Tata Motors may issue DVR shares

Renewed investor confidence in Tata Motors, following a robust performance by the company in the last three quarters, may induce it to issue more shares under the differential voting rights (DVR) banner for raising funds.

The country’s biggest vehicle maker is exploring various means of raising funds to meet capital requirements and cut debt. Tata Motors recently said it would explore the possibility of raising funds through issue of shares, bonds, debenture, warrants and other equity-linked instruments in domestic and international markets in one or more tranches. The company recently received shareholders’ approval to raise '4,700 crore. The company has to repay debt of '8,000 crore this year, besides meeting capital expenditure of '2,500-3,000 crore on a standalone level.

As the company’s shares are carrying better valuations, compared to last year, the street is expecting Tata Motors to launch DVR shares (‘A’ Ordinary shares). Six months ago, shares in Tata Motors were trading at around '780 levels. Since then, it has rising with continued growth in the company’s performance. Rating agencies and brokerages have also upgraded the company’s outlook and recommended a buy on the stock. Shares of Tata Motors today closed 4.19 per cent higher at '1,047 on the Bombay Stock Exchange (BSE).

“(Issue of DVR shares) surely is an instrument that we will look at, as it is one of the options the company has today, and the approval we have taken from the shareholders enable us to allow issuance of ‘A’ ordinary shares as well. Depending on the overall dilution and overall pricing levels, we will look at these options,” Chief Financial Officer C Ramakrishnan told analysts.

The market is expecting issuance of $500-700 million ('2,300-3,200 crore) worth of DVR shares, but the company management remained non-committal on it. From the issue price of '305 in late 2008, which later dropped to '280 on the BSE in March last year, the company’s DVR stocks today closed 6.73 per cent higher at '764.40. Since late 2008, the DVR shares, which carry one-tenth of voting rights, but enjoy higher share of dividend, have been trading at 27-30 per cent discount, compared to ordinary shares. Internationally, such shares trade at 10-15 per cent discount.