Tata Motors may dilute equity, to raise Rs 4,700 crore

Tata Motors on Friday said it plans to raise Rs 4,700 crore through a combination of issue of ordinary shares, convertible bonds, debentures, warrants or other equity-linked instruments in the domestic and/or international markets in one or more tranches.

C Ramakrishnan, chief financial officer, said that the enabling resolution has been passed and the funds to be raised will be used for growth plans as well as for reducing the debt on its balance sheet.

The net automotive debt as of March 31, 2010, was Rs 1,880 crore as against Rs 2,375 crore a year earlier.

The company’s net debt to equity reduced from 4.0 on March 31, 2009, to 2.05 as of last year.

“It may be too early to be definitive on this. If Tata Motors has to reduce debt, it either has to make a significant profit or dilute by roping in investors. The former is a less likely possibility as of now,” said an analyst with a domestic brokerage who did not wish to be norm. “So dilute the company will have to.”

The timing and structure of the issues will be decided depending upon market conditions post shareholders’ and other approvals.
The board also considered appropriate to seek shareholders’ approval for raising the limits for borrowings and for creation of security on the company’s properties from Rs 20,000 crores to Rs 30,000 crores.

In May last year Tata Motors had raised Rs 4,200 crore through innovative debenture issuance, followed by $750 million through global depository receipts and convertible notes in October; and this year in February the company got a loan of £340 million from the European Investment Bank.