Tata Motors raises $750 mn to repay debt

Tata Motors raises $750 mn to repay debt
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First Published: Fri, Oct 09 2009. 10 45 PM IST
Updated: Fri, Oct 09 2009. 10 45 PM IST
Mumbai: Tata Motors Ltd on Friday raised $750 million (Rs3,487 crore) selling securities to finish repaying debt from the takeover of Jaguar Land Rover.
India’s largest auto maker by revenues has $700 million in debt that remains from the $3 billion bridge loan it took to buy the British marquee brands from Ford Motor Co. in 2008. The remaining $50 million would meet working capital needs and other expenses.
Tata Motors sold 29.9 million global depository receipts (GDRs) at $12.54 apiece and 4% convertible notes due in 2014, it said.
The GDR price is a 1.5% discount to the closing price on Thursday, it added. The GDRs and notes will be listed in Luxembourg.
Tata Motors fell 6.6%, the most in more than three months, to Rs548.30 at close of trading in Mumbai. The benchmark Sensex index on the Bombay Stock Exchange declined 1.2%.
After Friday’s drop, the conversion price for the bonds works out to be at a 4.3% premium over the current price.
Tata Motors has been retiring the debt through stake sale in group companies, bond issues and fixed deposit schemes, among others.
Analysts said the development was positive as it reduces the company’s debt and interest burden, but would not significantly impact its consolidated debt of Rs21,900 crore at the end of June.
“The announced capital raising is certainly a positive as it will allow the company to reduce leverage, albeit not significantly, and improve its liquidity profile,” Ivan Palacios, lead analyst for Tata Motors with ratings agency Moody’s Corp., said in a statement.
Jatin Chawla, analyst at local brokerage India Infoline Ltd, said more such issues and stake sales could follow.
Typically, convertible bonds raised by a company are treated as debt. Analysts said that assuming the bonds are not converted into equity, Tata Motors’ debt-equity ratio will be 4.4:1. If they are converted, the ratio will be about 3.4:1.
The auto maker’s consolidated debt, excluding its vehicle finance business and cash and bank balance at the end of June, was Rs21,900 crore. Its consolidated net debt-to-equity ratio for the same period was 3.7:1.
The introduction of the $2,500 Nano contributed to Tata’s vehicle sales, excluding Jaguar Land Rover, rising in the three months through September, the longest winning streak in at least two years. Commercial vehicle sales also rose 10% in September and 28% in August after banks cut interest rates and India’s economy expanded for the first time since 2007 in the three months ended June.
Following the announcement by Tata Motors, Moody’s Investors Service said in a statement that Tata Motors’ equity and convertible bond offering would have no immediate impact on the company’s B3 corporate family rating and stable outlook.
Moody judges obligations rated B as a low investment grade rating.
Bloomberg contributed to this story.
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First Published: Fri, Oct 09 2009. 10 45 PM IST