Tata Power latest on the GDR bandwagon
3 min read 21 Jul 2009, 10:42 PM ISTTata Power latest on the GDR bandwagon
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Mumbai: Tata Power Ltd, the country’s biggest private-sector electricity generator said on Tuesday that it had started a sale of global depository receipts (GDRs) to raise $250 million (Rs1,208 crore). The move comes after a hectic Monday when three Indian companies, including one from the Tata group, raised money from overseas financial markets.
Tata Steel Ltd, the sixth largest global steel maker, Suzlon Energy Ltd, India’s top wind turbine manufacturer and Indiabulls Financial Services Ltd together raised close to $900 million.
Tata Steel and Indiabulls ended their fund raising activity on Monday evening. Suzlon Energy kept the book building process open till Tuesday morning to enable South-east Asian investors from Hong Kong and Singapore to invest in its foreign currency convertible bonds offering.
Tata Steel raised $500 million, in a sale of GDRs to be listed on the London Stock Exchange (LSE).
The company will be issuing about 65 million GDRs, each representing one ordinary share, that will lead to an equity dilution of 7.4%.
Each GDR has been priced at $7.644, a 5.3% discount to the closing price of Tata Steel shares on the Bombay Stock Exchange (BSE).
On Tuesday, on the back of the news of a successful fund raising, Tata Steel shares rose sharply to end at Rs411.75 on BSE, a gain of 5.28%.
The fund raising on Monday meant that the three Indian companies competed against Chinese coking coal producer Fushan International Energy Group and Taiwan’s Shin Kong Financial Holding to raise money.
The Chinese firm was in the market to sell shares worth $339 million and the Taiwanese one was making a $300 million GDRs issue, Finance Asia.com reported.
Suzlon officials declined comment on the fund-raising, citing a quiet period for the company which is in the midst of further fund raising.
Finance Asia said Suzlon was looking to raise $100 million and Indiabulls $200 million, the latter through a qualified institutional placement where shares are sold to financial institutions.
In a statement issued by Tata Steel on Tuesday, Koushik Chatterjee, group chief financial officer said: “The GDR offering has attracted demand from very good quality investors which enabled the company to increase the offering size from $400 million to $500 million—being one of the largest GDR offerings by any Indian Company on the London Stock Exchange."
A note titled “GDR issue leads to dilution" by analyst Jimesh Sanghvi of Standard Chartered Capital Markets to clients that was issued just after the Tata Steel GDR issue closed said: “The funds raised through the GDR issue would be utilized for pre-paying Sterling pound 200 million of debt at Tata Steel Europe as a pre-condition for easing of the debt covenants which have been suspended till financial year 2010".
In a 6 July report, Macquarie Research Equities, Rakesh Arora and Sanjay Doshi mentioned that the steelmakers’ funding could be a bit stretched.: “Based on our estimates, Tata Steel should have a free cash flow of $1.5 billion in financial year 2010. This compares well with the estimated capex of $1 billion. However, the net debt to equity at 1.8 times, the balance sheet is a bit stretched, hurting the company’s ability to undertake even profitable expansions."
However, the company maintained that the funds will be used for domestic expansion and buy and develop coal assets abroad. “Though the company has adequate liquidity with no material repayments in the next 12 months, the equity raising exercise will help in capitalizing the balance sheet and enable deployment in highly attractive projects-like the ongoing expansion of Jamshedpur in India and overseas mining projects. This deployment strategy would be value accretive to the company’s shareholders in the future," Chatterjee added.
Later, in television interviews, Chatterjee explained that the company preferred a GDR issue listed on LSE to give the company better exposure in the European markets, where it has a large presence through the Corus Group.
B. Muthuraman, managing director of Tata Steel said in a statement: “The equity raising exercise and the listing on the London Stock Exchange marks a significant milestone in the company’s capital raising journey and demonstrates the investors interest in the company’s strategic direction."
Citigroup Global Markets Ltd, Goldman Sachs International, JP Morgan Securities Ltd and UBS Ltd acted as joint lead managers and joint bookrunners to the Tata Steel GDR issue.
On Tuesday, shares of Tata Power declined 2.5% to ₹ 1126.15 each on BSE. The exchange’s benchmark index fell 0.9%.
satish.j@livemint.com
