INSUBCONTINENT EXCLUSIVE:
MUMBAI: Tata Sons will infuse Rs 6,500 crore into Tata Motors as part of a Rs 10,000-crore fundraising by the automaker, a move that is
aimed at building investor confidence in a company that has seen erosion in its market value and downgrades by global ratings firms.
Tata
Motors will allot preferential shares and warrants to the promoter at Rs 150 each
The remaining Rs 3,500 crore will be raised through external commercial borrowings, and the total proceeds will be used to reduce debt and
also refinance some loans, the company said in its filings with stock exchanges.
On Friday, the company’s shares closed nearly 5% lower at
Rs 126.95 on the BSE.
Promoter holding in Tata Motors will go up to 46.4% once the warrants are converted 18 months after their allocation,
according to an ETIntelligence Group calculation
Tata Sons currently holds 38.4%
The issue of ordinary shares on a preferential basis will immediately increase the promoter holding to 41.7%, and the balance will come in
after the conversion of the warrants into shares.
Tata Sons’ investment is expected to help assuage investor concerns that the group could
sell off the company, or at least reduce its stake, as has been speculated in the media for the past couple of quarters.
“This firm
support from Tata Sons will benefit all shareholders by allowing the business to focus on longterm strategy, reduce debt levels and provide
rating support to the Tata Motors Group,” chief financial officer PB Balaji said
“It is a signal from the promoters to say that we are providing a much-needed cushion in this difficult time.”
Tata Motors has been
under pressure due to falling sales at its UK-based Jaguar Land Rover luxury vehicle unit that was once the money-spinner for it, as well as
weak demand for its passenger and commercial vehicles in India where the economy is hit by a slowdown
In the past one year, ratings firms S-P, Fitch and Moody’s have downgraded the credit rating of Tata Motors, citing weak business
environment both at JLR and in India
The automotive business of the Tata Group has total debt of about Rs 50,000 crore, of which Rs 20,000 crore is at the Indian operations.
