Tata Power will be raising around Rs 1,200 crore by issuing 20.3 million shares to a key promoter, Tata Sons, in the next 18 months.The company will issue 9.9 million shares (5% of the existing share capital) in the financial year 2007-08 and 10.4 million warrants with an option to subscribe one share per warrant exercisable after April 1, 2008. The promoters' holding will go up from 32.28% to 35.44% and further to 38.52% after the complete conversion of warrants.Analysts expect earnings per share dilution to be close to equity dilution since funds raised from the issue are likely to be deployed for the expansion projects with little impact on other income. Tata Power is doing the preferential issue as an initial step to raise funds for the Bumi acquisition (Rs 5,350 crore for 30% stake) and the UMPP project at Mundra (4000MW) besides increasing promoters' stake in Tata Power. Analysts feel the company will need to raise more funds going ahead for its expansion projects and buying additional coal mines abroad.
