Tata Motors symbolically turned a full circle on Monday, when the country's largest auto maker said it would increase the size of a qualified institutional placement issue of shares by 25 per cent to raise $750 million (R3,328 crore) against the original target of $600 million (R2,662 crore).
The appetite for its shares is a strong one, indicating a higher capacity to fuel its small car, Nano, and take the next big steps after its acquisition of luxury car unit Jaguar Land Rover.
The size of the issue, which opened on Friday, was increased in the wake of the good response it received from large institutional investors. Around $200 million (R888 crore) is being raised through the issue of ordinary shares, while $550 million (R2,440 crore) will be raised through the issue of “A” ordinary shares that have differential voting rights. Shares with differential voting rights are normally issued to protect founders’ stake in a company. Such shares allow investors to reap higher dividends, but in return they have to surrender their voting rights.
In contrast, the company’s similar issue of shares with differential voting rights in 2008 to fund the acquisition of Jaguar and Land Rover was undersubscribed, and had to be picked up by Tata’s group firms.
“The institutional appetite has gone up for qualified institutional placement in the recent past and the confidence in Tata Motors is also significantly high in comparison to 2008,” said Alex Mathew, research head, Geojit BNP Paribas Financial Services.
The extra capital would help in funding Tata’s growth plans. Tata Motors has pledged an average R3,000 crore every year for the next three years for expansion purposes.