The allotment committee authorized by the board of directors at Tata Motors Ltd (TML)’s has approved allotment of ordinary shares and warrants on preferential basis to Tata Sons Pvt Ltd in a meeting held on Thursday evening, the company said in a stock exchange filing.
Tata Motors has approved allotment of 20,16,23,407 ordinary shares at a price of ₹150 each and 23,13,33,871 warrants at a price of ₹150 per warrant on preferential basis to its promoters, Tata Sons, it said in the regulatory filing today. Each warrant will carry a right to subscribe to one ordinary share per warrant.
“Pursuant to allotment of the ordinary shares, the paid-up share capital of the company stands increased from ₹67,91,702,130 to ₹71,94,948,944," TML document stated.
Earlier at a meeting held on October 25, 2019, TML’s board had approved issue of ordinary shares and warrants aggregating ₹6,500 crore to Tata Sons wherein the fundraise was done to bail the carmaker from its unsustainable net debt levels and also to continue funding the capital intensive projects.
“The equity infusion from the promoters will help Tata Motors to largely reduce its absolute debt levels. This fundraise will help Tata Motors’ stand-alone business, where the balance sheet has debt issues," P B Balaji, group chief financial officer had told Mint on October 25.
While Tata Sons’ shareholding in Tata Motors stood at 35.30% as on September 30 (pre-preferential allotment), it would rise to 39.52% post allotment of ordinary shares and 43.73% post exercise of warrants into the ordinary shares.
In order to continue re-financing its operations (including that of its subsidiary Jaguar Land Rover Automotive Plc), the board had also approved raising of additional funds up to ₹3,500 crore through external commercial borrowings (fixed rate senior unsecured notes), listed, unsecured, rated, non-convertible debentures or any other form of borrowing.
Last month, Moody’s Investors Service allotted Ba3 rating to the proposed senior unsecured notes to be issued by Tata Motors with a negative outlook. The credit rating agency views continued support from Tata Sons as a credit positive for the vehicle manufacturer’s stressed balance sheet.
The company had managed to narrow down its quarterly losses on a year-on-year basis for Q2FY20. It reported consolidated net loss of ₹217 crore in Q2FY20 as against ₹1,049 crore in Q2FY19. Although the domestic business continued to play a dampener thereby hurting its commercial and passenger vehicle verticals, TML attributed the correction to JLR’s improving global sales, primarily in China. This was despite the JLR’s local joint venture in China, Cherry Jaguar Land Rover Automotive Company Ltd continuing to accumulate losses month-on-month.
Meanwhile, Tata Motors domestic wholesales for April – November 2019 stood at 303,542 units, down 32% YoY.