Tata Motors plans to raise Rs 4,700 crore

Move to help meet capital requirements and cut debt.

Tata Motors, the country’s biggest automaker, will raise Rs 4,700 crore through a combination of instruments to meet capital requirements and cut debt.

The company, part of the salt-to-software Tata Group, said its board had approved the raising through an issue of shares, bonds, debentures, warrants and other equity-linked instruments in the domestic and international markets in one or more tranches.

In a filing to the Bombay Stock Exchange (BSE), Tata Motors said it would seek shareholders’ approval through a postal ballot. “The timing and structure of the issues will be decided depending upon market conditions, post shareholders’ and other approvals.”

The company has to repay debts of Rs 8,000 crore this financial year, besides meeting capital expenditure of Rs 2,500-3,000 crore. Now, Tata Motors has a debt of Rs 18,800 crore on a standalone basis, while its debt equity ratio is 2.05:1. It aims to bring down the ratio to 1:1. Analysts expect promoters to dilute their stake, but it’s too early to state the extent of dilution. The company is expected to come out with more clarity in the near future.

The promoters hold 37 per cent in the automaker as of March 31, down from 41.73 per cent as of March 31, 2009, according to stock holding data on the BSE.

Tata Motors’ shares rose 2.35 per cent to Rs 787.50 on the BSE. The company’s fund raising plans were disclosed after the trading hours.

In October, it had issued global depository shares and convertible notes to raise $750 million (Rs 3,500 crore). In March, the company had divested its 20 per cent stake in construction equipment JV, Telcon, to its partner, Hitachi Construction Machinery, for Rs 1,159 crore.

Further, the company is seeking shareholders’ approval for raising borrowing limits and for creation of security on the company’s properties to Rs 30,000 crore from Rs 20,000 crore.

A city-based analyst tracking the company said, “It is very interesting to see at what price the company issues the shares. If they are at a discount, then investors may lose confidence in the stock, but if they are at a premium, then there will be fear of the issue being overpriced.”

The said amount was almost 12 per cent of the company’s market cap, which stands at Rs 39,876 crore, according to the stocks’ closing price today.