COVID-19 has put the global economy in the whirlwind. The Chennai based motorcycle manufacturer plans to raise the INR 500 Cr via allotment of non-convertible debentures (NCDs).
Let’s go by definition; what are Non- Convertible Debentures?
These are a financial instrument that is used by companies to raise long-term capital. It is done through a public issue.
NCDs are instruments with a fixed tenure, and people who invest in these receive regular interest at a specific rate.
With liquidity crunch, the motorcycle manufacturers are raising the capital via debt route.
The decision was made with the company’s board of directors in there meeting.
It is no surprise that the motorcycle manufacturers are also facing issues in their supply chain cycle with most manufacturers have their plants in cities like Delhi NCR and Chakan Pune.
Now, these areas are entirely shut-down due to COVID-19 pandemic that has also made the operations standstill.
However, on the bright side manufacturers like Bajaj has already started their operations with limited staff.
TVS is not only one such motorcycle manufacturer going via the NCD path, Tata Motors and Mahindra and Mahindra to have raised INR 1000 cr via NCD.
Now the critical question arises. Let’s go by the definition of NCD.
NCDs are instruments with a fixed tenure, and people who invest in these receive regular interest at a specific rate.
The critical question here is why will people invest during this situation as the spending power of people may have already gone down.
As per the Economic Times, the G-7 countries and China – global growth would fall to 1.2 per cent in 2020.
Further, it says “A sharp decline in consumer spending in the European Union and the United States will reduce imports of consumer goods from developing countries”.
Source: Auto Economic Times
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