Tatas prune rights issue size

Tata Motors drops Rs 3,000-cr convertible preference share issue plan: To sell investments to group firms for part-financing JLR acquisition.

Tata Motors has decided to scrap a plan to raise Rs 3,000 crore by issuing convertible preference shares to help part-finance the acquisition of Jaguar and Land Rover.

The company’s board, which met today, instead decided to sell investments to group companies at the prevailing market prices over the next six to eight months.

The funds released from such divestments together with those already sold during the current financial year will form part of the resources to be raised for repaying the bridge loan taken for the Jaguar-Land Rover (JLR) acquisition, the company said in a press statement today.

TURNING POINT

Tata Motors had plans to raise Rs 3,000 cr by issuing convertible preference shares

The auto-maker wanted to use the money to part-finance the acquisition of Jaguar and Land Rover

The company now plans to sell investments to group companies at the prevailing market prices over the next 6-8 months

The decision was taken in view of current market situation

The company said the decision was taken in view of the current market situation and the change in the scrip price on May 21 this year.

The purpose is to keep the increase in the share capital as low as possible, it said.

When the details of the rights issue were announced, the equity dilution was estimated to be around 45 per cent. Since then, the company’s stock price has declined by 38.3 per cent and the initial fund raising plans looked unsustainable.

The scrapping of the convertible preference share issue means that the rights issue is now being restricted to two simultaneous but unlinked securities — issue of ordinary shares to raise Rs 2,200 crore, and a Rs 2,000 crore issue of ‘A’ ordinary shares having differential voting rights (one vote for every 10 shares held).

As per the original plan, the company was to raise Rs 7,200 crore from its investors including promoters by way of three unlinked, but simultaneous rights issue.

Besides, the company also intended to raise between Rs 2,000 crore and Rs 2,500 crore from overseas through appropriate issue of securities.

In all, the company planned to raise a total of Rs 9,500 crore to fund the JLR deal.

The company said the process for the rights issue is making satisfactory progress considering the complex information to be included in the offer document about the company, its subsidiaries and also the Jaguar-Land Rover acquisition.

This process is expected to be completed in the “near future.”