×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Tata Motors to raise Rs2,000cr via GDRs

Tata Motors to raise Rs2,000cr via GDRs
Comment E-mail Print Share
First Published: Sun, Sep 13 2009. 11 44 PM IST
Updated: Sun, Sep 13 2009. 11 44 PM IST
Mumbai: India’s biggest auto maker by revenue, Tata Motors Ltd, plans to soon raise about Rs2,000 crore ($413 million) from overseas investors through a sale of global depository receipts, or GDRs, and use the proceeds to pare its debt burden, according to two merchant bankers and three analysts familiar with the plan.
Tata Motors is working with a group of investment banks, including Japan’s Mizuho Corporate Bank Ltd, to raise the funds, said a merchant banker whose firm is not part of the deal and who didn’t want to be identified.
The firm will offer GDRs to raise around Rs2,000 crore as early as within this month, said an analyst at a Mumbai-based brokerage firm who also didn’t want to be named.
Mizuho Corporate Bank was also part of a consortium of 24 foreign and domestic banks that in March 2008 offered a bridge loan of $3 billion (Rs14,310 crore at the time) to Tata Motors for its purchase of the luxury Jaguar and Land Rover brands from Ford Motor Co.
Tata Motors is raising funds to pay down debt it took on for the purchase, of which $850 million is still to be repaid, analysts said.
It repaid $1 billion using the proceeds of a rights issue in September 2008, stake sales in some Tata group firms and a Rs4,200 crore bond sale in May that was guaranteed by State Bank of India(SBI).
Tata Motors took a $1.2 billion refinancing facility this year from a consortium of 12 banks including Citibank NA, SBI and BNP Paribas, and has retired part of this debt.
In the quarter ended June, dragged down by a 52% drop in sales at the Jaguar and Land Rover units, and the cost of servicing debt, Tata Motors posted a consolidated loss of Rs330 crore.
Its consolidated net debt to equity ratio for the quarter was 3.7:1 (excluding its vehicle finance business).
A senior banker with a Mumbai-based investment bank said it would make sense for Tata Motors to hold off on its fund-raising for some more time as the company’s stock, which has more than quadrupled since hitting a low in February, could strengthen further given the company’s domestic sales, which have increased every month since February.
“The recovery,” he said, “has just begun.”
The company’s share price has risen from a low of Rs130 on 17 February to Rs550 on 11 September.
Sensex, the benchmark index of the Bombay Stock Exchange (BSE), has risen 80% in the same period, while the auto index of the BSE has risen 137%.
Analyst Supriya Kedkar of ICICIdirect.com, in a 3 September report, changed her firm’s rating on the stock from “hold” to “outperformer” after the recent increase in share price while maintaining its price target of Rs560.
The company did not confirm or deny plans to sell GDRs. “Tata Motors has said that it is committed to deleverage the company through divestments and capital raising at an appropriate time, but specifics will be announced as and when we finalize on a case-to-case basis,” Tata Motors spokesperson Debasis Ray wrote in an email.
At a media briefing last month, Tata Motors’ chief financial officer C.R. Ramakrishnan said the company’s consolidated debt for the quarter ended 30 June was Rs23,000–24,000 crore, excluding its vehicle finance business.
“Given the high debt-to-equity ratio, equity infusion is critical for the company. Hence, going for GDRs is only logical,” said another analyst from a local brokerage who declined to be identified.
Already, some analysts have expressed concern about Tata Motors’ funds outflow. In a 28 August report, Mahantesh Sabarad and Vijay Nara of Centrum Broking Ltd wrote: “We find this situation alarming and so do rating agencies.”
Comment E-mail Print Share
First Published: Sun, Sep 13 2009. 11 44 PM IST