Tata Capital to Issue Green Bonds, NCDs to Raise Rs 15,000 Crore February 18, 2025 by
Tata Capital to Issue Green Bonds, NCDs to Raise Rs 15,000 Crore
Introduction In a strategic move to bolster its capital base and support sustainable finance, Tata Capital, the financial services arm of the Tata Group, is set to raise Rs 15,000 crore through the issuance of green bonds and non-convertible debentures (NCDs). This initiative aligns with the company’s broader vision of financing environmentally friendly projects and meeting growing capital demands.
Understanding Green Bonds and NCDs Green bonds are debt instruments specifically designed to fund projects that have a positive environmental impact, such as renewable energy, energy efficiency, clean transportation, and sustainable water management. Non-convertible debentures (NCDs), on the other hand, are long-term financial instruments issued by companies to raise capital, with fixed interest rates and a defined maturity period.
By combining these two financial instruments, Tata Capital aims to cater to both sustainability-conscious investors and those seeking stable returns through debt instruments.
Objectives Behind the Fundraising Tata Capital’s decision to issue green bonds and NCDs stems from multiple strategic objectives:
- Expanding Green Financing Portfolio – The funds raised will primarily be used to finance green projects, in line with global sustainable development goals (SDGs) and India’s commitment to reducing carbon emissions.
- Meeting Business Expansion Needs – As Tata Capital continues to expand its lending and investment portfolio, securing additional funds ensures that it can sustain growth without compromising liquidity.
- Diversifying Investor Base – The issuance of green bonds will attract ESG (Environmental, Social, and Governance)-focused investors, while NCDs will appeal to traditional debt market participants.
- Strengthening Capital Structure – Raising Rs 15,000 crore will provide financial flexibility, improve leverage ratios, and ensure stability in future market fluctuations.
Tata Capital’s Commitment to Sustainability Tata Capital has been a frontrunner in promoting responsible financing. The company has actively supported clean energy, electric mobility, and sustainable infrastructure projects. Issuing green bonds further cements its position as a leader in green financing, aligning with the broader Tata Group’s sustainability vision.
Market Implications and Investor Sentiment The Indian bond market has witnessed a growing interest in green financing, with institutional investors increasingly seeking investment opportunities that align with ESG principles. Tata Capital’s move is expected to generate significant investor interest due to:
- Strong Creditworthiness – As a part of the reputed Tata Group, Tata Capital enjoys high credibility in the debt market.
- Growing Demand for Green Bonds – With regulatory encouragement for green finance, the demand for such investment instruments has been on the rise.
- Attractive Returns – The structured NCDs will offer competitive interest rates, making them appealing to both retail and institutional investors.
Regulatory and Compliance Aspects The issuance of green bonds must comply with global and domestic sustainability standards. Tata Capital is expected to follow guidelines set by the Securities and Exchange Board of India (SEBI) and international green bond frameworks. Ensuring proper utilization of funds and transparent reporting will be crucial in maintaining investor confidence.
Potential Challenges While the fundraising initiative presents multiple benefits, certain challenges must be navigated:
- Market Volatility – Fluctuations in interest rates and economic conditions could impact investor sentiment.
- Greenwashing Risks – Ensuring that the raised funds are genuinely deployed for sustainable projects is crucial to maintaining credibility.
- Regulatory Scrutiny – As green financing gains momentum, stricter compliance requirements may emerge.
Future Outlook Tata Capital’s green bond and NCD issuance marks a significant step toward integrating sustainability into mainstream financial markets. The initiative not only strengthens Tata Capital’s position in the financial sector but also contributes to India’s broader goal of achieving net-zero carbon emissions by 2070.
With increasing investor awareness and regulatory support, green financing is expected to play a pivotal role in shaping the future of corporate fundraising. Tata Capital’s move sets a precedent for other financial institutions to embrace sustainable investment avenues while ensuring robust economic growth.
