The Tata Group's total debt is set to exceed Rs 100,000 crore (Rs 1 trillion) in the current fiscal, but it appears comfortable on the liquidity front, a report has said.

"We expect the total debt of the Tata Group as of the end of FY'09 (ending this month) at over Rs 1 trillion, of which Rs 11,700 crore (Rs 117 billion) is due through March 2010," analysts at domestic brokerage unit of financial major Kotak Group said.

When contacted, Tata Sons spokesperson told PTI, "We are not in a position to comment on such reports. As you are aware Tata Sons does not aggregate the debt of individual group companies as each company is a standalone legal entity and is evaluated accordingly."

Increase of more than Rs 30,000 crore (Rs 300 billion) in group's overall outstanding debt position from year-ago level of about Rs 70,000 crore (Rs 700 billion) is primarily due to its aggressive capital expenditure plans and past acquisitions, the report stated.

Analysts, however, noted that Tatas' funding challenges are manageable and debt obligations could be met through free cash flow generated at various group companies and proceeds from the stake sale by holding company Tata Sons.

"We believe the group's liquidity position is comfortable at an aggregate level," Kotak Institutional Equities Research analysts said, adding that possible fund-raising options include monetising Tata Motors' [Get Quote] commercial vehicle division and stake sale by Tata Sons in TCS [Get Quote] and Tata Tele Services.

"We believe the Tata Group of companies (represented by five largest listed entities) would generate Rs 10,000 crore (Rs 100 billion) in free cash flows in FY2010, against Rs 11,700 crore in debt coming due for repayment/refinance, implying a funding gap of Rs 1,700 crore (Rs 17 billion)," the report noted.

Total debt of these five entities -- Tata Motors, Tata Steel [Get Quote], TCS, Tata Power [Get Quote] and Tata Communications -- which account for 90 per cent of the group's revenues, is estimated at Rs 91,000 crore (Rs 910 billion) in FY2010, the analysts said.

This would include Rs 40,600 crore (Rs 406 billion) from Tata Steel, Rs 22,800 crore (Rs 228 billion) from Tata Motors, Rs 21,400 crore (Rs 214 billion) from Tata Power and Rs 6,200 crore (Rs 62 billion) from Tata Communications.

"Within the group, the most pertinent issue remains Tata Motors' Rs 11,300 crore (Rs 113 billion) debt coming up for repayment/refinance in FY2010," the analysts said. Tata Motors needs to refinance $2 billion (Rs 10,000 crore) of its $3 billion one-year bridge loan coming due in June 2009, while another Rs 1,300 crore (Rs 13 billion) debt is coming due in its books.

To meet group's funding needs, the report said, Tata Sons has the financial flexibility to support group companies in extreme cases like clampdown in the debt markets and its options include stake sale in group companies.

Tata Sons might also be required to infuse fresh equity into one or more group companies, such as Tata Motors and Tata Steel, in case of a sharp deterioration in operational and financial conditions.

"Worse and prolonged decline in global demand environment would require some tough decisions regarding restructuring of the group itself, asset sales and reorganisation within companies," the report said.

For instance, a decision might have to be taken if Tata Motors needs to be in both the passenger car and commercial vehicle businesses, it added.

For Tata Sons, analysts said, stake sale remains primary option. "Tata Sons has a 33 per cent stake in TTSL and in our view most suitable course of action would be to exit the firm," adding it could fetch $3 billion (Rs 15,000 crore).

Besides, Tata Sons has a 74 per cent stake in TCS, out of which a 25 per cent could be sold, but divestment has limited merit at current valuations. "While a strategic buyer may not be interested in a non-controlling stake, a financial buyer could pay 10 per cent premium to current market price," wherein Tata Sons could get $2.5 billion (Rs 12,500 crore).

Analysts said Tata Motors could monetise its commercial vehicle division, valued at Rs 12,000 crore (Rs 120 billion), through measures like stake sale or spin-off.

Besides, Tata Motors can borrow up to Rs 11,500 crore (Rs 115 billion) against assets in its books and sell some subsidiaries.

"Tata Motors' stake in Tata Motors Daewoo [Get Quote] could fetch $180 million (Rs 900 crore) . . . stakes in Tata Construction and Tata Technologies could fetch up to $200-300 million (Rs 1,000 crore to Rs 1,500 crore)," they added.