BackTata Motors raises $750mn
Tata Motors raises $750mn
Premium
Tata Motors raised US$ 750 million (about Rs3,525 crore) through Global Depository Receipts (GDRs) and convertible bonds, to pay off rest of the debt that it incurred for acquiring UK’s iconic brands, Jaguar and Land Rover (JLR).
The issue comprises of GDRs of $375 million and an equivalent amount in convertible bonds. The size of the offering was increased by 25% as the initial fund-raising target of $600 million (Rs2,820 crore) closed in less than an hour, following robust investor demand.
The stock, however, took a beating due to equity dilution concerns on the bourses. The company issued29,904,306 new equity shares in the form of global depository shares, at a price of $12.54 per GDS, aggregating to $375million (Rs1,763 crore), and 3,750, 4% coupon convertible notes at a price of $100,000 per note, totaling $375 million and due in 2014.
In addition to repaying the debt incurred in connection with the acquisition of the two luxury brands, the company also intends to use the proceeds from this offering for capital expenditure, working capital needs and other general corporate purposes.
Tata Motors issued 2.99 crore equity shares against GDR, which resulted in a 5.8% stake dilution. However, this GDS issue would not dilute the EPS to the same extent (5.8%), as the company is planning to utilize this amount for the partial repayment of debt in its books, which, in turn, would reduce its interest outgo to a certain extent.
Thus, considering the outgo of debt and the higher equity base, we adjust our consolidated EPS for FY2011E to Rs24.8 (Rs25.4 earlier). Considering the recent run-up in the stock price in the last couple of months, we maintain our NEUTRAL rating on the stock.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
