Tata Motors and is one of the oldest, biggest and most reputed Indian conglomerates. So it is difficult for most Indians to even consider the idea that Tata Motors will default on its debt — S&P or no S&P, and of course the recent crisis where large banks and insurers are stuck holding toxic / legacy — AAA paper — has raised a lot of questions on the credit rating agencies themselves.

Tata Motors Fixed Deposit Plan Schemes

Here are the two schemes that an investor can choose from:

Scheme A

Quarterly Income Plan

tata-motors-fixed-deposit-scheme-a

Scheme B

Cumulative Deposit Plan

tata-motors-fixed-deposit-scheme-b

Tata Motors Fixed Deposit Plan – For NRIs

NRIs can invest in the Fixed Deposit Plan if they deposit the amount from their NRO Account and this amount doesn’t represent an inward transfer from a NRE / FCNR (B) account. Interest will be deposited in this NRO Account and NRIs need to submit their Indian address while making the application.

Tax Deduction at Source

Tax will be deducted on source from the interest of this Fixed Deposit Plan according to the provisions of the Income Tax Act 1961 for residents and NRIs.

For NRIs — the tax will be deducted at source, as the current provisions of Income Tax Act 1961 doesn not allow interest exemption on interest earned from deposits with companies.

Subscription to Tata Motors Fixed Deposit Plan

You can subscribe to this plan through your broker.  ICICI Direct has a link to it where you can subscribe to it online. If your broker doesn’t have the facility to subscribe to this plan — then you can also submit the application form at select bank branches.

Tata Motors Contact Page

This site is not related to the Tata Motors FD in any way, and if you applied for the FD and haven’t received any acknowledgment, please go to the Tata Motors page for investors.

Link for Tata Motors Investors Page

On this page, there is a phone number that you can call, and an email address that you can use to write to them about your concerns. Please use those resources to get an answer to your question.

Image Source: Tata Nano Gallery

Disclosure: I have not applied to this fixed deposit plan at the time of writing.

This site has regular features about IPOs, FDs and other investment ideas, if you would like to get that content by email, please click here.

Update: Tata Motors Investor Relations link included at the end of the page.

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