Tata Motors $400m FCCB issue subscribed 10 times

The $400 million foreign currency convertible bond (FCCB) issue of Tata Motors, launched after market hours on Monday, was subscribed over 10 times. This is the largest international capital market offering made by an Indian company.

To be issued in two tranches, the issue is also the first ever multi-tranche convertible offering by an Indian outfit. Tranche I of the issue, aggregating $100 million, is convertible at a price of Rs 573.106 per share, representing a 17.5 per cent premium to the company's closing share price on the Bombay Stock Exchange (BSE) on April 19 (Rs 487.75).

The second tranche, aggregating $300 million, is convertible at a price of Rs 780.40 per share, which is at a 60 per cent premium to Tata Motors' closing share price on the BSE on April 19.

The tranche I bonds are zero coupon and will be redeemable at a discount of 4.89 per cent after five years. This is the first-ever negative yield structure offering by an Indian company.

The second tranche carries a coupon of one per cent and will be redeemable at a premium of 21.78 per cent after seven years. The company also has an option to redeem the tranche I bonds after one year, subject to relevant approvals.

The bonds "" to be listed on the Singapore Stock Exchange "" are convertible into either ordinary shares of Tata Motors or global depository shares.

The maximum equity dilution that would take place, if all the notes were to be converted, would be limited to approximately 6.4 per cent.

This will consist of additional paid-up capital of Rs 7.65 crore (2.1 per cent maximum dilution) due to the full conversion of tranche I bonds and additional paid-up capital of Rs 16.86 crore (4.3 per cent maximum dilution) due to full conversion of tranche II bonds.

So this would translate into the infusion of additional equity of Rs 24.5 crore if all the bonds amounting to Rs 1750 crore were to be converted. Merrill Lynch, Morgan Stanley, Citigroup and JP Morgan acted as the joint book runners for the offering.