Tata Motors raises $750 mn, shares skid
Tata Motors Ltd, India’s largest vehicle maker, raised $750 million (around Rs 3,500 cr) to repay debt by selling global depositary receipts and convertible bonds, sending its shares down nearly 7 per cent to their lowest close in a month report Janaki Krishnan & Narayanan Somasundaram.business Updated: Oct 09, 2009 23:18 IST
Tata Motors Ltd, India’s largest vehicle maker, raised $750 million (around Rs 3,500 cr) to repay debt by selling global depositary receipts and convertible bonds, sending its shares down nearly 7 per cent to their lowest close in a month.
Tata Motors said it would use the funds to cut debt incurred in its acquisition of Jaguar Land Rover last year from Ford Motor Co. It had consolidated debt of around Rs 24,000 ($5.2 billion) at the end of June.
Shares in Tata Motors, which have rallied this year, fell 6.7 per cent to close at Rs 548.30, while the main index fell 1.2 per cent. The stock had risen 5.4 per cent on Thursday.
“The shares have been rising in anticipation of this deal and when the news came it fell,” said Jigar Shah, senior vice president at Kim Eng Securities. “I would not read much more into it.”
Tata Motors said the GDRs were issued at $12.54 each and the convertible notes, due 2014 and carrying a 4 per cent coupon, were issued at a 7.5 per cent conversion premium over Tata’s GDR price with a yield to maturity of 5.5 per cent.
The price of the GDRs was equivalent to Rs 580.35 per common share, a 1.5 per cent discount to Thursday’s close, a term sheet said.
“It’s a very positive development for the company. But it all depends on ... whether it would be entirely used to reduce the debt,” said Standard & Poor’s analyst Suzanne Smith.
The fund-raising was increased from $600 million on robust investor demand, the company said, adding the proceeds would repay debt for the Jaguar Land Rover buy and go towards capital expenditure, working capital and general corporate purposes.
Chief Financial Officer C. Ramakrishnan said the funds would “augment our long-term resources, help us de-leverage and provide us with financial flexibility to pursue our strategic goals.” Reuters